“Money and success don’t change people; they merely amplify what is already there.” –Will Smith
People rarely get rich and become “more” generous. However, if someone is already generous, the money becomes a way of furthering meaning in their life, as an Expression of their value for Service and their use of money to show Love.
And, can money actually change us? If so, how?
This page will explore money’s effects on our behavior, perspective, and even personality.
“An abundance of money, alcohol, or power doesn’t change you, it simply reveals who you truly are.” ― Rob Liano
This Just In: We Can Use Money to Buy Happiness
Money buying happiness might sound exactly like what a soul weary from long work-weeks, years of sacrifice, and the promise of a better life needs to hear. However, let’s define happiness before going any further, and also acknowledge that the word “happy” has become so large that we need to define what we’re looking for before moving further. Step 1: Let’s accept that not all happiness is created equal.
This site contains a massive section devoted to understanding the nebulous topic of ‘happiness.’ If you’d like to check it out, click here. In short, there are four main types of happiness:
Type 1 Happiness, or Ephemeral Pleasures (like eating lobster while on a yacht) or Type 2, Happiness called ‘Flow,’ (the free time to pursue activities such as snowboarding, music, art, or other engaging activities are more easily obtained with money. To use money to buy the more powerful types of Happiness that come from (Type 3) Acceptance and Perspective or having a life full of (Type 4) Meaning and Purpose, abundant in Service, Discovery, Love, and Expression, though, we will have to work a bit harder. In these cases, money is spent as an Expression of these values and thus continues the flow of happiness in our lives, rather than buying it from scratch.
How to Buy Type 1 Happiness: Ephemeral Pleasures
Albeit, way shorter than we expect, due to the Hedonic Treadmill (our natural tendency to adapt to a new level of wealth or experience, and too soon return to a baseline level of happiness); we can temporarily purchase happiness. These are all of the temporary things that we think of when we think of being “rich.” To name a few:
- A new car
- Online shopping for things we don’t need
- A bigger tv
- Additions, like a new deck or pool, to our house
- Taco Bell, lots and lots and lots of Taco Bell, enough Baja Blasts for everyone to have two
“The way Americans tend to buy things: A person who has $20 will buy something for $40 if it’s marked down from $100.” ― Clifford Cohen
How to Buy Type 2 Happiness: Flow
This type of happiness can be bought by buying ourselves time to pursue whatever passions or experiences lead to a sense of presence, focus, and getting lost in the moment. A few examples or ways Type 2 Happiness can be purchased are:
- Paying for the opportunity to do things we may love such as snowboarding, surfing, or guitar lessons
- Having enough money to be able to spend more time doing things other than work such as going on hikes or getting lost in conversation with those we care about
How to Buy Type 3 Happiness: Perspective
Pay for courses on mindfulness, a meditation retreat, or some other meaningful experience. Also, with enough purchases, we’ll realize that money doesn’t equal long term happiness 🙂
How to Buy Type 4 Happiness: Meaning and Purpose
When money is spent as an Expression of our values and as a tool to deepen our senses of Service, Love, Discovery, and Expression, money becomes an Enabler and enhances the quality and connection to these Four Cornerstones of a meaningful life. Enablers are the skills that lead to our lives having a deeper sense of purpose, intention, and joy. Examples of such are when our money is in perfect alignment with our goals and values. Money used in this way might also fall into contributing to a sense of purpose. An example would be caring about child welfare in foreign countries and using money as an Expression of these values and a means of showing Love. The money being spent might also come from a place of Discovery in terms of how much impact one person can have on the world, or what ripple might be enacted in choosing to spend money in this manner.
Try This: How do You Enjoy Buying Happiness?
Join us in this 4 minute activity as we figure out how to buy happiness in our lives.
- What’s your favorite short term way of buying happinessType 1 Happiness? Type 1 can be purchased through spending on short term items like buying a new car.
- What’s your favorite short term way of buying happinessType 2 Happiness? Flow can be purchased through engaging in activities we enjoy like snowboarding or painting.
- What’s your favorite short term way of buying happinessType 3 Happiness? Perspective can be purchased through pursuing peak experiences, mindfulness retreats, or workshops that might offer one a new perspective on life.
- What’s your favorite short term way of buying happinessType 4 Happiness? This type of happiness can be purchased through using money to tap into all four of the cornerstones of meaning: Service, Love, Discovery, and Expression to create a deeper sense of meaning.
How Should We Spend Our Money?
“It’s not about what we earn, it’s all about how we spend what we’ve earned!” ― Stephen Magnus
Well, let’s start with how we shouldn’t spend our money. Eliminating these two types of expenditures alone, will tremendously free us up. The first way is avoiding spending money on material things. Due to the Hedonic Treadmill, our quickly returning back to a base level of happiness even when undergoing major life changes, our base level of happiness is not impacted very long by these things. If you don’t believe us, listen to the posterboy for material living, Dan Bilzerian, famous for his Instagram page of money, parties, travel, cars, and guns. One of our favorite quotes from his interview was of him sharing how he thought buying the new Ferrari would purchase him at least a few months of happiness, but it fell short.
