Lance Gunkel, CFP®, CFA, Managing Director
April 5, 2023
Money and happiness have a complex relationship. I was taught early on that money can’t buy me happiness, but that never seemed quite right to me. When I was in college, waiting until payday from a part-time job to fill my gas tank, I was surely happier when I could fill up my Ford Tempo and go places.
Studies back up the notion that money can buy happiness – to a point. One study shows that emotional wellbeing increases until an individual makes $75,000 a year (or $103,000 in today’s dollars). Once our basic needs are met, we begin to find happiness in other things. The important question is: What are those “things?”
Experiences Over “Stuff”
My wife and I decided early on that our family would prioritize travel and experiences. This has worked well for us and brought us closer in our relationships. When we make travel plans, we share the details with our kids right away, which gives us the opportunity to talk about the fun ahead for weeks or months in advance. We then get to share in the experience together, and for bonus fun we talk about it for years afterward. My boys are currently 15 and 13, yet we still start many conversations with, “remember when?” and talk about previous trips. They enjoyed these trips together when they happened, and they continue to experience the happiness associated with these trips through storytelling.
I think of each trip or experience as a bookmark: Our family is bookmarking that chapter in our lives, and we get to keep coming back to it throughout the years.
This type of spending is quite different from “retail therapy,” in which a person buys “stuff” for a temporary hit of happiness. How often do you reminisce with friends and family about that special time you bought that one thing off Amazon?
Spend On Others
We often think of charitable giving as writing a check to a charitable cause – and that’s great – but there are many other ways to spend on others. If my wife and I are out with other couples, it’s enjoyable for me to occasionally pick up the check. I also get a boost when I overtip or pay for the cup of coffee ordered by the car behind me in the Starbucks drive-thru. While these gestures are relatively small, I find that I get a happiness boost all day knowing that I did something good for somebody else.
This 2008 study found no relationship between happiness and money spent on oneself; however, there was significantly greater happiness associated with “prosocial spending.”
Buy More Time
When my wife – who also has a professional career – and I first navigated life with kids and careers, we felt constrained by time and the anxiety associated with feeling that we should be spending more time together. One solution for us was to outsource the tasks we didn’t enjoy, such as house cleaning. By not needing to spend our weekends vacuuming, dusting, and picking up, we could focus on family activities. It was great to remove the nagging thoughts of “well, I should really be cleaning right now.”
Since each person has different interests and dreams, the “happiness spending” may look different for you than it does for me. It will also take some trial and error, but my hope for you is to find more happiness and joy in using your money.