Money and Happiness


What is the relationship between money and happiness? In 1974 University of Pennsylvania professor Richard Easterlin examined this relationship in a famous paper” Does Economic Growth Improve the Human Lot? Some Empirical Evidence”.

Easterlin found that within one country, at any given point in time, those who make more money are more likely to be happy. He also found that richer countries are generally happier than poorer ones. This relationship between money and happiness is no surprise. Most of us assume that money and happiness go hand in hand.

"There is only one class in the community that thinks more about money than the rich, and that is the poor." — Oscar Wilde

“The Easterlin Paradox”

Easterlin also found that in any one country , across time, when income increases among the population (economic growth) happiness doesn’t necessarily increase. For example, happiness in the US did not increase between 1940 and 1970, despite the fact that our wealth did. This has been dubbed the Easterlin paradox. Why would this be true? The relationship between money happiness is complex.

Money and Happiness: Craving. Getting more makes us want more.

"Anyone who lives within their means suffers from a lack of imagination." — Oscar Wilde

Easterlin postulates when we have more we just want more. Certainly this is consistent with what I personally know to be true. What about you? I can remember when I was in college I just wanted to be able to eat, have pizza money, and pay for my books. Now I want nice furniture, a new kitchen, and star bucks coffee for breakfast. I didn’t want those things before. I didn’t think I needed them. It’s a good thing, too, because I couldn’t have afforded them.

“You're not your job. You're not how much money you have in the bank. You're not the car you drive. You're not the contents of your wallet. “ Chuck Palahniuk ( Fight Club)

When people make more, they want more. Then they spend more. The gain they would have had financially from their increase in income is is often canceled out by their desire for more.

Easterlin also postulates that within a given country, as wealth increases, we will often trade off our happiness in other areas to keep up with that lifestyle. We sacrifice other things such as health, family time and job satisfaction while trying to keep up our income.The mistake we make here is that those other things are also important to our happiness.

In my practice I have seen this is true. If clients have money, they are still unhappy. These clients are unhappy because they are overworked, they don’t have time for their families, they don’t have time for their spouses, and they don’t have time for their health. They may also be unhappy because of other things. They are just less unhappy about issues that have to do with money.

The relationship between money and happiness is not as clear as we think. This is one of the mistakes most of us make on our path to happiness. Just because people have money doesn’t mean they are happy. Look at all the unhappy wealthy famous people!

Money Does Make you Happier, to a Certain Extent

The correlation between money and happiness is most direct when you don’t have basic necessities or are unable to pay your bills. If you can’t pay your mortgage (or don’t have a home) , or are unable to put food on the table, or afford transportation or health care, more money will make you happier. Once you have enough money to do what you need to and live comfortably, more money won’t make you much happier.

“You buy furniture. You tell yourself, this is the last sofa I will ever need in my life. Buy the sofa, then for a couple years you're satisfied that no matter what goes wrong, at least you've got your sofa issue handled. Then the right set of dishes. Then the perfect bed. The drapes. The rug. Then you're trapped in your lovely nest, and the things you used to own, now they own you. “ ~Chuck Palahniuk, Fight Club

Hedonic Adaptation

Part of this is explained by hedonic adaptation. Hedonic adaptation is the phenomena that as you experience changes you may at first feel an increase in happiness, but it goes away. We get accustomed to things.

This explains a lot about us. Children illustrate this concept well. They may want a toy or video game desperately. They may act like they can’t live without it, and feel like they can’t live without it. What happens when they get that toy? They play with it for a little while, may be thrilled and happy, but soon that goes away. They are on to the next thing they want that will make them happy. Adults do the same thing. Unfortunately we often act without an awareness of this principle.

"Wake up, you idiots! Whatever made you think that money was so valuable?" — Kurt Vonnegut

Money helps us to be happy to a certain point. However, when it comes to being happy, there are other things that are important and must be equally weighted with money. Often, we neglect those other things while pursuing money.

As we often do, we pursue what we think will make us happy,and in doing so make ourselves more unhappy.

Money and Happiness are related, but there are many other things that contribute to happiness. In the pages linked to this page money and happiness will be more thoroughly discussed.

What causes happiness

Patience and happiness

Why pretending to be happy doesn't work

Money and happiness

How we make mistakes when pursuing happiness

How the internal self critic gets in the way of your happiness

How avoiding pain procrastination and fear of failure can prevent us from being happy

Click here to see more tips about being happy.

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