Something strange occurs on the way to becoming rich: It’s not all that it’s cracked up to be. Of course, the fancier car, bottle service with friends, a big new house — these are things that can be a thrill to acquire and to enjoy.
At least for a bit. And then the pleasure fades, leaving us wanting what everyone else wants: More.
From a psychologist’s point of view, that drive for more is a treadmill — sprint as you might, progress is not a possibility. More isn’t a goal, it’s a mindset, and not a particularly healthy one at that.
This is the standard tale of “money can’t buy happiness.” We’ve heard it countless times and, in fact, there is truth to it. Plenty of research substantiates that above a modest family income, there is zero relationship between a higher income and more happiness.
But it’s an incomplete take — and not in the way that some might suppose. For the counterpose here is not contemplative walks in woods or a monk-like existence devoid of material pleasures. I doubt anyone reading these words desires to be Siddhartha.
The real rub is that the we live in the modern world, a practical place of responsibilities and aspirations — both inextricably defined through the lens of money. And because we rarely define a third alternative — a place neither behind the velvet rope nor on the banks of Walden Pond — we amble through life not only searching, but often finding that the general topic of money to be profoundly stressful. The truth of the matter is that there is no topic that is more stressful in our daily lives, more so than politics, religion, mortality, or marriage.
The fork in the road appears when we prepare our minds to engage in two distinct versions of happiness, versions that were debated by Aristotle and the Hedonists 2,400 years ago which remain just as germane today.
One is daily pleasure or pain, good moods or bad. We have little control over the subconscious functions that drive these sentiments, plus they come and go quickly like the snap of a finger, soon replaced by another. No one catches fireflies for a living.
The other is what Aristotle referred to as “Eudaimonia,” a deeper sense of meaning. The linguistic shuffle of what to call this — fulfillment? contentment? joy? — is a distraction from the weightier task of figuring what makes a life worth living, transcending the day-to-day noise.
The trick is sorting through how money connects to this weightier pursuit. Modern research has revealed is that “money is an opportunity for happiness” that is frequently squandered. It doesn’t have to be that way.
In fact, here are three domains where money can potentially buy deeper contentment:
1. Experiences: There is some accepted wisdom that buying experiences instead of material things stokes a deeper sense of joy, but the question remains why. The primary answer is that doing instead of having deepens social relationships. In one study, for example, researchers looked at a dozen different forms of daily consumption found that only one — leisure — was positively related to happiness. Yes, there’s something inherently fun about the vacation or the night out, but it mostly boils down to the fact that you’re doing it with others.
Another factor is that even with solo pursuits, experiences tend to be more immune than material goods to “hedonic adaptation” — that idea of quickly growing accustomed to something, either good or bad. Experiences tend to be more multi-faceted than possessions (a vacation can include comfortable travel, cozy lodgings, delicious foods, adventure, and social engagement), plus we can savor the memories of these dimensions for a long time. Experiences are more likely to become part of our identity; they help shape who we are. Experiences become part of your story.
A word of caution, though: Until recently, it was hard to share experiences in real time, and much of their longer-term joy came from the memories and the storytelling. Social media is potentially ruining the comparative advantage of experiences. By constantly sharing experiences in the moment with others through Instagram and Facebook — in no small part to seek immediate approval through “likes” — we are undermining our own happiness.
2. Other people: The average ratio of spending on oneself versus others is more than 10-to-1. That doesn’t mean we’re living lives of gluttony or indulgence. Most of that personal spending is for the mortgage, utilities, groceries, and life’s many other essentials. However, in addition to the moral principle of generosity, scientific research has broadly demonstrated that “pro-social” spending makes us personally happier.
Think about this real-world experiment: Walking around town one day, a friendly stranger asks you how you are feeling, and you then agree to accept an envelope with instructions for a simple exercise. You rip open the envelope to find a $5 bill and this message: “Please spend this $5 today before 5 p.m. on a gift for yourself or any of your expenses (e.g., rent, bills, or debt).” But some envelopes read differently: “Please spend this $5 today before 5 p.m. on a gift for someone else or a donation to charity.”
Those who spent money on others were measurably happier than those who spent it on themselves.
The stranger (i.e., researcher) calls you that evening to ask two questions: First, how happy are you right now? Second, how did you spend the money? Those who received the first envelope purchased things like coffee or trinkets for themselves or paid a parking meter. The second group gave gifts to children, the homeless, or others. The researchers discovered that those who spent money on others were measurably happier than those who spent it on themselves, even though there were no systematic differences in happiness levels at the beginning of the day.
The links between generosity and happiness are universal, consistent across countries and income ranges. Rich and poor alike enjoy giving. As is the case with experiences, pro-social spending deepens our connections with others. It enhances our senses of control and context in that we have the liberty to script our story however we see fit and tie it to something beyond ourselves.
3. Time: We live in an age of being “busy.” Many feel overwhelmed by obligations and distractions, leaving little time to enjoy life’s pleasures, whether it be family time or engaging in a favorite hobby. There are trade-offs between having more time versus having other things of value, especially money. Most commonly, we can work harder to earn more, or we can work less but make less. Having both more time and more money is a luxury few can achieve.
Money can buy time by both eliminating distractions and purchasing short-cuts or conveniences, thus opening more time to do enjoyable things. The non-stop flight, Fast Pass at Disneyworld, indifference to the cost of parking in a crowded city — these all might sound trivial, but they all “create” time.
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Experiences require blocks of hours, days, weeks or longer to fulfill. You can’t take a week-long trip in a day. Time is spent to cultivate relationships, travel, volunteer, and engage in hobbies and work we enjoy. Time affluence can eliminate inconvenience and creates opportunity, regardless of age, income level, or occupation. It gives us control. Conversely, time-poverty stings. It’s hardly a revelation that workaholics are often miserable because they’ve foregone most of the touchstones in life that generate a deeper sense of purpose.
Wise spending can help underwrite a meaningful life. The stock phrase that “money can’t buy happiness” is often an excuse to avoid the preparation of the right mindset and the right financial plan. Those who take seriously both mindset and plan, however, are much more likely to end up with a life better lived.
Brian Portnoy is the director of investment Education at Virtus Investment Partners and the author of The Geometry of Wealth: How To Shape A Life Of Money And Meaning (Harriman House, 2018).
