Count Your Blessings - and Your Money, says Suze Orman

In her latest Yahoo column, financial expert/author Suze Orman comments on the recent money/happiness aspects of last week's New York magazine article on happiness:

I'd be the last person to tell you that money can buy happiness, but I'm fascinated by recent reports insisting that money isn't a major factor in whether or not people are happy. Please. Positive psychology (that's what academicians call the study of human happiness) is a hot field of research, and the folks at the Positive Psychology Center at the University of Pennsylvania have come up with an interesting questionnaire that's been getting a lot of press.

Yet nowhere in the 24-question Authentic Happiness Inventory does the issue of money -- or, more important, our desire for financial security -- merit a mention. Hmm.

A Conspicuous Omission
Given how expensive our lives are, how can money not be a factor? We have huge mortgages and tapped-out home equity lines of credit weighing on us. College tuition bills have never been more daunting. Our employers are less likely to give us a defined benefit pension, so the onus is on us -- and our 401(k)s -- to figure out how we'll be able to afford retirement. If we're lucky enough to get health insurance through our employer, the trend is for each of us to be responsible for a greater portion of the bill.

I would love to live in a world where authentic happiness was achievable solely from the richness of relationships, but I'm a realist. And the reality I see -- and that so many of you write to me about -- is one in which money plays into our ability to be truly happy.

Yes, I've heard about the study of lottery winners that showed they were not relatively happier than those who hadn't won the lottery, and the one reporting that folks on the Forbes 100 list (the wealthiest people alive) weren't much happier than the average American.

Those studies show that being filthy rich doesn't ensure happiness, but that's not something most of us have to contend with.

I'm talking about how your happiness is affected when you're worried about how you'll pay the bills at the end of the month, save for the future, and be able to afford to retire. In other words, how you'll make ends meet. When those worries are your reality, I think it's ridiculously hard to be authentically happy.

Happiness Is Income-Sensitive
Apparently, I'm not the only one who thinks so. A survey conducted earlier this year by the Pew Research Center reports that, overall, just 34 percent of respondents are very happy.

But when you start to slice the findings by income, it gets very interesting: 49 percent of respondents with an annual family income above $100,000 say they are very happy. When income falls between $75,000 and $100,000, the very-happy contingent falls to 38 percent. Just 24 percent of those with incomes below $30,000 said they were very happy.

I want to be quite clear: I'm in no way saying that money is all that matters. But I'm so tired of how scared everyone is to admit that money does in fact make a difference in the quality of our lives.

A Family Affair
Most of you would probably say that what makes you truly happy is your family and the love you share in your relationships, and I couldn't agree more. But money comes into play in those relationships, too.

When I talk about money this way to a group, invariably someone comes up to me afterward and give me a "tsk, tsk" look and says, "Suze, you are so wrong. Money isn't the key to life, this is!" At which point their wallet flies open and they show me a photo of their family.

That's when things get interesting, because I start asking them questions: Did you take that photo with your own camera? It looks like a beautiful beach; was the photo taken on a family vacation? Are those braces I see on the two teenagers? Do you hope to help those beautiful kids go to college?

As their heads bob in successive "yes" nods, I ask them how they provide all of that for their family. That's when they understand that I had it right.

Richer, But Not Happier
At the risk of repeating myself, I totally agree that family and friends are vital to our well being; without meaningful relationships, there's no chance of ever being truly, authentically happy. That's why, every Saturday night, I end my CNBC show with the following words: "People first. Then money. Then things."

But money does have a place at the table. If you don't have money to buy things, you're going to be very frustrated. It's just that simple.
How we handle the money we have also plays into our happiness. The Pew survey points out that over the past few decades, the percentage of Americans who say they're happy hasn't changed much (it hovers at around one-third of the population), while at the same time the average per capita income has doubled in inflation-adjusted dollars. So we have more money, but we're not much happier on average.

A paradox? Far from it. My sense is that we while we're making more money, we aren't making more of the money we make. We have a ton of debt, and we have to worry about saving for retirement in a way that our parents and grandparents never did. And as many of you know, it's really hard to boost your happiness quotient when you've got a lot of money worries.

Orman offers readers a chance to vote on whether money is a part of their happiness, with (unscientific, of course) results running about 85% affirmative.

