Can money buy happiness? What should we spend money on?

[WealthyDoc]

Several people who know me have asked "what in the world do you spend all your money on?"  I am thrifty by nature and make more money than I need.  Yet I do spend a lot.  Other than paying taxes (the biggest expense I have) I spend money on things that bring me and my family more happiness.  I love mnemonics and made a couple for this.  Money can buy happiness if you spend on the right things.  Based on my review of the literature I came up with these categories:

HEATS (Health, Education, Assets, Travel, Security) &

POETT (Pre-payments, Others, Experiences, Treats, Time savers).

These are evidence-based but also skewed to our values.  For example privacy/security is not a high value for everyone but it is for me.

Thoughts on money well spent?  Can money buy happiness?  More on this if desired: http://wealthydoc.com/blog/how-in-the-world-do-you-spend-all-that-money-every-year

[Zaphod]

No one likes to say it, and everyone is fond of picking that 75k number and saying thats all you need for "similar" happiness, but they sure do try very hard to not talk about incremental happiness. that comes above it, but so far it seems to. These studies seem gamed to get the opiating response they want anyway.

Slightly bigger house with all amenities we like...crazy awesome. Everyone (media, etc...) talks about experiences over materialistic consumption as a way to skirt the money issue, but with more money comes more frequent and much better experiences.

Im sure there is a point of diminishing returns, but is above my pay grade.

[Allonblack]

The point of a diminishing returns is certainly not above your pay grade if an extra 10 dollars doesn't make the difference between eating and not eating. The point of negligible returns is another question.

They have done studies on people who have lost limbs and people who have won lotteries and they have found that eventually happiness equilibrates to pre-life changing event levels, so I can believe people aren't happier after 75k.

That said I'm not sure the point of making more money is happiness. If it was I would say to look to positive psychology research and do thankfulness trips, meditate and get CBT+ssris if necessary before worrying about making more money. More money does allow you to be more satisfied however. You can reflect on how you've arrived when you pull into the drive way of your several million dollar home. But that's not the same thing as a better mood. Or so I've heard at least. It's going to be a long time till I make 75k a year. Seems like i could get as much guac on my chipotle burritos as I want with that much money...

[drcolleen]

I'm not sure about money buying happiness.  I think money can contribute to happiness but is not a pre-requisite, e.g. think about all those beach bum surfers or hiking guides, they are happy but dirt poor (granted that is not likely a sustainable lifestyle) vs people like my FIL who has a large stash but is stuck taking care of MIL in late stages of Alzheimer's in a house he has not finished remodeling in 20yrs because he is too cheap to spend any money.  Also, I see a lot of miserable people (you all know the kind), they are depressed or wrapped in their personality disorder/chronic pain/personal dramas vs traumas but don't admit it and they think everyone's life sucks that much and cannot be convinced otherwise--- I would guess that no amount of money will make some of these people happy (and each encounter sucks a small amount of happiness from my clinic session!).

I'll give you that there is a threshold below which it is more challenging to be happy if you are a responsible adult and above which it is easier to have feelings of security, pride, and contentment which are being equated with happiness but on a daily basis I think these are distinct goals. And, I would guess/agree that there is a point of diminishing reward somewhere far above my pay grade e.g. I would feel more secure if I already had retirement, kids' educations, and mortgages fully funded but that's unlikely to happen ahead of a long term plan and plans are always open to be derailed.

To answer the original question of "What should we spend money on", this year my husband has build a giant shop and is buying a tractor this week, he also spends a lot of time shooting his bow and gets random shooting paraphernalia, these things make him happy.  We bought a travel trailer so that we can take trips with our 4 kids+2 dogs hoping these experiences will bring us happiness.  We are going to sign our daughters up for 4H hoping this brings them a good experience (at what I assume with be an expense of parental $ and time).  I don't think you have to spend money on luxuries to buy happiness, it is sometimes the everyday things that lead to contentment and subsequent happiness.

