Human beings develop feelings toward spending money and happiness very early in life. As a society, we constantly get the desire for more money and wealth drilled into our heads. For kids, few things are as exciting as opening gifts on Christmas or their birthday. As a teenager, it might be having the right clothes and phone. From very early on we are basically taught that money can buy happiness.
But while we’ve all been conditioned from an early age to seek more. More things. More respect and prestige. And a lot more money. Research shows that there’s a lot more to true happiness than the size of your bank account, the size of your house, or your net worth.
Go ahead and ask the happiest person you know what the reason for their happiness is. They won’t say money.
Experts agree that after you have enough to cover the basic necessities in life, all of those extra things won’t bring you a meaningful amount of extra long-term happiness. But I don’t even need the research to know that, because I have lived to experience it first-hand.
Money Didn’t Buy Me Happiness
You might be thinking that it’s easy for me to say that money can’t buy happiness because I have an MBA from Harvard University — an achievement with a high expected salary. It’s true that the average Harvard grad has a lot of wealth.
But I didn’t come from the typical background you’d expect — I grew up in poverty, raised by a widowed mom who struggled financially. We never had enough money.
Growing up poor, I was fixated on eventually making a lot of money. My childhood room had posters of Ferraris and Porsches plastered on the walls. I was convinced having money was the key to happiness.
In high school, I would study around the clock so that I could get perfect grades and go to an Ivy League University so that I could get a job on Wall Street and never be broke again.
As a kid, I was embarrassed that my family was poor and I was determined to never feel that way again.
But when I stop and reflect on those early childhood years, I realize that while I barely had more than the clothes on my back, I had an extremely happy childhood. Love, support, friends. I had it all.
Or so I thought.
Realizing How Much I Didn’t Have Was Painful At First
Going to college at Harvard and Penn exposed me to a world I could only dream of. I had the chance to drive a friend’s Ferrari. A dream come true. Getting to fly on another friend’s private jet was like a dream I could never have even imagined a couple of years earlier.
In truth, realizing how some people had so much more than me was painful. It surfaced feelings of inadequacy. But then something important happened. I got to know these friends a lot better and realized that their lives were far from perfect. They had the same fears about their futures that I had. Some also struggled with depression.
These experiences showed me that no amount of happiness can buy you happiness. After I graduated, getting an extremely high paying job on Wall Street wasn’t as fulfilling as I had hoped it’d be.
Were those experiences fun at the moment? Yes, they were incredible! They were what I had dreamt of as a kid. But the happiness and excitement of the moment always wore off. It was fleeting.
In fact, the memories of those experiences never bring me as much happiness as being reunited with my family and getting to share a meal together.
Those private jet rides were fun but by the end of the flight, I just wanted to land and get home just like everyone else.
There Is An Important Link Between Money And Happiness
Look, I am not here to deny that having money is better than not having money. Even research shows that money and happiness are positively correlated. It’s hard to maximize life satisfaction if you are hungry or don’t have shelter.
There’s also some truth to the quote that says, “it’s more comfortable to cry in the back of Bentley.” Because while it sounds a little crazy, would you rather cry in comfort or under a bridge? Everything else equal, most people would obviously prefer to have more money.
The data shows that more money does give you additional happiness. But the critical piece that most people don’t realize is that the effect of an additional dollar wears off increasingly as you have more money.
Once you get to around $70,000 to $80,000 in income, the benefit of an extra dollar becomes so small that the relative happiness is hardly noticeable. Overall happiness for the ultra-wealthy isn’t 1,000x higher than it is for upper-class Americans. The same is true for lottery winners.
Think about someone who is simply hoping to get their basic needs covered. A new pair of shoes will mean the world to them and give them happiness every time they can walk without their feet hurting. Give the same pair of shoes to a rich person and it won’t make them more happy. Material goods only really benefit fit you up to a certain point. But spending behaviors aren’t in sync with that knowledge.
This explains the hallmark of lifestyle inflation or lifestyle creep, which is based on the principle that you get used to lifestyle changes so you keep spending more money without really increasing your quality of life. You’re basically trapped on a hedonic treadmill even though you have a high household income. The one thing you are missing is the most important thing: freedom.
Freedom to dictate how you spend your time. The freedom to decide who to spend time with and what to work on. Freedom to be where you want when you want. This is ultimately what we all seek by working for financial freedom.
But you don’t need to take our word for it.
I’m Not The Only One That Knows That Money Can’t Buy Happiness
As I prepared this article, I reflected on the most impactful things I’ve seen or read in order to help convey our message to you, and I kept coming back to the same two things.
The first was the famous Last Lecture by Randy Pausch. It has racked up millions of views and it has literally changed the way I try to lead my life. I think it will do the same for you and your happiness level.
Randy was a professor of computer science who gave a lecture after he was diagnosed with stage 4 pancreatic cancer and was given only 3-6 months to live. His now-famous lecture was about achieving your childhood dreams. Sobered by the fact that he only had a few months left to live, he focused his lecture on important lessons like showing gratitude and never giving up. Faced with the reality of death at the early age of 47, he was able to clearly see which things in life were the most important.
I first saw the video when I was 18 years old and it hit me like a ton of bricks. I had lost my father to cancer when I was a 7-year-old child when he was only 46 years old. This lecture gave me the clarity to focus on the things that matter most.
