I believe it was Sir Paul McCartney who said, "I don't care too much for money, money can't buy love." Nobody said it better. But if money can't buy love, can it at least buy happiness? In other words, does having more money make people happy?
My wife and I have been extremely fortunate throughout our lives. Even during the early years of our marriage when money was tight, we always knew that there was the proverbial light at the end of the tunnel. We always knew that if things got really difficult for us financially, our family would certainly help us. As I look back on all those years and compare them to now, I really can't say that being financially more secure has made me any happier.
We had a conversation recently about our respective retirement plans, specifically relating to the recent stock market declines related to the COVID-19 pandemic. Watching our retirement savings fall steadily lower each day could certainly put anyone in a bad mood. But here's the thing - that was always money for the future. While we certainly earned the money, it was never money that we actually "saw" in our pockets. So even if it seems like the last 5 years didn't really happen, at least from the perspective of our retirement plan, that's okay. We will still be okay. It may take a few years to build up our retirement, but we will be fine.
I am also not naive enough to realize that what is true for my wife and I, may not be true for everyone. As I said at the beginning, we have been incredibly fortunate. We will be okay. I worry about others who do not share in that fortune. However, I am amazed that, at least anecdotally, it is those individuals who are more financially secure than we are that are the ones who are crying the loudest about the current stock market woes. In other words, it seems that the wealthiest individuals are the ones who are most concerned about their stock market portfolio these days.
Which begs the question, does money "buy" happiness? Are those who are wealthy happier than those who are not? You won't be surprised (at least if you've been reading my blog) that there are a number of studies that have tried to answer this exact question. A couple of years ago, investigators at my alma mater, Purdue University, conducted a statistical analysis using data from the Gallup World Poll that involved over 1.7 million individuals living in over 160 countries around the world. They published their findings in the journal, Nature Human Behavior. They controlled for a variety of demographic factors, including the region and average income where individuals lived. Subjective well-being was measured using a validated scale. Income was measured in U.S. dollars and was adjusted for average purchasing power by region.
What these investigators found may surprise you. Consistent with other studies on this topic, they found that there was a positive association between subjective well-being and income. However, this relationship peaked at a certain level of income. As it turns out, once an individual made more than $95,000 per year, there was no further increase in a measure called "life evaluation," which really means life satisfaction. In fact, increases beyond this salary was associated with a slight decrease in life evaluation. These findings differed slightly by country and region of the world, but the relationships certainly held true. Emotional well-being had an even lower peak - in other words, emotional well-being increased with income up to approximately $65,000, at which point it slightly decreased with further increases in income. As reported by Purdue University, "This may be because money is important for meeting basic needs, purchasing conveniences, and maybe even loan repayments, but to a point. After the optimal point of needs is met, people may be driven by desires such as pursuing more material gains and engaging in social comparisons, which could, ironically, lower well-being."
So, based on this study, it would appear that money can buy happiness, but only up to a certain point. I think the better conclusion is this - if you are doing okay, don't worry about what is happening with the stock market. It will come back, even if it takes a few years. Worry instead about those individuals who don't have any extra money to fall back on. Worry about those who are much less fortunate than all of us.
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