Dotting the I's and Crossing the T's. The Money-Happiness Connection

Dotting the I’s and Crossing the T’s: The Money-Happiness Connection

Why do some people choose a job and work there for a lifetime while others switch their workplaces every two years; why do rich people sometimes live unhappily; why do others build their own businesses or found philanthropic organizations? All of these questions demonstrate the existence of a huge controversy between money and happiness. Even today scholars as well as ordinary people cannot agree on what the connection between these two is.

The opponents of money-happiness connection claim that these two subjects are not interdependent since the long-lasting happiness can only be built upon the non-material and spiritual life of an individual. A certain category of people believe that money does not influence people’s level of happiness. For example, in his article Novotney, A. (2012) claims that money cannot buy happiness. He talks about an experiment which was conducted in rich households. The researchers concluded that money is not important for these rich families because they have other problems concerning the well-being of their children, their aspirations and future life. In addition, the adherents of this idea emphasize that money does not ultimately solve all difficulties and it even creates several downturns. Novotney argues that rich people lose many of their friends, become isolated and their children become spoiled. Another concern that disturbs the author is the lack of motivation for living and growing afterwards. He gives an example of a man who sold his business, lived well and lost the meaning of life and motivation.

In addition, Richard Easterlin conducted a survey from 1972 to 2000 and concluded that more money does not mean more happiness. Researchers annually asked one question "Taken all together, how would you say things are these days? Would you say that you are very happy, pretty happy or not too happy?" According to Easterlin, people were happy when they spent their free time with loved ones and had good health conditions (Fock, 2005).

The opponents’ views mentioned above are clear and definitely make sense. Money itself is not the most important part of a person’s life. The meaning of life is what makes a person happy. Family, friends, the beloved job, hobbies and other components fulfill the individual making him or her unique and truly a happy person. Looking back at Abraham Harold Maslow, who was a famous psychologist and scholar, and his studies of “hierarchy of needs” in 1943, it is clear that such factors as self-actualization, esteem, love and belonging needs are a significant part of a person’s level of happiness. However, the base of this pyramid consists of two types of needs which are safety and physiological needs and hence is more or less materialistic. Certainly, these needs are basic because without them the rest of the needs cannot contribute to a person’s happiness. If a person feels hungry or in need of shelter, he or she will not think about esteem or self-actualizations needs. Everyone needs food and home which can only be bought by money which is a key element of financial happiness and financial freedom. Money is the means by which people achieve the overall happiness. It can also be a “hygiene” factor which means that money can be a dissatisfier that contributes to an individual’s unhappiness if there is not enough of it (Herzberg, 1954).

Thinking this way, scholars concluded that money is indeed important and it is tightly connected to people’s level of happiness and thus, it is necessary to know how these are connected. There are two main positions that researches hold and they are the ways people earn money or spend them. Also, there can be a combination of both earning and spending that increases the level of happiness.

For instance, in “Cashflow Quadrant” R.T. Kiyosaki’s (2000) objective is to show four different types of people based on their income. The people are divided into four categories: Employee, Self-employed, Business Owner and Investor. This idea signifies that only Business Owners and Investors provide an individual with true financial freedom allowing to work less, earn more, be financially secure, and pay less in taxes. Those who believe in the connection between the way of earning income and happiness, argue that people have different personalities and hence are suitable for different categories. Most people would probably agree that finding the perfect job is critical to anyone’s level of happiness. It is easier for people to become truly happy if they find their dream job or when they are in the right quadrants because they earn their money in a pleasant way. They are satisfied with their lives and can be sure that the rest of Maslow’s pyramid will come which is love, belonging, esteem and self-actualization.

Earning money is not enough for complete happiness as the person needs to know how to spend the money in the best possible way. The vast majority of researches tend to see money-happiness connections only in our spending habits, which are spending on experiential goods rather than material and helping those financially in need. They claim that the way people spend their money defines whether they are happy or not. This point of view is explained in an article written by scholars at the University of Virginia, University of British Columbia and Harvard University (2011). For example, 34% of people get more happiness from material goods, while another 57% from experiential purchases. Changing the spending habits and shopping mentality can lead to satisfaction and an increased level of happiness. People can become happier just from giving away a part of their income to charities and those who are in need.

Michael Norton holds the same opinion in his Ted Talk show. He claims that these lottery winners are not happy because they do not spend their money on others and just keep it for their own purposes and thus become very antisocial. Many experiments proved that spending money on others made people much happier than spending it on themselves. Combining the habits of earning and spending money right will almost certainly lead to an increased level of happiness for most of the people.

Going back to opponents’ views of money-happiness connection, it is clear that researches emphasize on uncommon life tragedies of several millionaires, but they do not address the issues of the ordinary middle class and poor people. Studies that say that money does not matter confuse their readers by doing a surfaced analysis instead of a deep one of the people’s true sources and foundations of happiness. The examples mentioned above looked at the top of Maslow’s pyramid failing to provide a full analysis of people’s needs. Therefore, the main reason to argue about the money-happiness connection lies in the essence of financial happiness which in turn allows for the overall happiness.

There is understandably a tension between those who claim that more money means more happiness and those who claim that money does not matter as true happiness lies in the meaning of life. It is futile to absolutely deny the importance of money but it is also not sufficient to say that money will solve all of the problems.

Furthermore, combining the knowledge about money and happiness, it is easier to reach peace and end the controversy simply by establishing a sequence to achieve the overall happiness. At first, we satisfy our basic physiological and security needs and create the financial happiness of earning money from the right quadrant. Then, simply add the rest of Maslow’s pyramid which is love, belongings, esteem and self-actualization by creating a beloved family, getting the dream job, and of course, spending money in the right way by helping those financially in need and then carefully distribute earned income on others and ourselves. Following these idea, probably, everyone can answer questions listed above. People who spend a lifetime working in the same place feel comfortable there while others still search for the “perfect job”. Some rich people are unhappy because they do not spend their money on others or because they fail to meet the top three levels of Maslow’s pyramid of needs. Finally, people build businesses in order to earn money from a desired quadrant and start philanthropic organization because they feel the duty to help others.

References

Fock, L. T., Dr. (2005). Money Can't Buy Happiness. Retrieved from http://www.mccc.org.my/Articles/Trends/moneyhappiness.htm

Kiyosaki, R. T., & Lechter, S. L. (2000). Cashflow Quadrant: Rich Dad's Guide to Financial Freedom. New York: Time Warner Book Group. Print Larsen, R. (2011, September 15). If money doesn’t make you happy, then you probably aren’t spending it right. Retrieved from http://journalistsresource.org/studies/economics/personal-finance/money-happy-spending-research#

Norton M. Video: How to buy happiness. Retrived from https://www.ted.com/talks/michael_norton_how_to_buy_happiness#t-309903

Novotney, A. (2012, July/August). Money Can't Buy Happiness. Retrieved from http://www.apa.org/monitor/2012/07-08/money.aspx