[Zaphod]

Allonblack wrote:

The point of a diminishing returns is certainly not above your pay grade if an extra 10 dollars doesn’t make the difference between eating and not eating. The point of negligible returns is another question.

They have done studies on people who have lost limbs and people who have won lotteries and they have found that eventually happiness equilibrates to pre-life changing event levels, so I can believe people aren’t happier after 75k.

That said I’m not sure the point of making more money is happiness. If it was I would say to look to positive psychology research and do thankfulness trips, meditate and get CBT+ssris if necessary before worrying about making more money. More money does allow you to be more satisfied however. You can reflect on how you’ve arrived when you pull into the drive way of your several million dollar home. But that’s not the same thing as a better mood. Or so I’ve heard at least. It’s going to be a long time till I make 75k a year. Seems like i could get as much guac on my chipotle burritos as I want with that much money…

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I sure am. Its not that they arent happier, it just slows down incrementally as you go above it, but the studies are overall poor. All depends on how "happiness" is defined. Also, eating is one of the lowest basic requirements on the hierarchy of life, if you dont have that happiness is a few distant accomplishments away on the horizon.

[DoubleMDs]

This is always debated and I never understand why. Yes money CAN buy happiness but it is not required to be happy. My wife and I are happy just to take a vacation together but there's no doubt the luxury suite with an on call butler makes it more enjoyable then the small hotel room. More money is the difference. The bottom line is money isn't what makes a person happy in and of itself. But it sure can make life easier and thus make happiness a lot easier to come by.

[retinadoc]

i just started working and dont spend much (<5k/month). i have arbitrarily set a budget of 6k/month for 2017. i plan on increasing my monthly budget by 1k/month each year until i hit a max (i hope!) of around $10-15k/month. my feeling is that relative luxury (started from the bottom, now we here) is more enjoyable than absolute luxury.

[DMFA]

Money can buy happiness if the things needed to attain happiness require money, but money can be spent without attaining happiness, and happiness can be attained without spending money.

Was that ambiguous enough?

Personally, the things that have made me the happiest in life, looking retrospectively, are fairly balanced as to what cost money and what didn't.  In order to enjoy my family and best friends I made throughout childhood and college, I now have to spend money to go visit them.

[GXA]

There are diminishing returns after one's basic needs are fulfilled.  I like to think I would be happier after I win the Powerball - I guess I will let you know after I hit it big  

[Kamban]

Allonblack wrote:

The point of a diminishing returns is certainly not above your pay grade if an extra 10 dollars doesn’t make the difference between eating and not eating. The point of negligible returns is another question.

They have done studies on people who have lost limbs and people who have won lotteries and they have found that eventually happiness equilibrates to pre-life changing event levels, so I can believe people aren’t happier after 75k.

That said I’m not sure the point of making more money is happiness. If it was I would say to look to positive psychology research and do thankfulness trips, meditate and get CBT+ssris if necessary before worrying about making more money. More money does allow you to be more satisfied however. You can reflect on how you’ve arrived when you pull into the drive way of your several million dollar home. But that’s not the same thing as a better mood. Or so I’ve heard at least. It’s going to be a long time till I make 75k a year. Seems like i could get as much guac on my chipotle burritos as I want with that much money…

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This $75K max has to be put in the context of one's upbringing, socioeconomic standing, and needs / luxuries that bring him or her happiness.

A blue collar worker making $35-50K per year might be very happy since that is all he he has gotten and probably likely to achieve and he has leaned to live and spend within that amount, that bringing him maximum comfort and happiness. So for him anything more than $75K might not bring much more happiness.

Taken on the other hand the children of the physicians on this board. Even though the physicians may be frugal and save a lot for FI they still spend well above $75K per year for their needs and this brings the same amount of happiness or unhappiness as the blue color worker family. Why should they go down to $75K per year and be told that > $75K won't bring additional happiness. You are a student and hence at this point in time $75K is a lot. But once you become a resident. fellow or attending your wants go up and so does you need for money.

