Money, the root of all evil as the old saying goes. I’m here to say something different, money makes me happy. Not in a Gucci wearing, make it rain sort of happiness, but something deeper and more meaningful.
Do You Need Money to Be Happy?
Let’s get this question out of the way first. No, I don’t believe money is a prerequisite to happiness. I do, however, believe that for the vast majority of people, money is a requirement for a happy life. You can be happy without money. Look at Buddhist Monks or subsistence farmers, I’m sure there are lots of happy people in both groups who have no money at all. Judging by my Google Analytics, I don’t have any readers from either category, so we will park these groups and focus on the bulk of society, those that need money in some capacity to be happy.
Money and Survival
For the vast majority of us, money is key to survival. We need money to keep a roof over our heads and to put food in our mouths. Without these basic needs, happiness is out of reach. The amount of money you actually need to survive will depend mostly on where you live. The cost of living in a city is higher than in a small town, but the economic opportunities tend to be greater. As someone who moved from a small town to a big city, I have seen both sides of the coin. My cost of living has increased massively, but so have my earnings.
If you are struggling to meet your basic needs, there is little debate that more money will increase your happiness (providing you are using it to improve your situation). I would imagine happiness is the least of your worries when you are living day to day and fighting for survival. In a similar vein to the previous section, not many (if any, thankfully) of my readers are in this position. So apart from meeting my basic needs, how does money make me happy?
I’m fortunate enough to be in a position where my basic necessities are covered and are of little or no concern to me. Does this make me happy? Yes, but it’s not something I think about very often. The main reason why I believe money makes me happy is the feeling of progress it gives me. When I talk about making money, it’s not for the sake of making money itself. I have no interest in making a shit load of money and having it sit in a bank or under the mattress. Nor have I much of an interest in purchasing the latest and greatest tech, or the newest pair of Yeezys. When I make money, I know I am going to use it to improve my future.
If you have read the blog and the Income Portfolio in particular, you will know I am in the process of building an income stream that will allow me greater flexibility in my professional life. Granted, it is small and in the early stages but the initial results are promising. My goal is to create a passive income stream that will allow me to retire if I wish, or quit my job, or become a Buddhist Monk! Money is how I measure my progress. By looking at my net worth, income streams and expenditures I can see if I am making progress toward my goals.
I can’t speak for anyone bar myself, but I am at my happiest when working towards a goal. Whether that’s a fitness goal, a relationship goal or a financial goal. Without money, I would find it impossible to measure my financial goals. The more money I make, the faster I can reach my goals and the happier I am with the progress.
Not everyone wants to retire early or have multiple passive income streams. Some people use their money to buy material things. Does this make them happy? I’m sure it does, in the short term at least. Long term I’m not convinced that material things can provide meaningful happiness, but if you want to try it knock yourself out. Over the last number of years, the concept of buying experiences rather than things has become popular. As someone who enjoys travel and different experiences, I can see why the idea is so popular. A trip abroad can broaden your horizons and give you a new perspective on life but don’t pursue new experiences at the cost of your basic needs.
Balance is the key for me. I like to split my money between the three categories above. Increasing my financial well-being is priority #1, but I will also splurge on material items and experiences from time to time. Without the gratification of buying a new jacket or taking a holiday, the pleasure of saving and investing is lessened for me. I don’t want to be in a position where I save 100% of my excess income, that level of frugality and discipline does not appeal to me, even if it means I could retire 5 years earlier. The world is a funny place, I could save and invest everything I have with the goal of retiring early and I might never reach retirement age. The Stoic exercise of “Memento Mori”, or a reminder of death, is apt here. You never know when your time is up, so postponing your happiness until you reach a certain level of financial independence doesn’t make any sense. I don’t see any merit in squirrelling away every penny and postponing the enjoyment of life until retirement age.
Does Money Buy Happiness?
Without going too deep into the “money can’t buy happiness” argument, let’s just say that for most people, an increase in income should equate to an increase in happiness. A study published in 2020 shows a strong correlation between income and happiness, with no discernable drop off after a certain amount. While we can’t say for certain that more money makes people happier, we can see that having more money usually correlates with having an increased level of happiness. While money can’t directly buy you happiness, it can eliminate some negatives from your life. With a high income, you shouldn’t have to worry about bills being paid or putting food on the table. (I say shouldn’t, you still need to ensure you budget correctly).
Like I say for a lot of things, it all comes down to balance. Earning a six-figure salary is useless if you don’t have time to do the things you love. While money may not directly buy you happiness, the freedom that having more money gives you is likely to make you happier.
Money by itself won’t make you happy, but it will certainly help. As with most things in personal finance, there is no one-size-fits-all approach. While one person may be happy with a salary of €35,000 another person may struggle with a salary of €50,000. It’s all relative. What we can say, is that increasing your income should have a positive impact on your happiness, but you need to use the money wisely. I know when I receive a raise, it makes me happier in the long run. It will allow me to reach my goals faster, but it will also increase my discretionary income. One thing it will not do is increase my cost of living. When I receive a raise I won’t get a new car, or move house.
If you are reading this post, you are likely interested in investing and or personal finance. I won’t preach too much on what you should do with your own money, just make sure that whatever you do you find a balance. I’ll leave you with two quotes, one serious and one less so.
“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.”
Franklin D. Roosevelt
“Money may not buy happiness, but I’d rather cry in a Jaguar than on a bus.”
The Stoic Trader