By Luke Erickson
With the holidays that come this time of year we’re reminded of many of the things that bring happiness to our lives, such as candy, turkey, and presents. If only happiness were so simple, right?
Happiness is an elusive thing. Yes, food and gifts can provide small, temporary paths to a little happiness, but research indicates that sustained happiness involves things like gratitude, life-purpose, relationships with others, etc.
And where does money fit into the equation?!
First of all some quick spending tips. Research has been pretty consistent in showing that dollar for dollar, money spent on experiences, time-saving options (like a house cleaner), and connecting with others (dinner out with friends) tend to produce more happiness than material goods of the same price.
But what about earning more money? Since money spent on certain things like experiences can boost happiness, shouldn’t more money and more spending result in even more happiness?
It’s common to see articles listing the highest earning actors, most successful rock stars, richest billionaires, etc., but how often do you see those same kinds of lists for happiness? What if we could actually measure happiness like we can dollars? Who would be the happiest person on earth? Would the list of happiest people line up with the same folks on the billionaire list? We know instinctively that that is probably not the case, yet it is so easy, and we’re so often pushed by the pop media, to equate money with happiness. This is a sentiment echoed by a quote I came across a while back, “Money can’t buy happiness, but it can buy a pretty close imitation.”
How close do money and happiness align? A well-known study in 2010 by Princeton professors Daniel Kahneman and Agnus Deaton found that a person’s happiness level will generally rise as they make more money, but only up to a point. That point, according to their estimation, was about $75,000 a year per person. A later study out of Purdue published in 2018 put that number more around $95,000 per person per year. But the evidence suggested that anything over roughly $100,000 per year did not correlate much with increased happiness.
In other words, once a person has some fairly reasonable needs and wants covered, the only thing extra money will do is increase expectations that offset any increases in income.
When choosing careers, we might visualize an “importance-of-money spectrum.” On one end of this spectrum are those who strongly believe that the more money they earn, the happier they will be. This belief drives many people into careers that they do not really enjoy, but which are fairly effective at filling bank accounts. On the other end of the spectrum are those who believe that money has very little value in determining one’s career, life pursuits, and ultimate happiness. These folks can sometimes find deep and lasting meaning in their careers, but can also be left wanting in certain basic financial goals, which can ultimately subtract somewhat from the happiness level the meaning in their jobs gives them.
It would seem that the key to money and happiness is in finding a balance in the middle of the spectrum, or, in other words, in finding that career path where you can pursue both meaning AND a fairly generous paycheck. Easier said than done, right? In a 2018 survey by BetterUp labs, 9 out of 10 people said they would give up about 25 percent of their income for a job that was more personally meaningful, meaning that most people do not find much meaning in their chosen careers.
So many of us feel stuck because we don’t know where to find such jobs, or, heck we don’t even know what our strengths are and what will actually give our jobs meaning. One way to find out is to explore and increase your personal strengths at viacharacter.org. Or, just try jotting down a few of your values until some patterns emerge that might translate into a career adjustment that you may find to be more fulfilling.
Now, let’s say that somehow you are able to become one of the few who have managed to find that perfect balance of meaning and pay in your career. Is your happiness level (as it relates to money) set? Nope! That would be far too easy. We also have to avoid the tendency to compare ourselves to others.
Comparison is one of the quickest paths to unhappiness with money, and yet we all do it. Even if we may be better off than 90 percent of our neighbors, we will tend to focus our attention in on that one neighbor who always seems to be driving a newer car, and taking slightly more luxurious vacations, and of course with the slightly greener grass. That’s the one we choose to compare ourselves to…and with predictable results: discontent with what we have.
Teddy Roosevelt is credited with saying, “Comparison is the thief of joy.” Today a similar concept is found in the popular term FOMO (Fear Of Missing Out). Experts say FOMO is exacerbated by comparisons to others on social media, where the vast majority of posts are meant to highlight the very best of a person’s life and hide the worst. Research has shown that about 10 percent of a typical person’s thoughts involved comparisons to others. So, if Teddy is correct, that means we spend 10 percent of our time unintentionally sabotaging our own happiness. The good news is that one of the best tools for combating this tendency is pretty simple and straightforward. It’s gratitude.
Author David Steindl-Rast said, “Gratefulness is the key to a happy life that we hold in our hands, because if we are not grateful, then no matter how much we have we will not be happy – because we will always want to have something else or something more.”
Keeping a regular gratitude journal can help us keep in mind those things that we might otherwise take for granted. Robert Emmons, a professor at UC-Davis, said that emphasizing people over things and treating the good things in our life as “gifts” can make a substantial difference. It also serves as an added distraction from the tendency to compare. When we’re dwelling on gratitude for something or someone, it’s hard to simultaneously dwell on feelings of comparison and discontent.
This brings us to the last main ingredient for happiness: strong relationships with others. Weak relationships tend to foster misunderstandings and jealousy, whereas strong relationships help you see a person as a whole – complete with strengths and weaknesses – which will help melt away tendencies for superficial comparisons.
So yes, money can help you on your path to happiness, but that is only one ingredient. Relying solely on money for happiness would be like using only sugar to make a batch of cookies. Sure, sugar is a pretty important ingredient, and may even taste okay on its own, but without the other ingredients it will never be a cookie.
In summary, take some time this holiday season to be grateful for the good things (“gifts”) and people in your life, and give a little thought to ways you might find a better balance of meaning and pay in your career.
Luke Erickson, Ph.D., AFC®, is an associate professor of personal finance for the University of Idaho. He lives and works in the Treasure Valley. Luke and his wife Rachel have been married for 15 years and live in Meridian, Idaho with their four energetic children. Got questions or comments about kids and money? Email them to email@example.com; he’ll respond in future articles.