5 Facts About the Relationship of Money and Happiness

Updated: July 13, 2022

Can money buy happiness? Will becoming rich make you happy? How does a person’s amount of wealth affect their general well-being?

These are some of the questions that Dr. Ryan T. Howell tried to find out.

An assistant professor of psychology at the San Francisco State University, he conducted a study to find out the role of finances and consumption in people’s happiness and general quality of life.

Below are five facts that his research discovered after analyzing thousands of participants in the Personality and Well-Being Lab at the university.

1. Credit card debt is an enemy of happiness.

There’s joy in buying something we like. However, that happiness is short-lived if the purchase would later put us in debt.

According to Dr. Howell, the financial stress of having unpaid credit card debts will always overpower the momentary enjoyment of experiencing retail therapy.

Thus, if you want to become happier, it’s a good idea to focus on paying all your credit card debts first.

2. Spending on others creates happiness.

People who spend a portion of their income towards charities and buying gifts for loved ones have a happier disposition than those who don’t.

Indeed, money can buy happiness, but only if you spend it on other people.

Several studies have also arrived at the same conclusion. One of them is Michael Norton, who conducted a social experiment, whose results he shared in this TED Talk.

3. Happy people invest in experiential purchases.

Happy people spend more on meaningful life experiences than buying stuff that has no other purpose but to satisfy their desire of owning it.

For example, enrolling in a dance class with your spouse would make both of you happier than buying a flat-screen TV because you simply want to impress your neighbors or friends with it.

Dr. Howell notes that buying stuff that will help create meaningful experiences with your loved ones is also good. As such, purchasing that television so you can have movie bonding sessions with your spouse is acceptable.

4. Never buy something just to impress others.

A lot of people make unnecessary purchases because they have this weird expectation that it will impress their friends and consequently, get compliments for it; and thus making them feel good.

This mindset of your putting your happiness in the hands of others often leads to disappointment because people don’t always react the way we want or expect them to.

The research shows that those who are true to themselves and draw their happiness internally have a better disposition in life than those who expect happiness to come externally.

5. Tangible goals make saving money easier.

When asked, people say that it feels good when they’re able to save money. So why can’t more people save? Because spending money also feels good.

Thus, Dr. Howell advises that if you want to have a stronger motivation to save, you need to set a clear financial goal. This way, you can visualize that future purchase to fight off the temptation of an impulsive purchase.

For example, let’s say that you want to save money for a one-week family beach vacation.

When you’re tempted to buy a pair of shoes because it’s on SALE, imagine buying plane tickets instead. Then imagine your whole family having a good time at the beach. The craving to buy those shoes on impulse can quickly go away.

Final Thoughts

Becoming rich cannot guarantee happiness. However, practicing good financial habits, learning the proper mindset about wealth, and spending your money on the right things can help you find long-lasting joy and contentment in life.

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  1. Yes, money can “buy” happiness only if we know where to spend it.

    Family, giving to the needy, giving to your church and spending on experiential purchases (like travel or gym class) for me are the major reasons why I want to earn big.

    Before I just wanted to buy stuff for myself because I wanted others to see me as “rich”. As I grew older, I realized it doesn’t make sense because it really doesn’t matter how people see me.

    At the end of the day, what’s important is if I have lived of service and gave value to others.

  2. Number three certainly rings true in our home. Beautiful Bride is never happier than when she is learning new things. For over two decades she produced academic papers for students and researchers around the globe. She told me at the very beginning of our relationship that she loves her profession “because it is like being paid to stay in school and learn new things. ” In fact, during the lockdown of 2020, a college that had NEVER before offered any on-line classes offered a program of interest to my wife. She already had all the prerequisites from her previous three college degrees and she signed up. Soon she will be completing her Thesis. Waste of money at forty years old? I think not. This fourth degree is both a long time passion for my Bride and also happens to be in a field where she had created a brand new business in the early part of the pandemic. It is a big win that makes my wife super happy and boots her credentials in the new business

    One other way we like to spend some cash are historical trips with high education value. I am referring to sites such as Intramuros. Literally, you could spend several days roaming/riding around and still not experience everything offered. How about a short ferry ride out to Corregidor? As an American EX-pat, “the rock” has very deep meaning to me as it should to all Filipinos. Did you know that after the Philippines declared independence from Spain in 1899, the first constitution was signed in Malolos, Bulacan, my home base! My family has loved every trip to see and learn at these historical places and it does not cost a fortune to indulge in these pleasures.

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