The second major thing to avoid is “Keeping up with the Jones’s” or Social Comparison.” Money spent to impress others begins an endless cycle of validation, creating dependence on others’ approval of us via our purchases.
Positive Routines Shares a few things Worth Spending Our Money On:
- Experiences are great for our social life (which increases our overall sense of connection and joy), get better over time (due to the way our memories work), more easily avoid the trappings of social comparison, and are more closely related with our identity. That’s right, our experiences help shape our identity, we believe ‘we are what we do.’ These experiences can also involve investing in the Four Cornerstones of A Meaning of Life: Service, Love, Discovery, and Expression
- Buy back our time. Try spending money on things that save us time, like someone to mow the lawn, clean our house, or anything else that can buy us back a few prized hours of time to spend with the people we love or doing more of the things that bring us joy. Especially if our love language is quality time, buying back time to spend with those we love, in a way, buys us more Love!
- Spend on others: Gallup polls: asked two sets of questions to people: “Did you give money to charities recently?” and “How happy are you with your life in general?” In 135 out of 136 countries the people who gave to charities recently reported being happier than those who hadn’t.
This video shares a few different studies that point to the effectiveness of giving.
One experiment gave Canadian undergrads money. They were told that they either had to spend the money on themselves or others. They varied the amount of money given to the different control groups. The results were that, despite the amount given, the people told to spend money on others reported being happier than those who spent money on themselves. Researchers wondered how these results would hold up in a society with far less resources. So they went to Uganda, and again found similar results.
In Belgium, they did an experiment where they gave money to different teams of business people and some were told to spend the money on themselves while others were told to spend the money on their coworkers. The money given to those to spend on their coworkers even ended up increasing output and making the company more money! However, the money given to employees to spend on themselves didn’t even produce well enough to make the money back (negative ROI).
Much of this book is based on work by psychologists Elizabeth Dunn, Daniel Gilbert, and Timothy Wilson. Mainly “They draw on empirical research to suggest that people will be happiest if they buy more experiences and fewer material goods, use their money to benefit others rather than themselves, and buy many small pleasures rather than fewer large ones.”
In sum, “the best way to save is not to focus on cutting small pleasures. Instead, keep your structural expenses (housing, cars) low as a percentage of your regular income, so you don’t have to worry about trivial expenses like lattes, even as you’re still putting money away.”
Her book can also be boiled down to the idea that ‘it’s better to have good sex a couple times a week than it is to have mind blowing sex a couple times a year.’
4. Spend According to Your Values– Vicki Robins talks about how we are not just trading time, but rather trading our life energy to our jobs. Robin defines life energy as the sum total of things that we are trading to our jobs; things like happiness, stress, sacrificing doing other things we love, our sense of self-worth, and perceived opportunity costs. First we must figure out the total expenditure of life energy (or opportunity cost) that we are trading for each purchase that we make. She offers these three questions to consider when looking to make a purchase:
- Did I receive fulfillment, satisfaction and value in proportion to life energy spent?
- Is this expenditure of life energy in alignment with my values and life purpose?
- How might this expenditure change if I didn’t have to work for a living.
Positive Routines also shares a few quick/helpful questions to ask whenever making a spending decision:
- Is this purchase mostly about competing with other people, or will it help me sustain and build relationships?
- Ten years from now, will this purchase look old and sad compared to the latest and greatest version, or will it stand the test of time?
- Is this purchase likely to sit on a shelf, or will I actively use it to create new memories?
- Will this purchase help me make the most of my free time?
- Is this purchase helping someone other than me?
“To fulfill a dream, to be allowed to sweat over lonely labor, to be given a chance to create, is the meat and potatoes of life. The money is the gravy.” – Bette Davis, actress
The Good Life Project also provides 5 ways of buying happiness:
- Buy experiences rather than stuff. The happiness we get from stuff deteriorates incredibly quickly. The deeper the sense of engagement and flow we get from an activity, the more happiness (Type 2 Happiness) we feel.
- Again, spend money on others. We are happier when we spend money on others than when we spend on ourselves.
- Spend on many little purchases rather than one large one. Small purchases over time give us continual boosts of happiness.
- Purchase things in advance that provide us a sense of anticipation. The anticipation provides us more happiness than actually getting the item.
- Pay for services that buy back our time. Having those few extra moments to spend with or on those we love provides large doses of happiness.
In The Illusion of Money, Kyle Cease offers a much more simple way of making decisions, but this strategy can be used when making purchases as well. His offering is to look at things in our life on a scale of 1 to 10. A 10 is something that our whole body is excited by and that is in line with our beliefs and values. With these purchases or decisions, asking ourselves how we feel about a purchase before making them enables us to start spending our money more in the way of buying things that we feel good about. He offers that when doing this with our actions, and consistently doing more things that are in alignment with our beliefs and values, we move closer to living a meaningful life. He also shares that ‘we are our own biggest asset’ and recommends ‘investing in ourselves.’
