Money Can’t Buy Happiness, Right?

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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!

Money Can't Buy Happiness

20 thoughts on “Money Can’t Buy Happiness, Right?”

  1. Wonderful post. Too many people realize that fact until it’s too late.

    Family, friends, and experiences make life worthwhile. Money is just a tool, nothing more. Materialistic things quickly fade away.

    Reply
    • Okay, this is where I’m going to cut in and say you people have no idea what you’re talking about. You felt that it didn’t give you pleasure because you didn’t suffer enough. I can guarantee that one. If you even lived one day in an actual struggle (being an adult with nothing), you would off yourself in a second. You cannot control your life. But you can control money. Ever think about that? Bob Dylan said it best. Its way better crying in a Mercedes than on a bicycle. Honestly, if you’re not happy with a large bank account and a family–youre an airhead.

      Reply
      • Sorry to hear about your struggles. We also struggled growing up and it wasn’t easy. But we still feel that past a certain income, extra money isn’t going to bring you sustained happiness. Those findings have also been found in studies. Obviously, having everything you want (including friends, family, money, etc.) is the best case scenario, but if I had to pick between my loved ones or an endless supply of money, I know what I would pick.

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  2. This is all so very true, and far too many people chase money without working out that what they should really be chasing is happiness. Although I do subscribe to the philosophy that: ‘Money can’t buy you happiness, but it makes being miserable a whole lot easier’

    I also completely agree with the idea that a lot of happiness lies in other people, particularly family. I am acutely aware that I have a very short window with my kids before they grow up and leave home. I often have that old Harry Chaplin song “Cat’s in the Cradle” running through my head as an exemplar of where I don’t want to end up.

    Reply
  3. Hi Finance Twins,

    This article is unfortunately, not in accordance with whats known about the impact on income on subjective well being.

    Here is the abstract of a great article on the economics of the question is below:

    There is a long tradition of psychologists finding small income effects on life satisfaction (or happiness). Yet the issue of income endogeneity in life satisfaction equations has rarely been addressed. The present paper is an attempt to estimate the causal effect of income on happiness. Instrumenting for income and allowing for unobserved heterogeneity result in an estimated income effect that is almost twice as large as the estimate in the basic specification. The results call for a reexamination on previous findings that suggest money buys little happiness, and a reevaluation on how the calculation of compensatory packages to various shocks in the individual’s life events should be designed.

    Bottom line: more money is associated with more happiness.

    Here is the link to the article:
    https://link.springer.com/article/10.1007/s00181-009-0295-5

    Reply
    • Hi James, thanks for sharing. We were able to contact the author (Professor Powdthavee) of the article you shared and he agreed with our main premise that money isn’t going to make you as happy as you think it will.

      Reply
    • It’s all relative, I believe more money brings more happiness, and a few 80- and 90-year-olds told me the same thing

      We can’t make any rule for anyone because each one of us is different, That’s the main point,

      Reply
  4. Early in my career I flew on our company jet a lot. Once even as the only passenger with two pilots who both made more money than I did. It was pretty cool I have to say. Never having to go through security and being able to take off as soon as you arrived at the FBO did make me feel pampered. It took 40 minutes to get to Houston and 45 to get to Chicago and that was from the time I stepped out of my car. It’s not enough to make someone happy, but it sure made me happy at the time!

    Reply
    • Having had a similar experience, I know exactly what you mean. Some things in life are really nice and really fun. But at the end of the day, they pale in comparison to time spent with your loved ones.

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  5. Knowing facts and opinions wildly around this statement, I’d say it’s TRUE: Money cannot, in fact, bring extra, long-term happiness. However, as commented above, many people that don’t HAVE a lot of money think the exact opposite thing. Their brainshave been fixed on them being poor, and not that even without money, your heart and well-being can be as happy as you’ll ever be.

    Reply
    • I agree, Sara. Sometimes we just have to roll with it as we go. Sometimes with our brains being fixed on what we DON’T have diminishes the gratefulness of what we DO have and love.

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  6. Some people just don’t think to be grateful of their loved ones and don’t see that what they do have is enough. It makes me so sad when I hear of someone with post-mortem-depression, because sometimes that person didn’t get to know that person very well at all, and wish they did. Step forward, my lovelies, and do what you know is right.

    Reply
  7. I’m only young, at 25, but I initially agree with this statement. Having a low-paying job isn’t all fun and dandy like salty candy, but at least I am as grateful as I can be for everyone I love and hopefully in the future, I will feel the same.

    Reply
  8. People find money as their way out of all their problems. They see it as their ticket to a better life but it’s not always the case. Money isn’t the root of all evil but it can sometimes be the reason why families can’t spend time with each other. Spending time with families is the best way to live life because you build memories – memories that last forever.

    Reply
  9. Well, you have quite a mix of comments on here. Clearly, a subject of controversy which is ironic. I suppose, many patrons who frequent your site may not be super happy to see the topic of this post. Its interesting to see their values surfacing in their comments. I’d say 90% seem to agree. I am in that majority group too. As a lowish income earner, I am feel that my focus needs to be on happiness and less on fiances.

    Reply

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