Can Money Buy Happiness? (Money Magazine)

Can Money Buy Happiness? asks a Money Magazine article reprinted on the Forbes website. Among the obvservations:

The new science of happiness starts with a simple insight: We're never satisfied. "We always think if we just had a little bit more money, we'd be happier," says Catherine Sanderson, a psychology professor at Amherst College, "but when we get there, we're not." Indeed, the more you make, the more you want. The more you have, the less effective it is at bringing you joy, and that seeming paradox has long bedeviled economists. "Once you get basic human needs met, a lot more money doesn't make a lot more happiness," notes Dan Gilbert, a psychology professor at Harvard University and the author of the new book Stumbling on Happiness. As the graphic at left shows, going from earning less than $20,000 a year to making more than $50,000 makes you twice as likely to be happy, yet the payoff for then surpassing $90,000 is slight. And while the rich are happier than the poor, the enormous rise in living standards over the past 50 years hasn't made Americans happier.

(emphasis added)

Interestingly, the recommendations to improve your happiness involve spending money, but with preference to certain expenditures over others:

SMALL PLEASURES

LATTE

Don't discount the satisfaction you can get from something as trivial as a good cup of coffee. Furthermore, casual encounters with familiar people like the barista at your local Starbucks or the guy at the newsstand have a bigger effect on your happiness than you might realize.

UPDATE 8/9/2007: Meanwhile, many financial advisor target this "Starbucks" factor as the first area to cut spending to get one's finances in shape. See, for example:

Every Penny Counts by Christine Haughney, New York Times, 7/29/2007;

Creating an emergency fund by Cheryl Allebrand, Bankrate.com, 7/23/2007:

Q: The solution I've heard most often to cut corners and start saving is giving up coffeehouse coffee. I'm not sure how caffeinated authors think we are, but is that really the solution -- give up the demon drink and you'll be financially secure? Or do you have some advice for tea drinkers?

A: I think one of the keys to financial security is about seeing what money's coming in and going out. That's where the latte factor comes in. Do you have to focus on every latte? No. See what your committed expenses are -- including taxes and the six things you have to pay every month like utilities and car payment -- and try to limit them to 60 percent of your total gross income. Look at savings: Invest 20 percent in long-term savings (education, retirement) and then you have 20 percent left. Ten percent is for your emergency fund. You never know when the boiler's going to break. That's where emergency money comes in. The 10 percent that's left is fun money, this is what partners divvy up -- 5 percent each. If you don't have 5 percent that month, you don't have the fun.

(interview with Sharon Epperson)

Happiness: A User's Manual (New York Magazine)

Courtesy of New York Magazine's Happiness: A User's Manual by Ben Mathis-Lilley (20 happiness tips):

Give up the great American novel, and start temping.
Some poor countries (China, Brazil) are happier than others, but few nations are mired in spiritually fulfilling poverty. Money, when used to feel secure about your ability to shelter and feed yourself, can, in fact, buy happiness.

But don’t work overtime...
The marginal life-enhancing value of each extra dollar quickly levels off, however; hence the existence of James Bond villains and studies showing that lottery winners and Forbes 100 members are no more likely to be satisfied than anyone else.

...As long as you’re content socializing within your tax bracket.
Nevertheless, being aware of how much less money one has acquired than one’s peers is quantifiably frustrating.

Some Dark Thoughts on Happiness (New York Magazine)

Some excerpts pulled from Some Dark Thoughts on Happiness by Jennifer Senior, New York Magazine:

One of the most interesting bits of American research to surface—repeatedly—in books about happiness is a study that shows depressives are far more likely to be realists, while happy people are more likely to walk around in a mild state of delusion.

Married people are happier than those who are not, while people who believe in God are happier than those who don’t.

Smarter people aren’t any happier, but those who drink in moderation are. Attractive people are slightly happier than unattractive people. Men aren’t happier than women, though women have more highs and more lows. Surprisingly, the young are not happier than the elderly; in fact, it’s the other way round, with older people reporting slightly higher levels of life satisfaction and fewer dark days.

Money doesn’t buy happiness — or even upgrade despair, as the playwright Richard Greenberg once wrote — once our basic needs are met. In one well-known survey, Ed Diener of the University of Illinois determined that those on the Forbes 100 list in 1995 were only slightly happier than the American public as a whole; in an even more famous study, in 1978, a group of researchers determined that 22 lottery winners were no happier than a control group (leading one of the authors, Philip Brickman, to coin the scarily precise phrase “hedonic treadmill,” the unending hunger for the next acquisition).