It taught me to be present and enjoy the little things. Before this, I was laser focused on getting the best education and best job possible so I would never have to worry about money again. I missed out on a lot of life experiences and the opportunities to build unforgettable memories.
Your Time On Earth Is Limited, Which Means You Have The Responsibility To Make The Most Of It
He spoke of his family, building emotionally-rich experiences, finding joy, and being present in everyday life. Do you know what Randy Pausch didn’t talk about in his lecture? Money, being rich or wishing he could buy more things.
As a respected college professor, Randy wasn’t poor by any means, but he also wasn’t a multi-millionaire. He surely had disposable income but he was more focused on finding contentment and living an amazing life than on buying things he didn’t need. He mastered the psychology of happiness.
The video is long, but it’s one of the most powerful lectures you will ever listen to. And it will be the most important thing you do today.
If it doesn’t change the way you view your life and the world, then honestly, I don’t know what will. So grab a box of tissues and buckle up.
“So today’s talk was about my childhood dreams, enabling the dreams of others, and some lessons learned. But did you figure out the head fake? It’s not about how to achieve your dreams. It’s about how to lead your life. If you lead your life the right way, the karma will take care of itself. The dreams will come to you.” – Randy Pausch
More Lessons Learned From Someone Who Knows Their End Is Near
The second thing that has left its mark on me is the book Tuesdays With Morrie. It’s a memoir written by Mitch Albom in which he recounts his time spent with a former professor who is dying from ALS.
In the book, what started as a weekly chat to keep an old friend company, ended up being the most profound series of life lessons that changed his life (and mine) forever.
Tuesdays with Morrie is filled with countless golden pieces of advice, but here are two of our favorites.
1. “Without love and family, we are like birds without wings.”
2. “Money will never bring you comfort like the people you love and their tenderness.”
Both are so true. Without finding love and meaning, you’ll have a void that money can’t possibly fill. It’s just a shame that sometimes, it takes a tragedy for those lessons to be learned.
Does that mean that money can’t bring you comfort? No, and I don’t think Morrie would disagree. He is simply stating that if we only focus on money, we will miss the things that can bring us even more comfort. When my dad died from cancer when he was only 46, he didn’t have a life insurance policy. He was the main breadwinner, and as a result of him dying I grew up in poverty.
When I got married I got a term life insurance policy because I didn’t want my wife and family to also suffer from my inability to provide for them. I say that to show you that I clearly understand the value and impact that money can have on your life.
What Dying Patients Say
As you may know, my identical twin brother, Francisco, is a doctor. Through the years in medical school and residency, Francisco has talked with many dying patients, both young and old.
In his experience, it’s not the patient’s age that differentiates those who are at peace with their certain fate and those who would do anything for an extra day.
You see, regardless of their age, some patients want and need more time to repair broken relationships. Relationships with friends, siblings, children, and parents. They have regrets or unsettled business.
A common regret he has heard is not apologizing sooner and letting small disagreements tarnish relationships.
Not a single dying patient has ever mentioned wishing they would have worked more or had more material things or money. The lesson to be learned from these individuals is to prioritize relationships. Always apologize first.
Don’t let your pride get in the way. Even if you are “right”, it’s not worth losing a relationship over it. And lastly, when it comes time to face your mortality know that money and material objects won’t matter.
Even If Money Can’t Buy Happiness, Money Still Matters
So how do I reconcile this understanding that there are more important things than money, with the fact that our #1 goal with this site is to help you become wealthy and make smart money decisions?
Well, for one, life is expensive, and not having enough to pay basic bills sucks. Living paycheck to paycheck is miserable and exasperating. Not having much money or financial security is the leading cause of stress. Stress is linked to heart disease and mental health problems. Clearly, having money and understanding personal finance is important.
As a child, seeing my mom’s debit card declined at the grocery store felt humiliating. I still remember those times like they were yesterday. By the age of eight, I basically knew not to ask for anything at the store because it caused us all a lot of pain.
A few things you can do to make sure you have enough money is to seek a higher income. This could mean getting extra money by developing secondary sources of income, getting a new job, or asking for a raise at work.
A higher salary will allow you to save more money and prioritize your spending on things that will bring you greater happiness. An amazing life experience will pay dividends for years while buying a material thing will bring you a quick high that will eventually fade.
So it’s important to set and reach financial goals, but NOT at all costs. There are many ways to live your best life while living within your means.
Don’t lose sight of what matters most. Don’t neglect your family for money. And don’t lose your marriage over it. Use your money on experiences that will enrich your life instead of acquiring a ton of objects and possessions just for the sake of it.
In a couple of years, you won’t even remember the Yeezy shoes you spent $350 to buy. Or the ugly Gucci belt you thought was cool.
You only have one life and it’s a lot shorter than you realize. So go out and create the life you want. Take it one step at a time, and realize that while money is important, it’s not the most important thing. You are more than your income level!
Camilo is a personal finance expert and the Co-Founder and CEO of The Finance Twins. I was raised in poverty by a single mother and had to learn everything about personal finance on my own. I have been featured on Forbes, Business Insider, CNBC, and US News. Earlier in my career, I worked as an investment banking analyst on Wall Street at JPMorgan Chase & Co., and I have an M.B.A. from Harvard University and a B.S.E. in finance from the Wharton School of the University of Pennsylvania.