Money may not be able to buy happiness, as some maintain, but it can assist in structuring some pretty good illusions, allowing one rent it for spell. Certainly, the link between money and happiness is complex.
One definition of being wealthy in the United States is earning $1 more than one’s brother-in-law. This may appear flippant, but academic research actually supports the spirit of this quip.
People who live in households that earn $90,000 or more are significantly happier than those in households earning less than $20,000, according to a study by two academics. Yet the higher income households were only slightly less happy than those living in households with total earnings ranging from $50,000 to $89,000.( “Would You be Happier if you were richer? A Focusing Illusion,” by D. Kahneman, A. Krueger, D. Schkade, N. Schwarz and A. Stone, Science June 2006.)
Once we establish an absolute level of wealth that ensures our basic needs are met, our happiness has more to do with the context of our money, than how much we have in some absolute level.
“If you compare two people with the same income, with one living in a richer area than the other,” Harvard Economist Erzo Luttmer told Money Magazine, “the person in the richer area reports being less happy.”(Quoted in, David Futrelle, “Can Money Buy Happiness?” Money, July 18, 2006.)
This makes sense—as it’s stressful keeping up with the Jones and the Jones aren’t the superrich in the magazines and television shows, but our neighbors whose children our children play with and with whom we socialize. If all the other kids are going to summer camp without a problem but a couple is tapping credit to provide the same experience for their child, they’d be happier in an area were kids stayed local in the summer.
A house, after all, is a house, and there’s nothing in the bonus room, granite countertop, or formal dining room that causes humans to emit endorphins. Consider that the average house in the United States jumped from 983 square feet in 1950 to 2349 square feet in 2006, according to National Association of Home Builders, “Housing Facts, Figures, and Trends 2006,” and it becomes clear that we are consuming more that just square footage when we build our literal castles.
Americans are not twice as happy with our houses in 2008 as they were in 1950. I recall many conversations from my youth with elders in which they linked two phrases without missing a step: “We didn’t have much, but we were happy.”
So if money alone can’t make us happy, can being happy make us money? It turns out the answer is yes, as long as we are not too happy. On a happiness scale of one to ten, people who scored themselves as a 7-8 enjoyed the most career and monetary success, according to researchers at the University of Virginia, University of Illinois in Urbana-Champaign, and Michigan State University. (Shigehiro Oishi, Ed Diener, and , and Richard E. Lucas “The Optimum Level of Well-Being: Can People Be Too Happy? Perspectives on Psychological Science, December 2007.)
Fall into the blues, and it carries over in negative ways. But more strikingly, blissed out individuals underperformed the merely content. The reason, researchers think, is that they are out of touch with life’s often harsh realities.
So if being above average makes us happy, and being above average happy makes us successful, it might come as a surprise that being down, blue, depressed can put us in the poorhouse. It’s called retail therapy and in a study to be published in the June 2008 issue of Psychological Science, researchers from Carnegie Mellon, Stanford and the University of Pittsburgh found that people who viewed a video clip designed to produce melancholy spent up to four time as much on an item as individuals who were showed emotionally neutral clips. The rationale is that being sad produces self-centered focus that causes people to treat themselves.
So what’s the lesson? One obvious one is that we are a wealthy society and offer plenty of money to pay people to study happiness. But beyond that, the lessons seem the sort that we all need to be reminded of periodically. Money is a tool that helps us achieve things we want for ourselves and our families. It can provide security, options, and, to some extent, freedom. But in and of itself, it does not produce happiness and can, in fact, produce strife, discord and tension. In the worst cases, money merely buys a cage with golden bars. I often liken it to the plumbing in one’s house: Well adjusted people don’t want to spend a lot of time thinking about it but if it malfunctions or worse, didn’t exist, they’d be in a world of hurt.
So, in terms of happiness, the best money advice is often that if you want to feel rich, count your blessings. Better yet, do so in the company of friends and loved ones. And if you want to feel like a baron, just make sure you earn $1 more than your brother-in-law.