I live frugally except in two areas - electronic toys including audio which costs a bit and foreign vacations that also put us in a $20-25K hole for each vacation. Especially when you include airfare, even the basic economy class. We are too old for hostels and backpacking and we have to take vacations while our daughter is off in the school summer / winter holidays, when the fares and vacation costs are the highest. These bring us the greatest happiness and they make us having to spend much more than $75K per year for our basic happiness. Not taking the vacations won't kill us but we will be unhappy. So that is why I call bulls**t these researchers who state that $75K is all that you need for near maximum happiness and spending more than that won't give you much.

Everything has to be taken in context.

 

[Zaphod]

Kamban wrote:

Allonblack wrote:

The point of a diminishing returns is certainly not above your pay grade if an extra 10 dollars doesn’t make the difference between eating and not eating. The point of negligible returns is another question.

They have done studies on people who have lost limbs and people who have won lotteries and they have found that eventually happiness equilibrates to pre-life changing event levels, so I can believe people aren’t happier after 75k.

That said I’m not sure the point of making more money is happiness. If it was I would say to look to positive psychology research and do thankfulness trips, meditate and get CBT+ssris if necessary before worrying about making more money. More money does allow you to be more satisfied however. You can reflect on how you’ve arrived when you pull into the drive way of your several million dollar home. But that’s not the same thing as a better mood. Or so I’ve heard at least. It’s going to be a long time till I make 75k a year. Seems like i could get as much guac on my chipotle burritos as I want with that much money…

Click to expand…

This $75K max has to be put in the context of one’s upbringing, socioeconomic standing, and needs / luxuries that bring him or her happiness.

A blue collar worker making $35-50K per year might be very happy since that is all he he has gotten and probably likely to achieve and he has leaned to live and spend within that amount, that bringing him maximum comfort and happiness. So for him anything more than $75K might not bring much more happiness.

Taken on the other hand the children of the physicians on this board. Even though the physicians may be frugal and save a lot for FI they still spend well above $75K per year for their needs and this brings the same amount of happiness or unhappiness as the blue color worker family. Why should they go down to $75K per year and be told that > $75K won’t bring additional happiness. You are a student and hence at this point in time $75K is a lot. But once you become a resident. fellow or attending your wants go up and so does you need for money.

I live frugally except in two areas – electronic toys including audio which costs a bit and foreign vacations that also put us in a $20-25K hole for each vacation. Especially when you include airfare, even the basic economy class. We are too old for hostels and backpacking and we have to take vacations while our daughter is off in the school summer / winter holidays, when the fares and vacation costs are the highest. These bring us the greatest happiness and they make us having to spend much more than $75K per year for our basic happiness. Not taking the vacations won’t kill us but we will be unhappy. So that is why I call bulls**t these researchers who state that $75K is all that you need for near maximum happiness and spending more than that won’t give you much.

Everything has to be taken in context.

 

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Idk if "context" is even necessary. They all say "diminishing" not "no further happiness". Its just as you and another poster mentioned. You can sleep in a van in the beach parking lot for cheap or get a sweet suite with all the amenities, and Im certainly enjoying the latter more, especially as I get older. Its simply a strange argument to be worrying about at all. No, we dont need much to satisfy our basic needs, but 75k is no magic number and the studies are not great at all. Theres no real inflation adjuster, HCOL/LCOL adjuster, family size, etc...

To me all the things people have mentioned, security, knowing my family is taken care of no matter what (insurance, etc...) makes me very happy. I pay upwards of 50k a year on just insurances. Anyways, all those studies make a significant clarification about what is "happiness" and the headlines never seem to mention that those that made above 75k were more "satisfied" with their life in general, friends, direction, etc...which to me is pretty interchangeable with happiness. It just didnt change your wake up in the morning level of happiness, which to be perfectly honest is somewhat a fixed scale.

