In the latest survey of U.S. college freshmen, when over two hundred thousand students at 279 colleges and universities were asked about their most important life goals, 77 percent checked off “being very well off financially.” But what does achieving this goal mean for our ultimate well-being? The old adage says that money can’t buy happiness, but is that really true? To better understand the complicated relationship between income and happiness, I spoke to an Ivy League educated plastic surgeon with a flourishing private practice. By the standards of many Americans, he had it all. His long hours were well rewarded and he and his wife were able to enjoy the benefits: He owned two vacation homes, two sport cars, and a cruising yacht. But over time, the pleasures of his position had diminished. He noticed that the meaning in his work and in his lifestyle started to seep away. “I had difficulty feeling motivated, and I had difficulty getting out of bed in the morning,” he told me. “That’s what I remember the most.” He realized he had everything he wanted, but was completely miserable. Why? Studies reveal that although there is a significant relationship between income and well being, it isn’t as straightforward, or as strong, as we might think. Research shows that as long as our basic needs are met, it's how we spend our money—not how much we possess—that has the greater influence on our happiness.
According to the latest data, the higher we are on the economic ladder, the happier we report ourselves to be. Of course, it’s not at all surprising that money buys some measure of well-being—having money not only gives us opportunities to acquire conveniences and luxuries but affords us greater status and respect, more leisure time and fulfilling work, access to superior health care and nutrition, and greater security and control. But money’s impact on day-to-day well-being appears to be negligible. In two studies published in 2010, when asked to reflect on their overall satisfaction, wealthy individuals said that they were happier than their peers. But when asked to consider their moment-to-moment happiness—e.g., “How joyful, stressed, angry, affectionate, and sad were you yesterday?”—wealthy individuals were no more likely to report having experienced happy feelings.
When considering the link between money and happiness, it’s also important to understand that humans are prone to hedonic adaptation—that is, we quickly become inured to changes in our lives—and my colleagues and I have found that that we get used to the positive changes, such as rises in income or acquisitions of new homes or cars, much more rapidly than the negative ones. Thus, sustained happiness is not found in accruing wealth—because we so rapidly get used to it—but rather in exercising that wealth wisely. Research from my laboratory and others’ reveals a number of strategies and practices to accomplish just that.
Growing evidence from Cornell University and University of Colorado at Boulder reveals, for example, that it is experiences—not things—that make us happy. Why are experiences superior to possessions? First, most possessions don’t tend to change after we’ve bought them, so we adapt to them a great deal faster. Once we open the box and put our new item on the shelf, or in the closet or garage, it won’t be long before we feel like it’s been there forever. Whereas material objects typically grow old and dull with time, until we are eager to replace them, experiences can actually grow even more positive and more enjoyable as time passes. A wonderful weekend, dinner, or conversation can become burnished and embellished in our memories and brings happiness every time we revisit it.
Second, experiences are intrinsically more social—more likely to be shared, anticipated, and relived with other people—than are things. Vacationing or bowling with a friend is a lot more likely to cement our friendship than discussing our new wristwatch or bedroom set.
A third reason experiences make us happier than possessions is that we are less likely to compare them to those of others, and thus less likely to learn that they have fallen short. I have shown in several studies that people who compare themselves with others—for example, in how competent or smart they are—are less happy than people who pay little heed to comparisons. Likewise, the average person’s happiness is influenced more by what our peers our making than what we make ourselves. A famous 1998 study showed that people prefer to live in a world in which they receive an annual salary of $50,000 when others are receiving $25,000 than an annual salary of $100,000 when others are making $200,000.
Perhaps the most reliable and direct way to maximize the happiness and fulfillment that we can extract from money is through need-satisfying pursuits—for example, by spending our capital on developing ourselves as people, on growing, and on investing in interpersonal connections. In other words, the purchases or expenses that will yield the greatest emotional benefit are those that involve goals that satisfy at least one of the three basic human needs—namely, competence (feeling capable or expert), relatedness (belonging and feeling connected to others), and autonomy (feeling a sense of mastery and control over one’s life). Research conducted in the United States, Canada, and Japan shows that spending money on need-satisfying goals, like mastering a new sport, celebrating a friend’s achievement, taking one’s nephew to the circus, or traveling to a distant land in order to aid victims of a natural disaster, can trigger “upward spirals”—that is, streams of happy moods, optimistic thoughts, and kind acts that gain momentum, propagate, spill over, and reinforce one another as they unfold.
An additional strategy for buying happiness is to spend money on others instead of ourselves. Having money means that we have the ability to contribute substantively to our loved ones and communities, and even change the world. Whether through philanthropy (e.g., donating to the local school district or helping immunize whole nations) or sharing our wealth with family and friends, our money can profoundly influence our own and others’ happiness. A University of British Colombia study surveyed a group of employees before and after they had received a financial windfall. The size of the bonus varied, but surprisingly the extent to which the award boosted employee happiness was not influenced by its size, nor by whether it was spent on necessities (like bills) or leisure. What did boost happiness was the percentage of the bonus that was spent on charities or buying something for others. When we give to others, we feel not only more positive about ourselves (that is, as a compassionate, altruistic person) but about the recipients as well (that they are worthy of our kindness and respect). We feel less distressed about the poverty and suffering in the world and in our neighborhoods, and we gain a greater appreciation for our good fortune. We are distracted from our own petty problems and ruminations. When it’s not done anonymously, sharing with others also stimulates positive social interactions, spawns new friendships and relationships, and improves old ones. Because of all these reasons, as multiple experiments from my own laboratory have shown, extending generosity is one of the simplest and most powerful ways to bolster and sustain well-being.
Finally, a highly rewarding way to spend our income is to use it to buy ourselves more time. The irony is that, in the United States, the more wealth people have, the greater number of hours they work. If we spend our money to open up more “free” hours in the day—for example, by reducing our work hours (because we already make enough) or paying others to perform time-consuming chores (e.g., stand in line at the post office, fill in tedious documents, call airlines)—we can spend our time enjoying those things in life that both empirical and anecdotal evidence suggests make us happy. Essentially, these activities include the kinds of need-satisfying pursuits I discussed earlier—for example, connecting with friends, nurturing intimate relationships, socializing at parties, consuming art, music, and literature, learning new languages and skills, honing talents, and volunteering at our neighborhood hospital, church, or animal shelter. Tellingly, these are precisely the activities that people on the brink of death report wishing they would have spent more time doing in their everyday lives.
What good is money if it can’t buy happiness? We may opt to consume our income and the extra time we buy with it by mindlessly watching television or surfing the net, obsessing over our looks or gadgets, or drifting aimlessly from one undertaking to the next. Or, we might choose to do something meaningful, engaging, fruitful, or growth-promoting. The key to buying happiness is not in how financially successful we are, but what we do with it; it’s not how high our income is, but how we allocate it.