October 21, 2012 | 2 Comments | Print Print
Written by David Krueger

A Money Quiz

Answer the following two questions with a single figure:

  1. My current annual income is ___________.
  2. In order to ensure happiness and contentment financially, with no more money problems or worries, my annual income would need to be ______.

I have given this quiz to several hundred people.  More than 90% indicate that their annual income would need to about twice the current level for them to feel happy free from money worries.  Someone who makes $50,000 a year believes it would take roughly $100,000 a year in order to be financially content; someone who makes $500,000 believes the figure would need to be about $1 million a year.

And, in follow up discussions with people after this take this poll, there is “trailing double” effect.  People who have actually doubled their income over time have also doubled the amount they assume will make them “happy and content” so happiness remains elusive.

Since “more” is not a goal with an end point, this brings into focus how we each define “good enough.”

Money and Happiness: The Real Relationship

Money can solve many problems, or at least make them easier.  But then we over-reach, to make money address more than it should.  The idea that more money will bring more happiness is one of the most pervasive and persistent money themes in modern culture.

Research suggests that money, like Prozac, doesn’t make someone happy.  Both, however, can prevent certain forms of unhappiness.  Money allows us to afford better medical care, safety, neighborhoods, gadgets, and at times, a better mood.

Dr. Daniel Gilbert, a Harvard psychologist, has demonstrated that both great wealth and actual purchases have little permanent impact on happiness.  His research shows that those events we expect to make us happy often prove less exciting than we anticipated.  University of Illinois psychologist Dr. David Myers found that after an initial excitement with a burst of good fortune, such as inheritance, lottery, or job advance, people revert to their initial set point of happiness or gloom.

Consistent evidence shows that creating an experience such as a vacation, theater, or dinner makes people happier than material possessions they spent money for.  When we spend for a possession, we quickly grow accustomed to it, and the pleasure wanes.

We need money in order to know what can’t be purchased.

Can Happiness Buy Money?

This may be a better question.

  • Several thousand college freshman were rated according to their cheerfulness.  Two decades later, those who ranked at the top of the cheerfulness measures earned an average income 31% higher than those of lower scores.
  • A study of employees at three large US companies over 18 months found that those with increased happiness had higher salary increases during that period.
  • Dutch men and women who laughed more often and had more positive use of the future had a 25% lower risk of mortality than those less optimistic.
  • Employees with a more consistently good mood missed fewer days of work.
  • Happiness can help keep money.  Unhappy people spend as much as 300% more for the same item.  The act of spending stimulates the pleasure center of the brain to temporarily counter both sadness and anxiety.

These findings suggest that happiness – a register of positive energy – can increase the most tangible and universal emblem of energy: money

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