In Mississippi its 65k whereas in Hawaii its 122k until that same level is breached. I dont really care but just always have been fascinated how everyone falls in line with this clearly arbitrary and meaningless type of studies. In reality almost all americans report themselves as "happy" everyday anyway, so its hard for a typical social science study to get any real discerning data at all. Also, its pretty obvious that a little bit more is a little bit better, and at some point it gets less so, but 75k sure seems low.

Now, I came from very poor, ie food stamps/banks, rotating living space with my moms friends for months when out of a house, etc...so I certainly dont need much to feel super lucky/blessed, and dont have the need to show how far Ive come either, but...still think these are a little disingenuous and more opiate for the masses type of articles. Especially how they gloss over the more satisfied to an equal degree of pay increase no matter your income parts. It makes the most people feel the best, but not necessarily true.

[HLM]

This has been an interesting thread to read.

The concept of whether money can buy happiness is one that I've been thinking about a lot this past year as I've tried to increase our savings rate by a lot which has necessarily meant that we have spent a lot less this year.

I agree with DMFA--I don't think there is a simple relationship between happiness and money. Sometimes more of it can make you happy and sometimes not depending on the spending situation.

For example, in recent years, our family spent tons of money eating out multiple times a week and I had convinced myself that doing so was adding to my happiness. But when we cut our eating out budget to less than a quarter of what we used to spend, I realized that I didn't miss it that much and that I actually enjoyed the times I have eaten out more this year because it's felt more like a special treat. I thought our kids would groan about not eating out as much since that's all they've known but it took about 3 months before one of them even commented that they noticed we hadn't eaten out in a while and there haven't been any real complaints since.

On the other hand, we still spent a decent amount of money on vacations this year and that money felt well spent and seemed like it did add to my happiness. So in that case maybe the money did make me happier.

However, when I try to think about my happiness levels at various times in my life, I ultimately have to admit that my happiness has not ever really been tied to how much money I had. I grew up poor with a single mom. And although I'm on the low end of the pay scale for a doctor, I still consider myself to be among the working wealthy of this country now. So I've experienced a wide range of how much money I've had and I just can't say that I can easily make a connection between my happiness growing as I've moved from being a poor kid who grew up in a family without enough money to own a car to a woman with enough money to take my own kids to Italy for a summer vacation.

I'd like to say that I stress about money less now that I have more of it. But I'm not sure that's even true. When my husband and I were first married and we barely had two nickels to rub together, I spent very little time thinking about money at all. I can't even say I felt stressed about how little we had in savings (essentially zero)!

Now making the most money I've ever made in my life, with the most savings ever and a reasonable plan to eventually retire in a comfortable (for me) set up, I find myself perseverating on money matters all the time and that feels stressful and not happy making at all!

As I said, the happiness/money connection is one I've thought about a lot this past year without coming to any solid conclusions. It really makes my head spin! But I still enjoy thinking about it and hearing other's thoughts!

 

[Zaphod]

HLM wrote:

This has been an interesting thread to read.

The concept of whether money can buy happiness is one that I’ve been thinking about a lot this past year as I’ve tried to increase our savings rate by a lot which has necessarily meant that we have spent a lot less this year.

I agree with DMFA–I don’t think there is a simple relationship between happiness and money. Sometimes more of it can make you happy and sometimes not depending on the spending situation.

For example, in recent years, our family spent tons of money eating out multiple times a week and I had convinced myself that doing so was adding to my happiness. But when we cut our eating out budget to less than a quarter of what we used to spend, I realized that I didn’t miss it that much and that I actually enjoyed the times I have eaten out more this year because it’s felt more like a special treat. I thought our kids would groan about not eating out as much since that’s all they’ve known but it took about 3 months before one of them even commented that they noticed we hadn’t eaten out in a while and there haven’t been any real complaints since.

