Does money buy happiness?
Can more money make us happier?
The answer to these questions is:
Yes... And no.
It depends really.
In this video I'll examine the relationship
 between money and happiness.
And hopefully you'll be able to answer those
questions for yourself.
A lot of people go through life chasing money.
And it makes perfect sense why.
Money is what's needed to provide us with
food, clothing, medical care, and a roof over
our heads.
If you don't have any money, you're unable
to fulfill those basic needs.
And when we don't have those essentials sorted
out, we probably won't feel too happy.
That is why not having any money is a great
predictor of unhappiness.
So in this case, getting our hands on some
money will definitely bring us joy, as it
would allow us to buy the necessities for
a normal life.
Now, you don't have to be living on the streets,
for money to make you happier.
Living paycheck to paycheck, and constantly
worrying if you're going to be able to pay
your bills and make it through the month,
has been shown to cause a lot of stress.
Also being thousands of dollars in debt, and
not knowing how you'll pay it off, has been
linked to depression, anxiety, hopelessness
and a lower life evaluation.
Money, would again, make you happier in this
case, as there would be one less thing to
constantly worry about.
A huge mental burden would lift and you would
have peace of mind. But when it comes to income,
how much money should someone be making in
order to maximize their happiness?
In most cases someone who makes $50,000 per year, will be happier than someone who makes $25,000.
Therefore it would make sense to assume that
$100,000 per year is going to make them even
happier, right?
Well not quite.
Above a certain point, making more money doesn't
equal more happiness.
Someone who makes $100,000 per year, isn't
much happier than the person who makes $50,000.
Back in 2010, a study published by Daniel
Kahneman, had shown that in North America,
making more than $75,000 per year, didn't
improve day-to-day happiness.
Money certainly helps with overall well-being
up to a certain point, but once you're sitting
comfortably in middle-class, more money probably
won't make your average day any happier.
Of course it has to be noted that 75,000 is
the average number and depending on where
you live, this number will be higher or lower.
If you live somewhere expensive, such as San
Francisco, more money will be needed to satisfy
your needs.
But if you live somewhere much cheaper, making
$30,000 could already be enough.
Another thing that you shouldn't forget is
that this study was done in 2010, and the
dollar has lost some of its value due to inflation.
So as more time passes, this number will only
get higher and higher.
*** $75,000 in 2010 is equal to $88,500 in 2020 ***
Now the same study found that while making
more than $75,000 annually won't bring you
any additional day-to-day happiness, it does
bring higher life evaluation.
This means that when people are reflecting
on their lives, those who manage to make more
money tend to be more satisfied with how their
life has turned out.
Even past the $75,000 mark.
And one of the reasons for this might be due
to social comparison.
Play along with me here for a minute.
Let's say you've applied for a job at Better
Than Yesterday Incorporated.
They have 3 different positions you could
fill, positions A, B and C, and all of them
come with different salaries.
In position A, you would be making $40,000
annually, while your colleagues would be making
$20,000.
In position B, your salary would be $50,000
and everyone else around you would also be
making that exact number.
But in position C, you would earn $60,000,
however everyone else in that department,
would be making $120,000.
In order to maximize your happiness, which
salary would you pick?
If you were to choose position C, you would
make a mistake.
While you would be making the biggest amount
of money, this choice would bring you the
least amount of happiness.
If you wanted to maximize your happiness,
the correct choice would be A. Relative to
your colleagues, you would be doing better
than them.
When it comes to money or achievement, part
of the satisfaction comes from the fact that
not everyone can match you.
It might sound petty, but it's just human
nature.
We love to compare how we stack up relative
to other people.
Take for example getting a B on a test.
If everyone else got a C or lower, you'd feel
great, because compared to others, you did
very well.
But if you got a B and everyone else got an
A, you obviously wouldn't feel too happy,
because everyone else did better, while you
did the worst.
Even if you got the exact same grade in both
cases.
How happy we are with the amount of money
we earn, is relative to the amount of money
people around us are making.
Of course, this also means that if someone
is making $1 million per year, but all their
friends are making $5 million, they could
be quite unhappy with their earnings.
In their mind, they could feel like "losers",
because their peer group is doing better than them.
Even if they're actually in the top 1% of
earners.
