Does Money Make Us Happy?

I’ve made a lot of money and squandered some. And I’m still not sure whether money made me happier.

In his famous TED talk, Dan Gilbert claimed that a year after winning the lottery or losing the use of their legs, people are equally happy with their lives. He was drawing on a 1978 study by Brickman, Coates and Janoff-Bulman, and the real findings are subtler and more interesting. The lottery winners, whose prizes reached $1 million, were no happier than ordinary people, and they took less pleasure in everyday things. The accident victims were less happy, but far happier than anyone would have guessed.

If millions don’t make us happy, then what does?

Let’s first define happiness.

Sonja Lyubomirsky, a psychology professor at the University of California, Riverside, who has studied happiness for over three decades, says happiness has two elements.

The first is feeling positive emotions frequently, what I’d loosely call pleasure. The second is satisfaction with how your life is going, and I think meaning plays a big part here.

I know this from my own feelings and from my journal. I often felt positive emotions when I bought a new Rolex, dined at a glitzy restaurant or made sure to be seen in Cannes. But I wasn’t truly satisfied with the direction of my life until I started going inwards, journalling, reading and then writing.

A much larger Swedish study later refined Gilbert’s claim. Surveying lottery winners 5 to 22 years after their win, researchers found that they were more satisfied with their lives, but only slightly happier. The difference came from the security that money gave them, not from how their day-to-day felt.

So money moved one needle far more than the other.

Our prefrontal cortex allows us to simulate experiences before trying them in real life. It’s one of the things that sets us apart from other species and contributes to our survival. However, this same simulator makes us overestimate how good or bad an outcome will feel.

I dreamt of buying a BMW X5, and paid a lot for it. For the first month or so, I’d smell the newness of the car, hear the unmistakable sound of the BMW engine, and feel the thrust as I accelerated, all of which made me happy. But after a while, those feelings faded. It became simply a car that took me from A to B. It elevated my status, but it no longer made me feel anything.

Evolutionary biology suggests we aren’t built for contentment. If our ancestors had been satisfied after finding food once, they would never have pushed on. And hedonic adaptation, which we succumb to time and time again, means every gain soon feels ordinary.

We’ve been programmed to believe that we will be happier after a better-paid job, after having a baby, or when something extraordinary happens. This new circumstance becomes the baseline, and desire moves to the next rung.

Gilbert introduces the concept of synthetic happiness. We can make ourselves happy even when we don’t get what we want. Unconsciously, we tell ourselves that we are better off not getting the higher-paid job, as it would’ve turned us into soulless machines.

This isn’t fake happiness; Gilbert shows that the happiness we make is as real as the happiness we find. Yet we don’t fully trust it; we look down on it as second best. That doubt makes us spend in the wrong places, searching for happiness.

So how do we become happier?

When people are mired in poverty and barely have time to care for their children, money can alleviate much of the despair. It removes the obstacles to happiness.

For the rest of us, Lyubomirsky says, money makes us happier only when we spend it in three areas.

Connection. Spending that brings us closer to the people we love. When I took my family on an expensive holiday to the Seychelles, we bonded and shared experiences we’d never have again.

Contribution. Spending on others, or on causes we believe in. I felt good paying for the education of underprivileged children through a foundation I set up to help young footballers build better lives. The foundation eventually failed because I couldn’t secure funding, but the good feeling of helping them, with mentorship as much as money, never went away.

Personal growth. Over the years, I’ve spent a lot of money on improving my writing. My week-long MFA residency in Vermont, with its time in nature, wonderful tutors and fellow writers, some of whom became friends, was both memorable and meaningful.

But what doesn’t work, she says, is possessions as an end in themselves. Remember my BMW. I doubt anyone thinks about their possessions on their deathbed. Experiences fade too, but they become stories, get shared, and stay unique. I can’t forget watching sunsets and talking with my family in Paros.

Having read Ashley Whillans’s research, I’d add a fourth: buying ourselves time. If we can afford someone to do tasks we dislike, like cleaning the house and running errands, why not spend our money there? It would let us focus on the things we enjoy.

Money has definitely made me happier.

I feel more secure, as if I have a stronger backbone. I have more freedom to do the things I love.

But as I’ve seen in my life, the more possessions I chased, the more disconnected I became from life. The more I spent removing everything I disliked, the more comfortable and meaningless I became.