Money can buy happiness (but usually doesn’t)

“New car, caviar, four-star daydream
Think I’ll buy me a football team”

-            Money, Pink Floyd, 1973

The relationship between money and happiness is complex.  Beyond a certain level of wealth, there is no evidence that happiness increases with wealth.  And often the reverse is true; our happiness can decrease as we get richer.   

Granted, for the poor, every extra dollar counts.  More money provides for life’s necessities, relieves financial stress and increases life satisfaction.

Wealth paradox

But for those with average or higher than average incomes, the nexus between happiness and increasing wealth breaks. For those households with enough to satisfy basic needs, more money does not deliver happiness and it can increase financial stress.

We don’t want more stuff

It is because human beings are notoriously bad at predicting what will make them happy.  So, they spend their money on the wrong things, like European cars in their driveway, bathroom renovations and new season fashions. Often, it’s financed on credit, spending money that hasn’t been earned yet, and increasing the day-to-day financial burden.

Financial commentator, Dave Ramsey, described the phenomenon like this, “We buy things we don't need with money we don't have to impress people we don't like.”

Benjamin Franklin was more generous, “Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”

How happiness happens

So, what then should we be spending our money on? 

The field of positive psychology holds some clues.  Research has proven what makes us happy; human relationships, being part of something bigger than ourselves, serving others and being in control of how we spend our time. 

We have seen it ourselves. At Daniel Crump Financial Planning we have helped hundreds of people plan for their retirement.  The most successful retirees have freedom to live generously, sharing their experiences with the people they love. And they align their financial decisions with their values, spending time and money on the causes they care most passionately about.
 

In this way, you can make your money work for you, rather than the other way around. Because in the words of the greatest showman, PT Barnum, “Money is a terrible master but an excellent servant.”

If you would like to know more, give us a call. We would love to help.

-        Daniel Crump is an independent financial adviser

This article is general and does not consider your personal circumstances so it may not be appropriate to you.  If you would like advice specific to you, please let us know at daniel@danielcrumpfp.com.au