How To Be Happier About Your Money

These days it seems like money makes the world go round. It rules our decisions and lack of it can stress us out. Can you become happier about your money or financial situation? You have probably already read the answer to this question in other articles. You know by now the answer is an unsatisfactory yes but to a certain extent.

More money can mean more happiness but only up to a certain extent. So, more money after some point doesn’t necessarily mean more happiness. In terms of life satisfaction, there is a linear pattern where more money means more contentment and fulfillment but again at some point, this correlation flattens too¹.

Where are you in this curve? Are your finances in a good state so you can feel good about your life?

Having some money can make a difference to your happiness and how you feel about your life. Money can predict well-being in that it gives us security and protects us from stressful and negative experiences¹.

Although wealthier people are happier than those who are considered poor, you can still be rich and unhappy about your financial situation². This is because it matters how you think about money and how you use it.

According to the Harvard Business Review, “how you spend, save, and think about money shapes how much joy you get from it”².

There’s really no avoiding the need for money but your mindset about money can make a difference. Here’s how to have a happier mindset about money.

You control the money; don’t let it control you

The most important thing is to not let money control you. If you have been using money to make your decisions like whether to take a job that you hate and makes you miserable because the pay grade is good, then you would be choosing based on money.

Studies have found that when people prioritize money over time, those people end up being more unhappy than those who don’t². For example, it may seem like a great idea to push to make as much money as you can as early on, foregoing other things in your life like family, friends, love interests, and time for yourself, but during that time you won’t be happy.

Perhaps, in the future after 5-10 years of working like that, you may be able to afford the life you want but you will have given up those years of potential happiness. Life is about the journey, not the destination so if you are working for a goal, it should be enjoyable. The actual goal is short-lived and once you reach it, then what?

Most likely you’ll want something else or more so rather than putting happiness off in the future and far distance, try to make sure what you’re doing is making you happy now.

It’s important to feel like you have control over your day-to-day and month-to-month finances⁵. Giving yourself the ability to control your money and set financial goals will make you feel better about your finances.

Saving a little money goes a long way

It turns out that saving your money and having some in your bank account can make a difference to your happiness. Imagine going into your bank account and seeing more than $2,000 saved in there. Better yet, imagine checking in on it periodically and seeing it grow.

More effective than having a high salary is having some money in your checking and savings accounts². If you have money coming in due to your salary but are spending all of it or more than you get, you won’t be able to save any. Not having this safety net for when things get tough like when you lose a job or have medical expenses will cause you some anxiety and is just not a good life practice.

In order to get money in your bank account to stay, you may be required to do some budgeting and cutting back on expenses. This can cause some anxiety at first¹ but focus on what you are trying to achieve by doing so.

By saving up your money, you are creating a safety net for yourself. Instead of getting short-term and fleeting highs of happiness by spending your money as soon as you get it, you will be creating longer-term happiness and stability.

Learn to budget a little better

If you’ve been spending at budget or over, you’re going to need to sit down and look at how you’ve been spending your money. Anything that isn’t essential to live should be considered extra and as many of those extras should be cut down.

Try living a little simpler. There is power to not needing too may possessions⁵. Cutting down on extras could help you appreciate what you have.

If you do want to continue to spend money on an extra or two, make sure that it’s because it’s bringing you happiness. If it is, then it’s fine to keep it in your life.

Elizabeth Warren, who wrote “All Your Worth: The ultimate Lifetime Money Plan” came up with the 50-30-20 rule to help people budget better. Here’s how it works: of your after-tax income, you spend 50% for your needs, 30% for your wants, and 20% for savings or paying off debt⁷.

A great way to think about how much money you have to spend has been said by Warren Buffet, a billionaire who is famous for not overspending.

Do not save what is left after spending, but spend what is left after saving.

Warren Buffet³

How you spend your money matters

So you have some money to spend. You’ve covered your essentials and put away some money to save. What do you spend it on? How do you spend it in a way that makes you happy and adds value to your life instead of filling you with regret afterward?

Some recommended ways to spend your money that will make you happier is to spend it on experiences, not things, to buy “time”, and to not spend it on ourself^1,2.

Experiences > things

Spending on things will not give you as much happiness as spending on experiences. Although experiences may seem fleeting whereas an object is more tangible, an experience will give you something that can’t be as easily compared.

Going on a trip, going to a concert, eating at a nice restaurant are some experiences that you won’t have anything tangible to bring home but you will have a new memory, may have learned something helpful, or will have an interesting story to entertain others with.

Unfortunately, buying things can be easily compared. For example, when the next iPhone comes out less than 12 months after you get your new iPhone, you’ll feel like you have the lesser model. Or when you get a car and your frienemy gets a more expensive car, you will see the comparison and feel down about what you have.

