Reaching financial independence is the ultimate goal for many of us, almost every personal finance blogger I follow state that their goal is reaching financial freedom. The general assumption is that with more money comes more happiness; some say money does not necessarily buy happiness but it can make things a lot easier. We don’t hear many people argue that money will bring unhappiness, what if I said it does? I am a strong believer that real happiness has zero correlation with money, sometimes money and happiness even have a negative correlation (more money = less happiness). I have stated earlier that money should just be a means to an end and nothing more. Let’s look at some reasons why money does NOT bring happiness.
More Money = More Stress
Always Want More [Greed]
You may believe that once you reach a certain financial target you will be happy and not want more. For example, you may believe that if you made $100,000/year you will be happy and want no more, but the fact is that nothing is ever enough for us as human beings. If you make $100,000/year why not try a little harder and make $150,000/year and buy the bigger house and a new luxury car? We always want more and herein lies our weakness and the source of our unhappiness.
Relativism
It’s not that having a lot of money is important; psychology studies have shown that we do not mind lower income as long as we make more than others. Our happiness is based on keeping up with the Joneses and their happiness is based on keeping up with us, hence it’s a cycle in which nobody will ever reach true happiness.
Less Time To Enjoy Life
The primary reason for reaching financial independence is so that we have more time to do the things we love and enjoy life. However studies after studies have shown that the more people make the less time they spend enjoying their life. With more money come more responsibilities and more stress (isn’t that counter-productive?), now put this together with the previous two points and you have the perfect receipt for unhappiness.
Money Makes Us Unhappy
At this point it should be clear that money has little or no chance of making one happy, but that’s not all. A study by Berkeley actually shows that money brings unhappiness. “In a capitalistic society, people generally believe that – all other things being equal – being rich is better,” Chatman states. “But that is not what we found.” Although the study compares differences between individuals depending upon work values, one can draw inferences to the general population.
Money’s Effect On Happiness Overrated
There is also research showing that money’s effect on happiness is overrated, Princeton Researcher and the 2002 Nobel Prize Winner Kahneman, PhD, says that money does not bring happiness. Kahneman says that people overrate the joy-bringing effect of money, he says:
- Increases in income has a relatively brief effect on life satisfaction.
- Psychological studies show that the wealthier people are, the more intense negative emotions they experience. These studies do not link wealth with greater experienced happiness.
- When countries experience a sudden increase in income, there is not a corresponding increase in citizens’ sense of well-being.
If you truly want to be happy than your happiness should never be based on external or material things. True happiness comes from within; a poor man living in the mountains of Afghanistan is often happier than a Wall Street CEO living in a NYC Penthouse.
How much of your happiness depends on money? Is your goal reaching financial freedom so that you can have more time with family and not worry about money…? Does money bring happiness directly or indirectly?
References:
Kahneman, D. Science, June 30, 2006; vol 312: pp 1908-1910. News release, Princeton University.
Solnick, S.J., & Hemenway, D.(1998). Is more always better? A survey on positional concerns. Journal of Economic Behavior and Organization, 37, 373-383.
If you enjoyed this post, make sure you subscribe to my RSS feed!
Article by Ray
Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.
Ray has written 271 articles.
If you like This post, you can follow Financial Highway on Twitter.
Subscribe to Financial Highway feed via RSS or EMAIL to receive instant updates.
{ 8 comments… read them below or add one }
Good post.
While I tend to agree that money is unlikely to buy happiness:
1. the use to which you put money can help achieve a measure of happiness: the knowedge that a higher income (combined with good savings habits) will get me to retirement sooner is a source of satisfaction;
2. lack of money can be a cause of considerable unhappiness: being unable to pay for things which are important to me or my family would cause a considerable amount of angst.
Hey, Ray. Have you been reading my book (Climb Your Stariway to Heaven: the 9 habits of maiximum happiness)? The key thing about money is that it can remove the stress of debt, and to that degree it increases happiness. But once basic needs are accounted for, the quantity of the money is no longer what determines happiness – the appreciation of what one owns/uses/benefits from determines how much happiness the money will buy.
If you’re interested in a new approach to boost your happiness based on the latest positive psychology research, check out our iPhone app: Live Happy; it’s based on the work of Dr. Sonja Lyubomirsky, author of “The How of Happiness” and provides a unique method to create a personalized program to increase your happiness.
You can also learn more about the iPhone app on our Facebook page.
Ray, I’m very passionate about this and try to throw this conept into my posts quite often.
I agree. After certain basic needs are met, the amount of money is unrelated or as you say negatively correlated with happiness.
Unfortunately, so many of us buy into this lie (or have bought into it in the past). Posts like this help us to see through this falsehood.
Thanks for the post.
I think that money does provide a foundation for happiness (could I use the word satisfaction?). Money can provide our general needs (food) and when it does we feel satisfied. That satisfaction would not be possible without money. The problem is that money is extreemly limited in what it has to offer but we keep trying to use money reproduce those feelings of satisfaction – but it will never come. When more satisfaction illudes us we are left empy and miserable.
That made for an interesting read, I’m glad I stumbled upon this.
I think that in modern society today, money, to a certain extent, does bring a person happiness.
It’s not fair to compare a wealthy investment banker to a man living among nature in the mountains. Living with nature has also proven to bring happiness. If you want to live among the mountains in modern society, you need money. If you want to live among the mountains in a third world country, all you need to do is go there.
Hey Ray,
Bang on with the comment about happiness coming from within.
What if we had all the material possessions we wanted? Where we would go from there? The inward journey then begins..
Money does bring happiness if you know how to use it to achieve it. One need money to achieve the goals that he/she has set. What happen is that we believe having money the happiness will start but it doesn’t work like that. Having the money is just a stepping stone where we take ourselves from being in debt. When an individual is financially free and do the things that he/she wants to then the happiness will begin. Happiness starts within oneself.
{ 6 trackbacks }