Money and Happiness

Statistically speaking, money buys a little happiness, but not very much. Every study that compares income and happiness finds that while poverty can make you miserable, once you rise above poverty more money makes you only a very little bit more satisfied with your life. Now why should that be? It seems that the real problem with money is how we spend it:

A few researchers are looking again at whether happiness can be bought, and they are discovering that quite possibly it can - it’s just that some strategies are a lot better than others. Taking a friend to lunch, it turns out, makes us happier than buying a new outfit. Splurging on a vacation makes us happy in a way that splurging on a car may not.

“Just because money doesn’t buy happiness doesn’t mean money cannot buy happiness,” says Elizabeth Dunn, a social psychologist and assistant professor at the University of British Columbia. “People just might be using it wrong.”

Dunn and others are beginning to offer an intriguing explanation for the poor wealth-to-happiness exchange rate: The problem isn’t money, it’s us. For deep-seated psychological reasons, when it comes to spending money, we tend to value goods over experiences, ourselves over others, things over people. When it comes to happiness, none of these decisions are right: The spending that make us happy, it turns out, is often spending where the money vanishes and leaves something ineffable in its place.

What makes people happy isn't stuff, it's connections to other people. I suspect that one reason money doesn't do more for us is that we typically use it to insulate ourselves from other people, for example, by buying houses with such big yards that we never see our neighbors. When poor people move they rent a truck and call in their friends, but rich people hire movers. Helping your friends move is a drag, but this is the kind of thing that builds strong social networks, and friends -- not money, not freedom from carrying mattresses -- are what makes us happy. I am quite certain that broadband internet is one of the most important things my family buys, since we use it mainly to keep in touch with friends.

Another part of the equation shows up in the value of vacations and other adventures. When daily life gets dreary, it is great to have something different to look forward to, or something special to remember. One study I read showed that going to a new restaurant made married couples much happier than going to one they'd been to before. We need variety in our lives, and when we spend money to get it, we may be doing ourselves a lot of good.