On the other hand, we still spent a decent amount of money on vacations this year and that money felt well spent and seemed like it did add to my happiness. So in that case maybe the money did make me happier.

However, when I try to think about my happiness levels at various times in my life, I ultimately have to admit that my happiness has not ever really been tied to how much money I had. I grew up poor with a single mom. And although I’m on the low end of the pay scale for a doctor, I still consider myself to be among the working wealthy of this country now. So I’ve experienced a wide range of how much money I’ve had and I just can’t say that I can easily make a connection between my happiness growing as I’ve moved from being a poor kid who grew up in a family without enough money to own a car to a woman with enough money to take my own kids to Italy for a summer vacation.

I’d like to say that I stress about money less now that I have more of it. But I’m not sure that’s even true. When my husband and I were first married and we barely had two nickels to rub together, I spent very little time thinking about money at all. I can’t even say I felt stressed about how little we had in savings (essentially zero)!

Now making the most money I’ve ever made in my life, with the most savings ever and a reasonable plan to eventually retire in a comfortable (for me) set up, I find myself perseverating on money matters all the time and that feels stressful and not happy making at all!

As I said, the happiness/money connection is one I’ve thought about a lot this past year without coming to any solid conclusions. It really makes my head spin! But I still enjoy thinking about it and hearing other’s thoughts!

 

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It definitely helps to figure out what actually increases your happiness and what doesnt. I just like hanging out with my family and friends, and riding my bike which aside from the occasional trip is a very thrifty endeavor. Sometimes you can become a victim of knowledge of course, its not always bad to be a little ignorant of the kind of situation you're in, and you should try to not let this new knowledge disrupt you too much as you're obviously doing very well. It takes time for things to really come together.

While I wish I had figured out finances in residency, being blindingly ignorant of how bad my money situation was certainly allowed me to focus on what I had to do at the time. I did spend several months freaking out and it faded as I got control and saw the light was real...somewhere down the line.

[TheHappyPhilosopher]

Money can buy pleasure and comfort, and pleasure and comfort can lead to happiness, but money can not buy happiness. Happiness is something that emerges from living a life with meaning. The problem is that almost no one really believes this deep down. We can intellectualize it, but we all really believe that more money will make us happier. We bolster this idea with conformation bias (when we do feel happy we attribute it to monetary things). Now this is not to say some basic level is needed to provide food, shelter, health etc. but I  think what we are really talking about here is the extra stuff (ie. luxuries).

I'm not sure how much I believe those 75k is the optimum happiness level studies, but there is something to this. I see no real correlation with spending and happiness in my cohort of friends, and also there has been no correlation in my own life with spending and happiness. Some of my happiest stretches were my poorest, and most of my miserable years were quite spendy.

[Zaphod]

TheHappyPhilosopher wrote:

Money can buy pleasure and comfort, and pleasure and comfort can lead to happiness, but money can not buy happiness. Happiness is something that emerges from living a life with meaning. The problem is that almost no one really believes this deep down. We can intellectualize it, but we all really believe that more money will make us happier. We bolster this idea with conformation bias (when we do feel happy we attribute it to monetary things). Now this is not to say some basic level is needed to provide food, shelter, health etc. but I  think what we are really talking about here is the extra stuff (ie. luxuries).

I’m not sure how much I believe those 75k is the optimum happiness level studies, but there is something to this. I see no real correlation with spending and happiness in my cohort of friends, and also there has been no correlation in my own life with spending and happiness. Some of my happiest stretches were my poorest, and most of my miserable years were quite spendy.

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Happiness via direct spending seems exceedingly fleeting and more of a symptom of looking for happiness. Having meaning and a "good life" is obviously super important but is so individualized and difficult to quantify I think people just look for simpler proxies, and money fits the bill. None of these things are perfect, but you know, publish or perish and these articles are very well received.

I seem to find more happiness with the security and stability a higher income has provided, but think that is just from my background of no stability, its what I tend to value now. Its going to be a bit different for everyone.