Buying “time”

How do you buy time? You can’t, but you can purchase timesaving services and equipment.

If there are things you don’t like to do and you don’t have time for them, then you can spend your money on a service or another person to do those things. This will free you up to do more of what you like to do.

(Related: Why Slowing Down and Doing Less Can Actually Bring You More in Life)

People who buy timesaving services report a higher life satisfaction². With all of the options these days that range from grocery delivery to random tasks, almost anyone at any salary level can afford this. Of course, be wise that you don’t spend too much money exporting all of your tasks.

For me, sometimes I get more satisfaction from completing a task myself that may seem tedious rather than spending money to have a service do it for me. It just all depends on how you feel. So, consider each task individually.

Spend on others

When you feel like you don’t have a lot of money to begin with, this can seem counterintuitive. However, people are shown to be happier after spending money on others and not themselves¹.

Perhaps, this goes back to the why behind spending money that you have. If you spend your money on frivolous things, you can just fill yourself with regret. Buying things you don’t need but want for one reason or another may give you an initial high but that eventually wears off.

When you spend on others like buying a small gift for a friend or giving to your favorite charity, you will be spending out of the goodness of your heart and that in return will fill you with happiness that will last. You will be improving your relationships and possibly making the world a better place with your money.

Enough will never be enough

As I mentioned before, more money means more happiness up to a certain point. This point is at about $75k per person a year⁴. But it’s easy to get caught up in the idea of more, more, more.

As humans, we adjust and get accustomed to new “normals”. This phenomenon is called “hedonic adaption”⁴. This adaption is another reason why things that we buy that seem so great at first end up not giving us satisfaction later on.

Another problem is comparison. If we compare ourselves to the “glamorous lives of the absurdly wealthy”⁶, we will always feel dissatisfied about our financial situation and therefore our life.

There’s more to life than money

Besides having the money for financial security meaning that you have money to meet basic needs⁴ and the capacity to absorb financial shock⁵, more is not going to bring you much more happiness.

Once you meet basic needs, more money doesn’t make a lot more happiness.

Dan Gilbert⁶

Knowing realistically what money can and can’t bring to your life will allow you not to expect too much from money⁶. It can fix a lot of problems and bring an equal amount of solutions, but it can’t do everything.

Even if you have money, you will still have to deal with existential issues such as if your life is meaningful enough, are you making a difference, will you be remembered. Money can’t answer these problems⁴.

So instead, find a purpose for your life. Set up a challenge for yourself or a self-improvement goal that you can focus your time and energy on. People who work on themselves and work toward something are much happier⁶.

(Related: Set the Tone for 2021 with Your New Year’s Resolutions)

There’s a lot of talk of financial freedom and the idea is to have enough money and have your financial situation set so that money isn’t your concern. You are free to live your life and be happy.

Instead of working to make yourself richer, work to set yourself up financially to live a life that brings you happiness. Work to be able to make choices that allow you to enjoy your life⁵.

When you start to change your mindset about money, you can start to free yourself from its chains and use it to support your endeavors for a happier life.

Live happier,

Nicole

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References

1. Entis, Laura. How to spend money to squeeze more joy out of life. Vox. 2019 Nov 20. Retrieved from https://www.vox.com/the-highlight/2019/11/13/20951937/money-experiences-buy-happiness-happy-how-to-spend.
2. Dunn, Elizabeth and Courtney, Chris. Does More Money Really Make Us More Happy? Harvard Business Review: Psychology. 2020 Sep 14. Retrieved from https://hbr.org/2020/09/does-more-money-really-makes-us-more-happy.
3. My Favorite Money Quotes. Corporate Monkey CPA. Retrieved from https://www.corporatemonkeycpa.com/awesome-money-quotes/?cn-reloaded=1.
4. Stieg, Cory. From the ‘perfect’ salary to keeping up with the Joneses, here’s how money really affects your happiness. CNBC. 2020 May 26. Retrieved from https://www.cnbc.com/2020/05/26/how-your-salary-and-the-way-you-spend-money-affect-your-happiness.html.
5. Dholakia, Utpal Ph.D. How Our Personal Finances Can Make Us Happy: Focusing on security and stress, but not on contentment or joy from money. Psychology Today. 2017 Dec 04. Retrieved from https://www.psychologytoday.com/us/blog/the-science-behind-behavior/201712/how-our-personal-finances-can-make-us-happy.
6. Futrelle, David. Here’s How Money Really Can Buy You Happiness. TIME. 2017, Aug 07. Retrieved from https://time.com/4856954/can-money-buy-you-happiness.
7. The 50 30 20 rule: how to save more, and overspend less. N26. 2020 Sep 10. Retrieved from https://n26.com/en-eu/blog/50-30-20-rule.