Follow the link for more information on Chris Peterson's Authentic Happiness Inventory test that was referenced in the article.

The book repeatedly referenced in the article is Stumbling On Happiness by Daniel Gilbert.

Authentic Happiness Inventory Positive Psychology Center

The Authentic Happiness Inventory is a happiness test administered by the Positive Psychology Center of the University of Pennsylvania.

Their web site has tests anyone can take, to further their research, including the Authentic Happiness Inventory Questionnaire (measures overall happiness); the CES-D Questionnaire (measures depression Symptoms); the Fordyce Emotions Questionnaire (measures current happiness); and the General Happiness Questionnaire (assesses enduring happiness).

Rich Get More Sleep Than Poor

An example of the health impact of socioeconomic status, a study found that - surprisingly - the higher one's income, the more sleep one tended to get:

The amount of sleep people got increased with their income, and this effect was stronger for the black participants than the whites.

There are a number of potential explanations for the findings, Lauderdale noted. People who make less money may have more worries that prevent them from sleeping well. They could be living in noisier, less comfortable environments, and they may have more health problems.

The racial and economic sleep differences detected in this study could help explain the well-known disparities in health that exist between blacks and whites, [the reseracher] added.

American Journal of Epidemiology, July 1, 2006, as reported by Reuters, June 29, 2006.

See also: Money not imporant, but...

Billionaire Mark Cuban discusses his wealth

[INTERVIEWER: C-SPAN'S BRIAN] LAMB: What does it mean, for those of us who can’t comprehend what, you know, that kind of wealth is like, what’s it mean?

[BILLIONAIRE BUSINESSMAN MARK] CUBAN: Two things probably. It means security, you know. I don’t have – I mean I’ve woken up days and not known if I could pay my light bill. I’ve come home from work or come home at times and the lights have been turned off. And, you know, it’s embarrassing and it’s, you know – it’s motivating. You know I’ve slept on the floor for six months in buddies’ apartments when I first got to Dallas.

So, you know, I’ve been on both sides and not having to worry about those things anymore that’s part.

And when I was single I would have told you there’s nothing even remotely bad. But now I have a two-and-a-half-year-old daughter and it scares me. It scares me in how she’s going to be raised because I grew up completely middle class and I think, you know, there’s a lot of accountability involved in growing up where you are responsible for yourself. And you know, she’ll figure it out at some point in time that there’s a little cushion back there and that’s what scares me. But other than that, you know, it’s a beautiful thing.

You know it really is being able to wake up with a smile on my face and say, OK, what do I want to do today.

3/26/06 C-SPAN interview transcript

Ben Stein's Cruel Truth About Retirement

For most of us, by far our biggest financial liability is going to be our retirement. Living without working is not easy, and it's getting more difficult as defined-benefit corporate pension plans go the way of the do-do bird. To live comfortably off your capital requires a very large amount of capital relative to our earnings....

There are several points here. One is that the amount of saving the pre-retiree has to do even with a fairly good head start is fantastic.... So, prepare to save a lot....

Second, you must remember that inflation will still be eating away at your savings after you retire. Many people forget that, and it hurts them dearly.

http://finance.yahoo.com/columnist/article/yourlife/3679

Money Buys Lack of Unhappiness?

MBH recently came across this 1999 Slate article citing research that indicates:

While it's true that, overall, these data show that money doesn't dramatically affect the distribution of happiness, let's examine some of the nuances. One is that you're nearly four times as likely to be miserable if you make less than $15,000 than you would be if you made more than $35,000. True, 79 percent of people making less than $15,000 still consider themselves "pretty happy" or "very happy." But what if you don't happen to belong to this naturally buoyant majority? Clearly, for at least 15 or 16 percent (i.e., the proportion of unhappy people exceeding the "naturally unhappy" baseline of 5 or 6 percent), the lack of money buys unhappiness.

Chatterbox is also intrigued by what happens when your income rises above $75,000. If you were unhappy before, apparently you're likely to stay unhappy. But 11 percent of the people who were "pretty happy" will become "very happy." Money may not buy happiness, but if you're already happy there's a decent chance it will make you more happy!