Laura Rowley: Money DOES Buy Happiness, But...

Financial author Laura Rowley was interviewed recently on NPR/Motley Fool radio while promoting her book, Money & Happiness: A Woman's Guide to True Wealth, and asked if money buys happiness.

Her reply - on the air, at least; we haven't read the book - was that "a certain amount of money does buy happiness."  That is, the difference between having no money and having enough money to meet one's basic human needs of food, clothing, shelter, was enormous.  Beyond that, she felt based on the studies she had reviewed, such as those showing enormous increases in wealth in countries like the United States but only marginal increases in the happiness reported over the same time frame, that additional wealth buys little, if any, additional happiness.

Vaguely referencing various studies, some of which are mentioned in other posts and links here (this being radio, there were no "cites"), she adds that lottery winners and even Forbes list-ers are only somewhat happier than the average person.

So how much is enough, according to Rowley?  Depends in part on your expenses, she says.  With the median U.S. income being $43,000 per year, she says, those earning $50,000 and more annually report fewer "blue days", according to another unnamed study.

She says scientists/economists have found the pursuit of money as a primary or number two goal in life has negative consequences such as relationship trouble, depression, and low self-esteem.  And that any increase in standard of living is quickly adjusted to, with only more and bigger looking appealing thereafter (e.g., after moving from an apartment to a house, one then wants a bigger house, one with a pool, in a better neighborhood, etc.).  Thus, more and more money is required, with presumably more work and less job options available to finance this newfound lifestyle.

If you can't buy happiness, can you win it?

Money, if won, can cause and increase in one's happiness.  Or so says a study by Professor Andrew Oswald:

Winning just £1,000 [about $1,900] can be enough to change a person's outlook on life.

However, less than £1m is unlikely to have a lasting effect on personal happiness and experts found a strong marriage and good health were more likely to make people feel content than money.

The researchers looked at 9,000 families in Britain throughout the 1990s.

They observed the impact of windfalls on individuals using standard strain indicators to gauge their levels of happiness.

The BBC report on the 2002 study went on to note that

Professor Oswald advised that money was not the only factor affecting good mental health and happiness.

He said:  "There are lots of other factors in life, especially personal things like getting married and so on."

The research found that women tended to be happier than men, and people in their 30s were least likely to be content.

Professor Oswald said happiness followed a U-shaped pattern, with people beginning life happy but becoming discontented in their early 30s, before their happiness recovered and continued, increasing into their 60s.

Money = Happiness? One study says no

I've been rich and I've been poor.  Rich is better. - Sophie Tucker

Does more money buy more personal happiness?

According to surveys conducted by University of Southern California economist Richard A. Easterlin, no.

Instead, his research indicates -- as explained in layman's terms by Fool.com columnist Dayana Yochim -- that being married rather than single or divorced, and having friends and good health are more important to happiness than money (though money does indeed have some effect, both authors acknowledge:  She notes that "[T]he most prosperous among us -- the Forbes' 100 wealthiest Americans surveyed by University of Illinois psychologist Ed Diener -- are ... slightly happier than average.").

Easterlin concludes that

people allocate a disproportionate amount of time to the pursuit of pecuniary rather than nonpecuniary objectives, as well as to "comfort" and positional goods, and shortchange goals that will have a more lasting effect on well-being....

[M]ost individuals spend a disproportionate amount of their lives working to make money, and sacrifice family life and health, domains in which aspirations remain fairly constant as actual circumstances change, and where the attainment of one's goals has a more lasting impact on happiness.  Hence, a reallocation of time in favor of family life and health would, on average, increase individual happiness.

In one of Yochim's other columns, however, she quotes research summarizing what retirees who are looking back on their lives wish they had done more of, were they able to have a "do over" on their retirement planning:

• Nearly 60% said they would start saving earlier.
• One-third would reduce expenses to save more for retirement.
• A third would be more disciplined about retirement income.
• 25% would work longer.

Not exactly compatible with not focusing on earning money during one's lifetime.  And perhaps indicative of the fact that many underestimated the importance of money until retirement (but prior to retirement mau have answered university professors' subjective happiness surveys by indicating that they had enough money and were overall quite happy with their financial situations).

Overall, the conclusion here seems to agree with Sophie Tucker's quote:  Rich is indeed better and does indeed make one somewhat happier, but given limited time to devote to relationships/family/health versus finances, the typical person will experience higher marginal utility in pursuing the former over the latter.

Study: Wealthier Nations Generally Happier

Wealthier nations are generally happier ones; and, although the correlation is far from one-to-one, it is quite striking overall.

The study by Ronald Inglehart and H-D. Klingemann, "Genes, Culture and Happiness," MIT Press, 2000, compared GDP versus the mean percentage of the population subjectively happy with life as a whole, as determined by surveys.

The richest nations, the United States and Switzerland, in that order, had average happiness levels of 85% and above.  The poorest nations, Nigeria and Bangladesh, respectively, had happiness ratings of around 75%, though these nations were actually anomolies -- most nations with comparable wealth levels ranked lower on the happiness scale, as examination of the chart shows.

It is perhaps not surprising that the happy and prosperous countries also tend to be democratic with free markets.

See also Wealth and Happiness Don't Necessarily Go Hand in Hand, Wall Street Journal 8/13/04 via Van Sloan (sq.4mg.com).