Wealth and Happiness – Is There a Connection?

There were 10 of us living in a small four-bedroom house 50 yards from the railroad. We wore hand-me-downs and drank powdered milk. In a neighborhood of working class families, we were probably the poorest.

I remember being ashamed of the house, my shabby clothes, and how I never had enough money to buy a school lunch.

But on the whole, my childhood was happy.

And my life as an adult was even better. I can conjure up hundreds of happy memories. Lazy summer days at Long Beach. Painting houses with Peter. Learning poetry from Harriet Zinnes at CUNY and Herbert Barrows at University of Michigan. Teaching literature and philosophy as a Peace Corps volunteer in Africa. Enjoying a baguette and vinordinairelunch on my first trip to Paris. Building my first set of furniture. Falling in love. Publishing my first book. Climbing Mt. Kilimanjaro. Getting my black belt in Brazilian Jiu Jitsu. Seeing my children grow into people I admire…

I cannot deny that in my life money and happiness have often been related. But the relationship has not been simple or direct.

Try this: Make a list of 10 or 20 of your happiest and least happy memories.

When you study the list, you will likely notice, as I did, that many of the happy experiences were either free (falling in love) or not expensive (a baguette and a bottle of wine in a public park), while many of the unhappy experiences were money related.

Where does that get us?

Well, let’s look at some facts. According to a 2015 survey of 3,000 UK households (conducted by Sun Life Direct), people that don’t have enough cash to pay their routine bills report having more stress and less happiness than those that do.

That jibes with my memories of being poor.

But here’s something else the study revealed: Having lots more cash than you need doesn’t increase happiness. The happiest 10% of the households surveyed had on average only about 700 pounds (about $1000) of spare cash on hand each month.

The same general conclusion can be drawn from a 2014 Pew Research study of 43 nations. When the researchers compared wealth (in terms of GDP) and reported levels of “life satisfaction,” they found was that richest countries are happier than the very poorest countries. But only to a point. When you can’t pay for the basics (which, according to the study includes not only food, clothing, housing but also healthcare and education for your children), you are going to be relatively unhappy. But soon after those needs are met, the happiness curve is flat or barely rises.

Another study, headed by Dr. Eugenio Proto (University of Warwick) and Aldo Rustichini (University of Minnesota), found that the happiness curve actually begins to decline once a certain income level is reached. They attribute this to the onset of a “never ending cycle of aspiring for higher and higher levels of wealth.”

And according to a new study from Princeton University’s Woodrow Wilson School, the lower a person’s income falls below $75,000, the unhappier he or she feels. But no matter how much more than $75,000 people make, they don’t report any greater degree of happiness.

Trying to Make Sense of It

It is often said that money doesn’t buy happiness. Except that it sort of does. All of these studies suggest that:

  • It’s hard to be happy when you don’t have enough money to pay for the basics.
  • When you can pay your bills and have a little left over, it’s relatively easy to be happy.
  • Having a lot left over – i.e., being wealthy – does not increase happiness. It can actually diminish it.

I wasn’t sure how I felt about these findings when I first read them. On the one hand, they corresponded to my own experience, and that was somehow comforting. On the other hand, I didn’t want to admit to myself that which I knew was true: that all the time and all the stress and all that I gave up over 30 years of working delivered the wealth I wanted but brought me no extra happiness, and might have brought me less.

As I said, I didn’t want to feel like I had wasted so much of my life. So I read some more and thought some more and eventually arrived at a view of this money/happiness problem that I can live with:

 

  1. There is no benefit in regretting the past. Looking backwards is a foolish and even dangerous way to move into the future.
  2. Having “extra” money doesn’t actually hurt me unless it makes me want more of it.
  3. Since I know for sure that I (and my extended family) need much less than I have, I can spend that money in ways that might actually make me feel good.

So the question is: What are those ways?

I read a book once that summarized a host of studies on happiness. The data suggested, the author argued, that people generally get more long-term pleasure out of spending money on experiencesrather than things.

At first, I found that illogical. Experiences are ephemeral. You have them and they are gone. But things last.

It didn’t take me too long to realize the fallacy of my logic. Experiences can last. They can last a lifetime. And the pleasure they bring can be deep. Things usually bring a lot of pleasure immediately, which ebbs over time. Eventually, they might bring no pleasure at all.

So I resolved to spend less on things and more on experiences. And that has worked well.

I also figured out how to get more pleasure out of my things. It’s a simple trick. All you have to do is to pay more attention to the things you have, to decide how much pleasure they can give you, and to make decisions accordingly.

For example, I long ago discovered that after the initial thrill is gone, I get very little extra pleasure from my cars. So long as they are comfortable and drive well, I’m happy with them. So I sold most of my collection of collectible cars and contented myself with just three: one that is 30 years old, one that is 20 years old, and a third that is 10 years old.

On the other hand, the art I own gives me new pleasure every single day. It is not the art itself, of course, but my experienceof it. So I continue to buy and sell art, always in an effort to improve the quality of my collection, because the experience of doing so gives me lasting pleasure.

I’ve also discovered – and this should not surprise you – that I can “buy” a considerable dose of happiness by spending my money on other people. Instead of buying a new car for myself, for example, I’ll buy one for my sister or I’ll lease a car for a friend that needs one.

In fact, when I think of the total pleasure K and I have had from spending money over the years, there is no doubt that the greatest yield was from the “cousin camps” we’ve sponsored over the last 30 years, the help we’ve given family and friends in financial need, and our Community Center in Nicaragua.

When I was 32 or 33, I decided I wanted to be rich and made that my top priority. At 49, I realized I was rich enough and devoted my time to other goals: writing and teaching, primarily. At 65, I finally began to understand what we’ve been talking about in this essay and I decided to shift my priorities from personal pursuits (writing books, making movies, etc.) to spending my time and money on experiences that would give me more happiness. And as you know now from everything I’ve said so far, that means spending my time and money on creating experiences for others.

Imagine a set of concentric circles. You are at the center. Just surrounding you are your immediate family and very closest friends. Beyond that are your extended family and good friends. Beyond that, your acquaintances and colleagues. And beyond that, the rest of the world.

This is a diagram of the potential for pleasure that we all have. The center circle will give us the greatest temporary pleasure but the least amount of long-term satisfaction. As we move outward, we can get more or less long-term satisfaction depending mostly on how much attention we are giving to those other people. It’s not so much about how close they are to us biologically, culturally, or otherwise. It’s about how much attention we give to our giving.

That’s where my thinking is now.

As an extension of that thought process, I came up with a new idea – a goal that I’m especially excited about…

In the next five or six years, I plan to give away most of my wealth. I’m not going to be giving it to anyone that asks for it and I’m not going to be giving it to public charities. I’m going to treat the giving with the same attention I gave to the getting. And this time, instead of buying things for me and my inner circle, I’ll be investing in the good and useful experiences of many more people.

This is really a very simple (though challenging) goal. One I should have taken on decades earlier.

And what do I hope to get out of it? Not the fun of bragging rights, although I can see how this sounds like that. I’m talking about the good, steady feeling of knowing that my money is helping, or at least giving pleasure, to those that don’t have more than the “enough” we discussed earlier.

Elsewhere, I’ve pointed out that there are many kinds of wealth other than financial wealth. One can have a wealth of knowledge, a wealth of friendships, a wealth of wisdom, and a wealth of good feelings.

In the end, these forms of wealth are the only kind that matter. Once we can accept that and understand the relationship between money and happiness, we can make better decisions about how hard and long we should work for money and how best to spend it.