Wednesday, August 18, 2010

Money for Happiness

Money obviously provides an opportunity for happiness. Money allows you to choose and sample a wide range of experiences, from vacations at luxury locations to fine dining in pleasant company and luxury travel including space travel. It allows you to have more leisure time.

However the link between money and happiness is not strong. The wealthiest people aren’t the happiest people. Maybe the way that the money is used has the potential to influence an individual’s level of satisfaction and happiness.

The recent AMP.NATSEM Income and Wealth Report, The Pursuit of Happiness, shows that although there are definite links between money and happiness, spending money wisely can bring greater contentment and make people happier.

According to the report, Australians with more money tend to be happier, while the least satisfied Australians are those on lower incomes. The median income for the two least satisfied groups was $15,000 and $22,000 dollars compared with $40,000 for those giving a higher rating for their level of happiness.

Interestingly, the relationship between happiness and money is also relative. The happier people tended to be those earning more than others in their peer group, while the more dissatisfied were earning less. This would mean that a person earning $70000 compared to his friends who earned $50000, would be happier than another person earning $90000 while his friends earned $115000.

The report mentions that particular types of wealth such as the family home, superannuation and savings are linked to greater happiness than other types of wealth. Spending money on home, home renovation or holidays is likely to provide more satisfaction than spending money on eating out, a new car or a new television. Having low or no credit card debt or no overdue bills is also likely to increase overall life satisfaction.

Factors like family and friends, health and work are significant contributors to happiness. The report shows younger and older generations are more satisfied than those that fall between. In their middle people experience an increase in their responsibilities, which can lead to stress. As people get older they have more leisure time and happiness increases. It is thus important to save for a comfortable retirement.

According to psychologist Sonja Lyubomirsky we should be able to wring out rewarding experiences by the judicious use of money, so as to increase our happiness. The most effective empirically-supported ways include:

1. Spending money on activities that help us grow as a person (acquiring a new skill, investing in an entrepreneurial venture), strengthen our connections with others (meals with colleagues, car trips with friends), and contribute to our communities (donating to the needy).

2. Spending money on activities and experiences (trekking, watching concerts) rather than material possessions.

3. Spending money on many small pleasures (regular massages, weekly purchase of fresh flowers) rather than on one expensive item (a new car or a LED TV).

4. Spending on something that we work extremely hard to get and have to wait for (whether it’s a trip or a gadget) and enjoy the feeling of anticipation as we wait and hard-won accomplishment.

5. Taking time to value and savour the objects on which we have spent the money (the vacation, gadget, concert or the smiles of people we have helped).

6. Taking efforts to inject novelty, variety, and surprise in our buying activities.

7. Strive to compare less with others (e.g., focusing on how much fun the play was rather than on the luxury car our acquaintance drove to the venue in).


VSB said...

Money can't buy happiness, however,I really like the things it can! Wisecracks apart, I am in consensus with the view of happiness being directly proportional to the judicious use of money. Bill Gate is using his wealth to benefit nations around the world in so many different ways. I am quite sure that the smile that Mr Gates supports is more a spiritual manifestation of contentment than mere physical expression of happiness.

VS said...

That thought about the smile of Bill Gates is something to ponder about. Is it possible that the satisfaction you earn is in direct proportion to the number of people you help or is it proportional to the effort you could put in?

VSB said...

An effort that commands a vision greater than the happiness, well-being, promotion and nurturing of ourselves and comes to encompass the others translates into joy. said...

Great list of ways to gain the most happiness from spending money. Like so many things in life, moderation is the key. Spending can get old in a hurry when it's spent often and without much forethought.

VS said...

I agree, but I also wonder if the concept of moderation impairs our ability to really enjoy ourselves. Those who need to moderate don't care about the concept while those who need to be relaxed always think about moderation. :)

elisa freschi said...

A similar question: isn't it the case that happier people tend to spend money in a "wise" way, that is, in a way that makes them happier, whereas unhappy people are more likely to waste it in gambling and many other not-so-rewarding expenses and activities?
In other words, I am sure that such suggestions are valuable, but probably only for the ones who already agree with their principles.

VS said...

Elisa, I agree, but then as humans we have the option to exercise choices. :o)