What are the last five purchases you can think of that you still feel 10 out of 10 about (feel joyous about and that these purchases are in line with our values, hopes, and dreams)?
Does winning the lottery make us happier?
Conventional wisdom and past research has told us that lottery winners are not any happier a year after winning the lottery. The reason for this belief is due to the Hedonic Treadmill (our ability to quickly adapt to changes in our quality of life and return to a previous happiness setpoint). However, new research shows that Lottery winners said:
“they were substantially more satisfied with their lives than lottery losers. And, those who won prizes worth hundreds of thousands of dollars reported being more satisfied than winners of mere tens of thousands. These effects are remarkably durable. They were still evident up to two decades after a big win.”
Does Money Alone Make Us Happier?
More money allows us to live longer and healthier lives, protects against financial stress and worry, allows us to have more opportunity, affords a higher quality of life, and provides a sense of novelty that meets our need for spontaneity. The increase in life quality of life that comes from making $40,000 per year to having even $100,000 a year is huge. After a certain point though, the amount of happiness we receive from money has been thought to plateau. The graph below shows that $75,000 per year is the point where money stops significantly making us happier. And new research has bumped that number up to $105,000 in the United States. Having $105,000 reduces things like worrying about having “enough” or basic financial stresses. It’s important to note though that this graphis measuring for life evaluation, or how a person rates their own life.
And another study points to no upper limit as far as the happiness and money relationship. They tracked up to a salary of $500,000, and found no break where happiness stops being impacted by income. This data suggests the more we earn, the better we feel about our lives! To only talk about the attainment of money though, would be incomplete. Far more important than the amount of money we earn is how we spend it. The huge caveat here is that money, whether it can make us happy or not, isn’t everything. Meaning is the best solution for a life well-lived.
Does Money Change Your Morals?
Research conducted at the University of Toronto by Stéphane Côté and colleagues confirms that the wealthy are less willing to give to those significantly below their level of income. The findings show that it is the “distance created by wealth differentials” that seems to stop the flow and maybe even empathy felt towards those much poorer. Côté found that “higher-income individuals are only less generous if they reside in a highly unequal area or when inequality is experimentally portrayed as relatively high.”
Wired shares how rich people generally feel less empathy. This article also shares how, “Keely Muscatell, a neuroscientist at UCLA, found that wealthy people’s brains showed far less activity than the brains of poor people when they looked at photos of children with cancer.”
How Money Changes the Way You Think and Feel also shared that “Extremely affluent people actually suffer from higher rates of depression. Some data has suggested that money itself doesn’t lead to dissatisfaction—instead, it’s the ceaseless striving for wealth and material possessions that may lead to unhappiness.”
The pursuit of wealth itself also can become an addiction or compulsive behavior. As psychologist Dr. Tian Dayton explained, “a compulsive need to acquire money is often considered part of a class of behaviors known as process addictions, or “behavioral addictions,” which are distinct from substance abuse. Process addictions are addictions that involve a compulsive and/or an out-of-control relationship with certain behaviors such as gambling, sex, eating, and, yes, even money.…”
Several studies have also shown that having wealth might impact one’s overall level of empathy and compassion for others. “Research published in the journal Psychological Science found that people of lower economic status were better at reading others’ facial expressions—an important marker of empathy—than wealthier people.”
How Money Changes Us
Do we believe that having money makes anyone a “bad person?” No. However, the more affluent a person is, the more challenging it might be to feel empathy. Having more money means a higher level of selectiveness might need to be applied as far as who to help.
Also, does having money equal greed or possibly a decrease in happiness? No. Pursuing money for money’s sake might lead to a sense of sadness upon realizing money alone does not equal happiness. However, those with money tend to be happier, almost indiscriminately. Why? More money equals a higher quality of life, more opportunities and choices, and a decrease in financial stress.
An even bigger boost to our happiness is how we spend our money. Spending money on others, buying experiences, buying back our time, and spending in accordance with our values are all ways to increase our sense of happiness. The key point here is tapping into the cornerstones that make for a meaningful life: Service, Love, Discovery, and Expression.
When we talk about money buying happiness, it’s important to remember that there are four different types of happiness and four different ways that money needs to be spent in order to purchase each of these types.
- Type 1 Happiness – Ephemeral Pleasures can be purchased through spending on short term items like buying a new car.
- Type 2 Happiness – Flow can be purchased through buying access to engaging activities like snowboarding or art.
- Type 3 – Acceptance and Perspective can be purchased through pursuing peak experiences, mindfulness retreats, or workshops that might offer one a new perspective on life.
- Type 4 Happiness – Meaning and Purpose can be purchased through using money to tap into all four of the cornerstones of meaning: Service, Love, Discovery, and Expression.