"There are some people so poor, all they have is money."
I just graduated from college and decide to move to "the big city." I don't have a job lined up, though. I tell myself that not having a job will be the fire behind me that I need to find one. It takes a while, but I eventually get a job. They don't pay me well at first, so I live paycheck to paycheck.
A year later I'm sitting in my review meeting and I learn that I'm getting a 20% raise! Jackpot! I can spend more money now!
Another year later I'm getting another review, and I learn I'm getting a 28% raise! I'm rich (at least I think I am)!
After a couple years of spending money on things and stuff, like I think I'm supposed to, I change directions and am finally able to stop living paycheck-to-paycheck. I finally get out of debt. I am able to build emergency savings. This comes with less stress and more peace of mind.
Later I take a trip to Alaska, and I had a great time. This is the first time I had a clue that the way I spend my money matters; that going to Alaska for a week gives me more enjoyment than buying a new computer desk or car stereo.
Money Can Buy Happiness
More money can buy happiness up to a certain point, which is about $75,000 per year. This number depends on where you live, of course, but the idea is that if you make less than this you are at greater risk of not having your basic needs met. If you're basic needs aren't being met, then making more money will give you more happiness simply because your stress levels are down.
If you are below the magic number, then yes, more income will make you happy up to the magic number.
Purchase Experiences Instead of Things
One way to use our money to bring happiness to our lives is to purchase experiences instead things. To some this may seem counter-intuitive. After all, if we spend money on physical things, we still have the physical thing a week, a month, a year later. If we spend money on skydiving, a concert, zip-lining, attending a painting class, or going to a museum, we don't have anything physical to show for it, the saying goes.
However, as time passes we have to look at the physical things we bought. We watch them break. We watch them get out-dated. We see new versions come out. We see the prices drop. We see them become redundant. We finally throw them out, sell them, or trade them in.
On the other hand, even though there is nothing physical to show for our experiences we have memories, and these memories live on. It's even better, because we have a tendency to forgot the bad aspects of the experience and only remember the great parts. I don't remember the fear I felt before jumping out of the airplane, just the experience of free-falling and having my face flapping in the wind. Even if I do remember some negative aspects of the memories, it's in a positive light. If you went out for dinner with a loved one, but you spend an hour and a half picking a place, you probably won't remember that as a stressful moment. Instead it will be recalled as a funny moment.
Helping Others Can Make Us Happy
Making more money doesn't necessarily make us any happier if all our needs are being met. However, using some of that money to help others whose needs aren't being we can give us a lot of satisfaction. We can donate to charities or even help people in person. We can help others without spending money, as well, by volunteering. Helping people and causes that are important to us will definitely bring us more long term satisfaction than getting a raise.
Purchasing Time Can Make You Happy
Everyone has the same time. We all have 24 hours in a day. We all have seven days in a week. We all have 52 weeks each year. Time does not discriminate. Using our money to buy more time can contribute to our happiness, because it frees us up to be able to spend our time on hobbies, experiences, and volunteer activities that will engage and energize us.
Income Can Be Used to Build Wealth
Now, just because we can spend our money on buying experiences and giving to charities doesn't mean to should spend all of our money buying experiences and giving to charities. Income can't buy happiness, but it can build wealth over time. While wealth (nor income) alone will make us happy, wealth provides us options, freedom, and independence. It gives us the flexibility to use our money in a way that supports our happiness.
Use Your Money (and Time and Energy) to Support Your Values
It used to be that we could be influenced by our neighbors, peers, and some advertising on TV, magazines, and billboards. The proverbial Jones' that everyone tried to keep up with used to be our neighbors, the Jones'. Now, with the internet and social media, the Jones' are everywhere and everyone. Image crafting has become much simpler in the age of social media. Everyone is miserable, but they portray their lives as being amazing. As a result, we see their crafted images, feel insecure, and try to keep with the internet-version of the Jones' even though it is a facade.
If we try to support other peoples' values (friends, family, neighbors, social media friends), we're unlikely to be happy. It's an unstable way to use our money.
The alternative is to get clear about what your value, what you want out of life, and what money needs to do for you. By doing that, and aligning your use of money to support that, you will be far more satisfied with your life.
A pile of money won't make you happy in the long run, but the way you use your money can. Live your life intentionally and on purpose.
Dan Ariely, Jeff Kreisler: Dollars and Sense
Jonathan Clements: How to Think About Money
Dorothy B. Durband, Ryan H. Law, Angela K. Mazzolini (eds.): Financial Counseling
Daniel Kahneman: Thinking Fast and Slow
Dr. Brad Klontz: Money Can Make You Happy - 4 Ways Money Can Buy Happiness
Thomas Stanley, Sarah Fallaw: The Next Millionaire Next Door
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