A lot of emphasis is placed on saving money when we talk about personal finance. Saving more and spending less equal financial success, right?
Fundamentally, yes, but that doesn’t mean all spending is bad. Spending money becomes an issue when we do it mindlessly on things that don’t bring us happiness, or when we spend money fruitlessly in an effort to solve problems that are internal.
Here’s the reality: Nobody sells happiness. Not lasting, fulfilling, true happiness. And while money can help you solve some basic problems by providing for essential needs, money can’t make all your problems disappear. In fact, many times, money only serves to highlight our internal struggles.
According to research by Daniel Kahneman and Angus Deaton, “U.S. happiness levels off at incomes around $75,000.” So if you’re a higher income earner already, making more money won’t actually make you happier.
Why Money Doesn’t Always Solve Our Problems
Sometimes more money really does equate to more problems. That happens when we’re spending our money ineffectively, or when we chase after happiness by spending more and more trying to find it.
Our problems aren’t always based on the amount of money we make in a year. More often, they’re internal and psychological. If you’re actually dissatisfied with the career you have, earning more is unlikely to make you satisfied. Only taking action and making a change to your employment situation is going to make you happy. And if you feel like you’re broke because you constantly spend money in pursuit of a certain image, having more money is only going to compound the problem.
None of this means we should give up our efforts to grow wealth. Not having enough money to care for ourselves causes a whole different set of problems. But if you’re working to earn more and save more to increase your wealth, don’t pin your hopes for solving today’s problems on tomorrow’s money. Money is not an automatic problem-solving tool.
How to Use Money to Increase Happiness
If used correctly, however, we can leverage our money to increase our satisfaction and positive feelings. After all, money is a tool — and like all tools, it can be used for good if you know how to do so.
The first step is to align your spending with your values. The way you spend your hard-earned money should be in harmony with what you believe is most important in your life.
This is easier said than done. Identifying your values means taking a good, long, hard look at your life and what you want to do with it. It means being honest about your dreams and your goals — and accepting what it will take to achieve them. It means creating and setting priorities — and sticking to them.
When you do this, you can start to see how some spending is unnecessary. It can even take you farther away from what you want to accomplish.
The second step is to understand what makes you feel truly happy and fulfilled. Learn how to recognize the difference between happiness that lasts and adds quality to your life and happiness that is superficial and fleeting.
A good rule of thumb? Go for experiences and relationships over stuff. Buying stuff makes us feel happy in the moment, but spending on things actually drags us down over time. We tend to create real, lasting happiness when we do things instead of own things.
Action Steps for Aligning Your Money and Happiness
After you have a heart-to-heart with yourself (and your partner, if you share finances with your significant other), it’s time to take additional steps to ensure you’re working on building both your wealth and your happiness. You can do this by:
- Practicing gratitude
- Spending money on experiences instead of things
- Assessing your spending month to month and noting your motivations. Are you using your money to increase your happiness and add value to your life?
- Spending money on others or donating to charities whose work you value
In the book Money Can Buy Happiness by, MP Dunleavey, she states that money can buy happiness if used to buy “more time, less stuff, better health, stronger relationships, greater confidence, rewarding hobbies, life enhancing skills, financial security and peace of mind.”
So the next time you think about splurging, think about whether it’s going toward one of these areas. Make sure you’re buying yourself a little happiness, too!