You’ve heard the expression before – money can’t buy you happiness. Maybe you say money is the root of all evil. But is all that actually true?
It’s easy to be skeptical, but it turns out money might make you happy after all – and recent studies have shown that to be the case.
What is the ‘wealth happiness peak?’
As reported in by CNBC, a number of studies show that a certain level of wealth actually can make you happy.
A 2010 Princeton University study showed that the magic number is around $75,000 or £57,000 a year. The more you earn below that amount the less satisfied with your life you feel, but the more you earn above it – well, that actually doesn’t improve your level of happiness.
Does how you earn your money affect how you spend it, and your overall satisfaction?
When you were a child, did your parents ever make you save up over time for a big purchase? Maybe it was your first Nintendo system, or a shiny new bike, or even a school trip. If they did, you likely cherished that object or experience far more than the things that were just handed to you, with no hard work on your part.
Science backs up this phenomenon. The wealth that we earn through by hard work makes us feel more satisfied than when we are simply given money, and we tend to value it more, and spend it wisely. You can often see this in action when lottery winners lose it all just a few years after hitting the jackpot.
What kind of spending gives lasting happiness?
Most of us get a kick when we engage in ‘retail therapy,’ but the rush we feel when we buy consumer items wears off quickly. Research shows that spending money on experiences that we engage in with others, such as travel or cooking lessons, makes us feel much more fulfilled in the long run.
Want your money to bring you even more happiness? Spend it on other people. Buying thoughtful gifts for others, or helping them with their financial needs, in turn helps us in the following ways:
- It strengthens our personal connections to others
- It helps us to live out our personal values, and be of service to people we care about
- It brings happiness to others, and encourages them to ‘pay it forward’ and do the same
How to curb emotional buying
When you’re in the heat of the moment, emotional buying seems like the answer to all of our problems. If only we had that garment, or that skin care product, or that new car, our lives would be perfect! When we make an emotional decision to buy something that we haven’t planned for, it rarely makes us as happy as we had hoped.
So, how can you curb emotional spending? One the best ways is to keep your credit cards at an arm’s length, such as stored in a family safe or even in the freezer. That way, you have to take a few extra minutes to fetch it (or defrost it) before you can input the numbers and click ‘purchase.’ Also, make sure you don’t allow your laptop or phone to auto-save your banking details. Similarly, you can stop online shopping completely, and only buy things in the shop.
Saving for specific goals increases satisfaction
Saving a sizeable chunk of money can feel very difficult and overwhelming. The same impulse that convinces us that emotional spending is exciting and worthwhile also works against putting money aside. After all, there is no instant gratification when you place your money in the bank instead of blowing it at the shops.
The best way to overcome this impulse is to save for specific goals. When you know that if you commit to your plan, your money is going to pay for a long-awaited holiday or a new car at a specific date in the future, you can inject some of the same passion and emotion back into the process. Ultimately, if you work hard towards your goal, the satisfaction will be all the sweeter when you save the right amount of money.
So, can money really buy you happiness?
It seems that yes money can make you happy, but at a level a lot lower than most of us thought. Earning £57k, or just above, allows you to direct income in ways that can bring you happiness and satisfaction – from saving up for something important to you, to spending money on others or engaging in meaningful philanthropy.