However, nowadays with social media at our
fingertips, we're not just comparing ourselves
to our friends and colleagues anymore, we're
comparing ourselves with the entire world.
While other rich people could serve as an inspiration,
they can also make us feel inferior.
If that's the case for you, you might want
to take a break from social media, as this
type of comparison could be a major source
of unhappiness.
Just something to keep in mind.
Now when it comes to grades, the maximum you
can attain is an A+, and there isn't anything higher.
So if you attained that grade you'd feel pretty
good.
But when it comes to money, there is no upper
limit.
You could always be earning more.
For this exact reason, we're always going
to want more money, no matter how much we're
currently making.
When different individuals are asked about
what their perfect salary would be, the answer
is pretty much the same.It's always more than
the amount they are currently making.
Those who make $30,000 per year, would say
that $50,000 would be their perfect income.
Whereas those who earn more than $100,000,
say they would need $250,000 to be satisfied.
And even if those individuals were to attain
their desired salaries and wealth, their desires
would only increase.
When it comes to money, we're never really
going to be quite satisfied.
But why do we feel like we always need just
a little more?
Well it's because of a concept called hedonic
adaptation.
Let's say you're currently making $30,000
per year, but then you get hired at another
job that pays you $50,000.
How would you feel?
Pretty good right?
Now the mistake would be to assume that you're
going to feel that way forever.
While your happiness would definitely spike
up, it would only last a short time.
Over the course of the next few months, you
would get accustomed to this new income.
Essentially your new wealth would become your
new normal.
And you would need to get a raise, or a better
paying job to feel happier again.
Until of course, you get used to it again,
just like before.
Interestingly enough, a lot of people don't
know that this type of adaptation will even
take place.
Perhaps it's because it happens so gradually
that we don't usually notice it.
For example, we experience the same type of
unnoticed adaptation with temperature.
Imagine you're out on a hot summer's day.
But then you enter your air-conditioned house.
The air feels very cold, compared to the heat
outside.
However, as you spend more time in the house,
you get so accustomed to the air conditioning,
that you don't even notice that it's there.
What was fresh and cold before, now feels
like a normal temperature, because you've
adapted to it.
And the exact same thing happens when you
acquire money or other material possessions.
When you buy a new fancy sports car, sure,
you'll feel great about it for a few weeks.
But that feeling of novelty will fade away.
Your new car might be better than the last
one, but you won't feel as excited about driving
it, like you were on the first day.
The same happens when you buy a bigger house.
You'll feel great about your purchase, until
of course, this new house becomes your new
normal and you start dreaming about an even
bigger house, with a better view.
Make no mistake, objectively you will live
better.
But you won't feel better about how you live.
Every single time, you will adapt and feel
like you could use a slightly better car,
a bigger house, and a little more money.
Contrary to popular belief, money and material
possessions don't bring us lots of happiness
for a long time.
But rather, they bring us a little happiness
until we adapt and feel like we deserve better.
However, this sort of adaptation isn't negative.
If you're not as fortunate in your life, adaptation
is great.
Imagine that you found yourself in a car accident,
that confined you to a wheelchair for the
rest of your life.
You would feel pretty horrible, right?
Well not so fast.
A classic study, compared the happiness levels
of lottery winners and paraplegics.
Interestingly enough, 1 year after their life-changing
events, their happiness levels were not that
far apart.
There is no doubt that if you were to ask
the lottery winners how they felt at the moment
they won, they would say that their happiness
levels were off the charts.
And if you were to ask those who were in the
accident how they felt at that moment, you'd
find out that their score would be as low
as possible.
But as time passed, both the lottery winners
and the paraplegics
got used to their new circumstances.
And their happiness returned to roughly the
same point it was before their life-changing events.
But make no mistake, the lottery winners were
still happier than the accident victims, just
not by as much as one would think.
So as you can see, if you're not as fortunate,
adaptation is very useful.
However, that same study found that those
who win the lottery face a different problem.
A lot of them now have a diminished ability
to appreciate the small things in life.
Things like a freshly brewed coffee in the
morning, or a lovely sunset, just aren't as
enjoyable any longer.
This happens because the lottery winners often
rush to spend their money on the best things
life has to offer.
And their standards suddenly increase.
