Money can buy happiness
But the relationship between the two isn’t as simple as you might think.
MORE money means more problems, right?
Try telling that to a solo mum who has to make every last dollar count if she wants to feed her three growing kids. Food, water, shelter and clothing are the physical requirements for survival, and they come at a cost.
You’ll find these on the bottom layer of Maslow’s hierarchy of needs, a pyramid-shaped model of universal human requirements.
The next level up is security. A struggling family might not actually be starving or homeless, but teetering on the brink of the financial abyss is still incredibly stressful. Anyone with mounting debts or uncertain work hours will know this feeling.
You can’t climb above the first two steps of the pyramid if you don’t have enough money.
Research makes it clear that incomes are strongly linked with happiness. The interesting thing is that the relationship has diminishing returns, and breaks down completely after a point. According to the most famous study, once you get past US$75,000 (NZ$102,000) there’s no difference in happiness.
Similarly, local research found plenty of New Zealanders earning six figures were just as unsatisfied as those living on the bones of their bums.
I reckon you can keep buying happiness all the way up Maslow’s pyramid. Those who earn a lot but remain miserable must be spending their money on the wrong things.
The best thing money can buy is freedom: Freedom from debt, freedom from stress, freedom to spend time with loved ones, freedom to pursue passions and interests.
Let’s look at two very different families. Mr and Mrs Normal both work long hours, and mostly use their decent salaries to buy stuff - a lovely house, a bach, top-end electronics for the kids, a couple of European cars.
Mr and Mrs Frugal earn the same amount as the Normals, but mostly saved and invested their money to buy freedom. Now Mrs Frugal has cut her hours back to part-time, and Mr Frugal is a fulltime dad.
Coming back to Maslow’s hierarchy of needs, both families have comfortably made it past the first two layers.
The third universal need is love and belonging. Mr and Mrs Normal have a huge mortgage and lots of credit card debt, so they work a lot of overtime. They don’t see much of each other, or of their kids, who are raised by babysitters and nannies.
Mr and Mrs Frugal have plenty of time for each other, for their kids, their wider family, their friends, and their community. They’ve got love and belonging coming out their ears.The fourth need is esteem. Mr and Mrs Normal crave status, so they work hard to have a better house, newer cars, and better private schooling than their neighbours. They’re never satisfied.
Mr and Mrs Frugal know esteem comes from within, not from impressing others. They long ago realised that keeping up with the Jones’ is a fool’s errand.
Onward to the tip of the pyramid, which is the final stage of Maslow’s hierarchy. Achieving self-actualisation requires mastery of all the previous steps, so Mr and Mrs Normal don’t make an appearance.
Meanwhile, Mr and Mrs Frugal are unlocking their full potential. They are the best parents they can be. Mr Frugal has several interesting hobbies, and Mrs Frugal is realising her dream of becoming a jazz pianist. They volunteer their time, and give substantially to charity.
The Frugals got to the top of the pyramid with money. They just used it a bit differently to most people. 123rf
Money is a lump of metal; zeros and ones on a computer server. It only takes on meaning once you exchange it for something.
So what should you exchange it for, if your goal is to maximise happiness?
Next week, we’ll outline strategies to squeeze the most joy out of every dollar.
Got a money question you’ve been struggling with? Want to send a bouquet or a brickbat? Email Budget Buster at richard.meadows@thedeepdish.org, or hit him up on Twitter: @MeadowsRichard.
‘ Money is a lump of metal... It only takes on meaning once you exchange it for something.’