Can money bring you happiness?

For many people, earning more money provides little lasting improvement in how they feel about their lives.

Let’s start with the obvious. Does making more money bring more happiness?

The answer is that it depends. Think about low-income earners who can’t afford to buy food or pay the rent. Certainly, for them, making more money so they could afford to support their family would make them feel a lot better about life.

But what about people who have all the basics covered? Think about the last time you got a raise. It probably made you feel good when you heard you were getting it, but a few months later, did it result in you feeling better about your life in general? For many people, earning more money provides little lasting improvement in how they feel about their lives.

According to a study done by Princeton University’s Woodrow Wilson School several years ago, happiness increases as someone earns up to $75,000 a year. But no matter how much more than $75,000 they make, they don’t report experiencing much, if any, more happiness.

So if focusing on earning more money is not going to increase our happiness, how about we instead focus on what we can all control, which is how we spend the money we do have.

I’ve just finished reading a fascinating book on the subject titled Happy Money: The Science of Happier Spending, by Elizabeth Dunn and Michael Norton. They conducted extensive research including experiments where they gave people money and told them how to spend it. Here are some of their key findings.

Invest in experiences rather than stuff

Many people assume that buying more things for themselves will bring them happiness. What the authors found was that in many cases this was not just unproductive for happiness, but counterproductive. Shifting from buying stuff to investing in experiences is one of the most important recommendations. Their research showed that people tend to be initially happy with new things, until they realize that better things are available. They also found that satisfaction with experiential purchases (vacations, going to restaurants, spending time with friends and family, hobbies, etc.) tends to increase with the passage of time, while satisfaction with material purchases tends to decrease.

Spend time and money on others

Many people they studied reported feeling significantly better after donating their time or money to those less fortunate. And it doesn’t even have to be a large amount. In a Gallup World Poll of 136 countries, donating to charity was found to have a positive effect similar to what people thought doubling their household income would have.

Exercise

When was the last time you were depressed while you were exercising? Exercise results in immediate and longer-term benefits for happiness. The authors found that the more you exercise, the happier you get (within a reasonable range of exertion).

Stay focused

Have you given any thought to exploring the concept of mindfulness? Staying focused on the present moment is beneficial for happiness. In fact, people are happiest when they remain focused on an activity, whether that activity is pleasant or unpleasant.

Socialize more

The authors provide evidence that people experience the most positive moods of the day while spending time with friends and family. Also, playing with children produced more positive feelings than almost any other common daily activity.

Focus on time, not money

This is a tough one for accountants; after all, time is money, right? But working long hours to earn more money to provide your children with fancier homes and shinier toys represents a bad happiness trade-off, especially given that it reduces the time you’ll have to be involved in their lives.

Imagine you are on your deathbed

Do you think you’ll be wishing you bought more stuff? Probably not. My bet is that you’d give just about anything for more time. The authors encourage us to think about how each purchase we make will change the way we use our time. When people focus on their time rather than their money they begin to act like scientists of happiness, choosing activities that promote their well-being, rather than activities that will bring them more money.

One last tip: decreasing debt has been shown to provide one of the best routes to increased happiness. Brilliant — one of the best financial moves you can make can also make you happier.

About the Author

David Trahair


David Trahair, CPA, CA, is a personal finance author and speaker (www.trahair.com). His latest book is The Procrastinator’s Guide to Retirement.

Highlights

Jointly presented by CPA Canada and CPA Ontario, The ONE is the must-attend, multi-track event of the year, designed for all CPAs who want to be at the top of their game.

Our Firm Directory allows you to search for Canadian CPA firms using our interactive map as well as other criteria.

You’re in the eye of the storm amid a swirl of slips, forms and receipts. Chart your way through tax-time turbulence with these updates and resources.