Why Money Can't Buy Happiness - Investors Psychology

Why Money Can't Buy Happiness

For many people life is rough and presents itself with a plethora everyday challenges. For some, many of those challenges could be overcome just with a little bit of extra money. It could help you fix the broken down car, it could let you quit that job you hate, or maybe make you afford the one gift your child so deeply wished for.

Then why do we say that money can't buy happiness? Surely you'd be happier if you just had an extra $1000 a month! 

For some it this probably holds true. It'd be ridiculous to think that there isn't anyone who would benefit from money in terms of happiness. Fact is, that those with the most strained budgets usually sees the highest improvement in well-being just from a small increase in income. Hence, just a couple hundred dollars a month can make a significant difference in some cases e.g. for the single mother raising her 4 kids and working shifts at two different jobs, just to scrape by. 

The famous psychologist and Nobel prize winner Daniel Kahneman nicely summed up the interpretation of data on money and happiness: 

Money does not buy you happiness, but lack of money certainly buys you misery.

We're gonna tell you the reasons why money can't buy happiness as a general rule of thumb. If you believe money will solve all your problems, you're wrong.

Why Can't Money Buy Happiness
Image by Frantisek Krejci from Pixabay 

If Money Can't Buy Happiness Then Why is it So Fabulous?

In the popular song "Money" by the artist Poppy she sings "if money can't buy happiness then why is it so fabulous?". Well, anyone with the possibility to save a little money every month needs to ask themselves - is money really so fabulous after all? It will be highly questionable if money really is the root of your problems, unless you're not surviving financially on a day to day basis. Rather, it might be the perceived lack of money leads to unhappiness. Trying to keep up with the Jones is simply yet another source of anxiety and stress. 

It's better to approach money more stoically. Unless you have nowhere to sleep or lack food on the table, then focusing on what you don't have will only deteriorate your mental health. Instead, try to appreciate the good things in life that you do have. 

With regards to stoic thinking we, at Investors Psychology, sincerely recommend reading "Man Searches For Meaning". It's a book by a psychiatrist named Viktor Frankl, who lived through some of the most horrific events to ever exist, namely the holocaust. While imprisoned in the concentration camps he had nothing to his name and barely no food to survive, yet he was still able maintain his psychological well-being. In the book he goes on to describe how he (and a few others) were able achieve this and how it helped them survive the atrocities they encountered on an everyday basis before being rescued by allied forces.

Reasons Why Money Can't Buy Happiness

Here are the 3 main reasons why money can't buy happiness and why it wont have any positive affect on deteriorating mental health.

1. True Happiness is Long-Term Happiness

Chasing surges of dopamine for short-term happiness is not a sustainable strategy to improve your long-term well-being. Spending money on short-term happiness only gets you so far. You'll end up chasing new highs and end up feeling worse after each time. You're only momentarily numbing your true feelings, and afterwards it will leave you feeling even emptier inside. Instead, it's more important to focus on long-term mental health, this might include getting professional help with mental health issues, exercising regularly, forming meaningful relationships, and enjoying new experiences (which doesn't have to cost you money!).

2. Money Doesn't Solve Everything

It's known that exercise and companionship are two key components when talking about mental health and long term happiness. These two things can't be bought no matter how much money you have. For example, deep emotional connections with other human beings, as well as participating in physical exercise, which has been proven to increase mental well-being

So while money can provide some of the basic necessities in life, it certainly can't make someone well-trained nor can it buy meaningful relationships, no matter how much of it you have. After all, there are plenty of unhappy rich people.

3. Science Says it Can't (Kind of)

A scientific study from 2010 showed that additional money no longer positively affected peoples happiness after their income increased above $75,000 a year ($102,500 adjusted for inflation). This doesn't explain why money can't buy happiness, as the study indicates that higher income seemed to have a positive effect on peoples well-being up until some point. However. this is still goes to show that more isn't always better. Once you reach a certain amount of money it doesn't grant any further increase in happiness. Arguably the increase in happiness until that point is greatly influenced by the decreased stress from everyday financial stress, not from being able to afford any luxury items.

How To Stop Thinking About Money?

Then what do you do after realizing that money doesn't buy happiness? We'd recommend you to learn how to stop thinking about money, so that you could focus on the positive things in your life instead of the negatives. Don't let the financial stress live rent-free in your head. 

Once you disconnect your emotions from the money you'll be much happier, and you won't have to suffer from money anxiety or obsessive thoughts about it. This doesn't mean you can't strive for a healthy income or learn more about investing. It just means that the main goal should be happiness, not mindless monetary accumulation.

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