The financial news has been decidedly grim for the better part of the last 18 months. Many people have seen their wealth, both actual and perceived diminish substantially over that time frame. While many more people are concerned about their financial future than they were before, has this reduction in wealth led to a reduction in happiness and it again raises the question of whether there’s a correlation between money and happiness.
Most psychologists and sociologists will tell you that happiness derives primarily from social interaction. Those with good relationships with their family and friends generally describe themselves as happy.
As to the link between increased wealth leading to increased happiness, surveys have shown the following:
· American wealth has increased dramatically in the 20th century, but on average,
Americans are no happier than they were a century ago.
· Once your level of wealth allows you to have basic creature comforts, happiness doesn’t increase markedly as wealth increases.
So, if more acquiring more wealth doesn’t increase happiness, does increased spending help improve happiness? We all know somebody that loves to indulge themselves in a little ‘retail therapy’ when they’re feeling down. The reality is that spending can increase happiness, but it depends on where the money is spent. For example:
· Spending money on oneself can actually decrease happiness. Too many people fall into the trap of having to work so hard to achieve the appearance of ‘wealth’ that their happiness is actually decreased due to stress.
· Study after study has shown that $1 given to somebody else provides much more happiness than the same $1 spent on oneself.
Finally, from my completely unscientific standpoint as a financial planner helping clients acquire and maintain health, it is my firm opinion that money does not lead to happiness but instead simply magnifies your innate state of happiness. If you are a generous, happy person when you have no money, there’s a strong likelihood that you will be equally or even more happy with more money. If you are a naturally unhappy person, the increase in wealth will simply provide you more reasons to be unhappy and more things to complain about.
Money is clearly an emotional topic for a lot of people and this topic is one that has fascinated me since I started working in the financial services field and I would love your thoughts on the topic.