It is certainly fair to assume money buys happiness up to a point. We need money to cover our basic needs such as food, water and shelter. Having enough money to pay bills reduces stress and in turn increases a person’s overall well-being. Even having extra money to cover fun activities, extracurriculars, and travel will bring an individual more joy. But is there a point where one’s level of happiness levels off?
Studies have shown that Americans’ levels of happiness increase as their income rises to $75,000 a year. However, beyond that, the impact of a higher income on happiness plateaus.
Beyond our financial resources, it is evident that relationships, a sense of community and purpose, and our experiences all contribute to our overall well-being. Because so many moving pieces factor into our level of happiness, it is crucial to first figure out what makes us happy and from there make financial decisions that support our values and goals.
Achieving optimal levels of happiness is much more likely when we align our decisions with our values. Maybe you most value memories and time spent with your family. A financial adjustment to meet this goal could be choosing to forego purchasing your next big toy and instead, use the difference to plan a vacation with your family. The memories from the trip will last a lifetime and could far outweigh the temporary pleasure you feel from buying the expensive new toy.
The same is true when looking further into the future, whether it be planning for retirement or deciding whether or not to take a job offer in a new city. Before we can plan for what is needed financially, we first need to understand your goals. Think of the money you save and invest as a tool to help you achieve your goals – not the source of your happiness. What do you want your money to do for you long term? Maybe you would like your money to provide you with the resources to…
- Visit your children and grandchildren in retirement
- Take a special vacation with your spouse
- Work for or start a nonprofit
- Fund your children or grandchildren’s college education
- Pay your country club dues
- Fulfill philanthropic goals
- Help your child or grandchild with a down payment on their first home
- Leave an inheritance
Your values and goals are unique to you; therefore a “cookie-cutter” financial plan cannot be used for you or anyone else. Work with a financial advisor who wants to get to know you on a deeper level, so you can make smart financial decisions that will increase your overall happiness.
If you are like me, self-reflection can be difficult, but it is an imperative step to figuring out what is most important in your life. To get you started I will leave you with three thought provoking questions provided by George Kinder, the founder of an approach known as Life Planning which aims to help you discover your deeper goals and dreams.
- Imagine you are financially secure – how would you live your life? What would you change?
- Now, imagine a doctor tells you that you have only 5-10 years to live, but you won’t feel sick. What will you do with your remaining time?
- Finally, imagine the doctor tells you that you have 24 hours. What feelings arise? What did you miss?
I encourage you to write down your answers and consider them next time you are faced with a financial decision. In doing so, it is more likely you will make a smart decision in line with what you truly value. Remember, money doesn’t buy happiness – at least not beyond a certain point. It is what we choose to do with it that brings us fulfillment and joy.
For more reading, check out another recent blog on this topic titled “Money Can’t Buy Happiness: True or False.”