How Much Money Do You Really Need To Be Happy?

So many of us work long, hard hours to provide for our families and children-often long hours away from home, maybe taking on extra jobs at times or hoping to get a raise in an effort to make our lives richer financially–working harder at the expense of sleeping and taking good care of ourselves in order to have extra money. It seems so many of us just aren’t content with what we have now. But is there a point at which striving to earn or acquire extra money can be counterproductive? Or, in other words, when having extra money just doesn’t make us “happy” anymore?
In a recent column in the the Sunday Review of the New York Times, Elizabeth Dunn and Michael Norton attempt to answer this question and by doing so create a perfect opportunity for us to reflect about the limitations of how the desire to accumulate money can ultimately affect our happiness.
There certainly is a relationship between your salary and happiness; people who earn a good living are often happier than people who live in poverty. Having extra money can certainly enhance our lives by providing extra food, objects and creature comforts in our homes.
But the irony is that earning additional income will actually not lead to extra happiness, once you have already attained a “comfortable standard” where you have what you need to function and be content. The “comfortable standard” can be quite variable based on the city, state or country you live in. Here in the US, according to Dunn and Norton, the standard falls around $75,000. Researchers at Princeton examined Gallup poll data from nearly 500,000 US households and found that higher family incomes were related to better moods on a day to day basis. However, the positive effects of money had no effect on people’s happiness and moods after a level of $ 75,000.00 was attained.
The issue then arises why we work so hard after we have reached an income level that is able to make us happy. Beyond a strong work ethic engrained by family values, or the desire to excel and compete with others, it appears that our ideas about money and happiness have gone awry. Dunn and Norton explain that based on their research with a national sample of Americans, the thought that life would be happier with double their salary (from 25K to 55K) did not translate into any measurable happiness. (Twice the money did not lead to twice the happiness). But according to Dunn and Norton’s data, people who earned 55K were only 9 percent more content than those making $25,000.00. 9 percent happier may be difficult to quantify, and better than 0 percent, but not the 100 percent you may be expecting from the extra income.
However the true take-away from all of these mental exercises with money and happiness is that what we do with our money is more important than the money we earn. The thought that making more money can allow us to have bigger houses and fancier cars to nicer digital televisions-more for ourselves- is ultimately ineffective at turning money into happiness. Research has demonstrated that if you are going to spend money on yourself, you may want to switch from buying material objects (TVs or cars) to buying experiences (trips and special events). Based on additional research by Dunn and Norton, while buying more “experiences”, you will be better off by just buying less in general and instead buy for others.
As an extension of this concept, Dunn and Norton refer to the concept of “underindulgence”- indulging a little less than you typically do- may lead you to a place where you achieve more happiness for your money. The concept is that by denying yourself the excess that you may ultimately desire may allow you to savor and appreciate the finer things in life. Dunn gives the example of indulging in chocolate sparingly -instead of in excess- may actually make you appreciate the taste and texture much more.
An extension of the underindulgence concept also relates to the ban on oversized regular soda that New York City recently proposed. In many areas of the country, the childhood obesity crisis has led to a ban on regular soda in a number of schools and campuses. According to research, restricting access to sugary sodas only at particular times of the day may actually have the ability to improve taste, while having a beneficial effect on limiting consumption. In fact, research from Arizona State University has shown that individuals enjoy the taste of soda much more when they can’t have it immediately. Food experts have previously recognized that the first sip or the first bite is often more enjoyable than the 30^th bite or sip.
A more extreme but scientifically proven means of increasing the happiness you derive from your money is a bit more radical-not spending it on yourself. It turns out that people who spend money on others rather than themselves are actually happier in the long run. They derive a greater feeling of reward and satisfaction and this helps to enrich their inner feelings of sharing and contentment.
So instead of buying that extra watch or TV the next time you have some new found money, consider the alternative: indulging less and offering others the opportunity to share in your wealth.