When you get to experience the best, what
was previously considered good, isn't good
any longer.
Instead it's considered sub-optimal.
Your new standard is only the best.
You can also think of it this way:
If the first car you buy is a half a million
dollar Ferrari, how would you feel about driving
a $50,000 BMW?
Probably not that great.
Your expectations would be set so high that
everything below a half a million dollar car,
would be seen as a downgrade.
And this is exactly what lottery winners experience.
So if you ever get your hands on a lot of
money, don't rush to spend it, if you care
about your happiness.
Otherwise you will quickly raise your expectations
to such a high level, that whatever brought
you joy before, now won't.
Or at least it's going to be in lower amounts.
But how should we spend our money, so that
we can get the most happiness out of it?
One way is to spend it on experiences.
Things like a romantic meal with your partner,
a trip to an adrenaline park, or attending
a concert.
We don't really adapt to these types of experiences,
because they're usually short.
You can't get accustomed to a one time concert
after all.
But keep in mind, that if you start dining
out every day, then it's not considered an
experience any longer.
It's a change in lifestyle, which you will
adapt to, and treat as a regular day.
To avoid this trap, make sure to keep your
luxurious experiences rare.
What's the point of a good meal, if it doesn't
make you feel good?
Another thing we could spend our money on,
is other people.
This might sound counter-intuitive, because
when you think about spending money, you think
about spending it on yourself.
But studies have shown that when people spend
money on others, instead of on themselves,
they feel happier.
And it doesn't matter how the money is spent.
It can be a small gift, or even a charitable
donation.
Neither does it matter how much of it was
spent.
It's the act of giving that has measure.
Improving someone's day, improves your day.
Another good way to spend your money is to
buy yourself more free time.
If you're like the vast majority of people,
you probably have a day job.
This means that more than half of your day
is spent on the commute and at work.
However, people who spend most of their time
working and trying to earn more money, tend
to enjoy their lives less.
Likewise, people who have more time for themselves,
report enjoying their life much more, even
if they don't earn as much.
This is because doing something voluntarily
because you enjoy it, and not because you
have to do it, increases happiness while avoiding
adaptation effects.
Whether it's gardening, rollerskating, or
writing a novel.
It's good to dedicate at least some of your
time to a hobby you enjoy.
So if you have the option to reduce your working
hours, and still get through the month with
less money, this can be a good investment
for your day-to-day happiness.
And instead of thinking about it like a pay
cut, you can think of it as "buying more time".
However, this doesn't necessarily apply to
everyone, as some people derive meaning and
purpose from their job.
And a lot of them don't even know which hobbies
would make them happier.
Which brings me to my next point.
Instead of spending your money on things or
experiences that would make you happy, you
can use it to minimize whatever makes you
unhappy.
You probably already know what you dislike
and makes you miserable.
But I'll list 2 things I believe are worth
striving to minimize.
One of them is noise.
Living in a noisy environment is something
we don't ever truly adapt to.
Especially if the noise varies and comes in
waves.
If you're living next to a busy street, moving
somewhere quiet
would probably increase your happiness.
Or you could buy noise-cancelling headphones.
Either way, it's worth trying to remove sources
of noise from your life.
The other thing is commuting.
Most commutes are filled with heavy traffic
and people tend to end up with higher levels
of stress.
If possible, buy a home closer to your daily
destination, or look for a way to change your
work hours in a way that will allow you to
avoid the rush hour traffic.
Anyhow, try to find a way to avoid this major
source of misery.
Of course, what we find frustrating, differs
from person to person.
Therefore, you will need to think about your
own source of unhappiness, and see if you
can use your money to reduce your exposure
to it.
So, to sum it up.
Does money buy happiness?
Will more money make you happier?
I don't know, you tell me.
As you've seen, it's not a simple yes or no
answer.
It really depends on the individual, the situation
they're in, and how they're spending their money.
In some cases money does make us happier,
while in other cases it doesn't.
Hopefully you now have a better understanding
of the relationship between money and happiness.
I believe it's worth examining your own situation
with all this information in mind, and then
decide for yourself, if chasing more money
is worth your time.
Or if perhaps, you would get more happiness
from somewhere else.
As always, thanks for watching.
I hope you learned something new today, and
you became better than yesterday.
