Can Money Really Buy Happiness?

There was a great article in Bottom Line this month featuring MSN Money columnist M.P. Dunleavey about the actual correlation between increased wealth and increased happiness. As you might expect, the findings were not simply that you will be happier on a day-to-day basis if you have more money.

The article points out that between 1972 and 2004, the average per capita income in America has more than doubled. That means the average person has more than twice as much wealth (adjusted for inflation) today than they did 32 years ago.
First, it should be pointed out that certain purchases can improve your overall happiness. These are generally purchases which lend themselves to personal improvement. An example might be a membership at a nice gym, a budget which allows for a wide selection of foods that can improve health and perhaps, as a consequence, happiness. These are examples of when money can lend itself to happiness.
What doesn’t do much for us are the status purchases such as cars and jewelry. This stuff actually makes us feel even more competition with our neighbors, even as we climb into higher income and wealth brackets.
In a survey done in the 1960’s, economist Richard Easterlin found that, on average, people thought that owning 4.4 items emblematic of the good life (boats, fancy cars, a pool, country home, etc) would satisfy them. At the time, the average participant in the survey owned an average of 1.7 such items. Seventeen years later, participants, on average, had 3.1 of such items, but then reported they would need 5.6 of them to be satisfied. What changed?
Perhaps the aging of the participants had something to do with it. Ownership of more material things can become an item of convenience as one gets older, has children, takes on more responsibilities, etc. But, the more likely explanation is increased greed and competition.
According to Dunleavey, besides personal improvement spending, the other area which can lend itself to a happier life is spending on relationships. Studies consistently show that people who spend lots of time with other people tend to lead more fruitful lives. On the flip side, those who spend time alone tend to be more depressed. So, go take your friends out to dinner! (Well, not somewhere too fancy).
Dunleavey goes on to explain that people get a chemical rush from the feeling of buying things (in the nucleus accumbens if you must know…) which you can sometimes trick yourself into feeling. One might do so by shopping online and filling up a cart but not actually checking out with your credit card when it gets to that point. It may also be accomplished by going shopping but not buying something.
Just some food for thought. I found it interesting. The Bottom Line is an incredible publication–full of all sorts of little secrets related to personal finance, healthcare, travel, and other “secret stuff” you probably thought about but never fully explored.
Please e-mail me with any questions or comments.
Russell Bailyn
Wealth Manager
Premier Financial Advisors, Inc
14 E. 60th Street, #402
New York, NY 10022
(212)752-4343 *31
Securities and certain investment advisory services offered through: First Allied Securities, Inc., a registered Broker/Dealer. Member: FINRA/SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.

2 thoughts on “Can Money Really Buy Happiness?”

  1. Russell,
    A very interesting post, and certainly more scientific than the “Money can’t buy happiness but it can sure rent a heck of good time” approach. :)
    Art Dinkin, CFP

  2. I loved Dunleavy’s book and found it well written and insightful. However, comments about the “increase in per capita income” leave me with a nagging feeling of unease. We also need to remember the spiraling increases in expenses such as housing, health care, college tuition, and child care — all of which are making many middle class Americans feel poor (and pretty unhappy). To get a broad picture, I also recommend The Two Income Trap by Elizabeth Warren.
    Somewhere in between the two there must be a happy medium, where we can feel secure — and seek happiness.
    And speaking of books, I received an advance copy today of yours — Navigating the Financial Blogosphere. Still reading it, but it’s an easy friendly read. Congratulations!

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