Money May Satisfy But Does Not Bring Happiness
I am intrigued by the relationship between money and behavior. Knowing something about it helps me understand why I and the people around me do some of the crazy things that we do with our money and our time.
We often hear that “money can’t buy happiness.” This suggests that society in general is aware of and believes in the truth behind the words.
So why doesn’t society act like they believe it? Why is there so much political discourse and media focus on who has money and who doesn’t?
Satisfaction vs. Happiness
The study found that when people reported being “happier” with more money, the feeling was actually an illusion. The illusion is based on the difference between “satisfaction” and “happiness.” This is what the scientists who conducted the study reported:
The belief that high income is associated with good mood is widespread but mostly illusory. People with above-average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense, and do not spend more time in particularly enjoyable activities.
What is this illusion about happiness?
The scientists tell us that we tend to associate certain “things” and status with happiness when in fact they are not the same. We assume that getting a promotion, living in a big house, or driving a nicer car are measures of happiness. So when we achieve these things, we are supposed to be “happier” and that’s what we tell people. But while that McMansion or big paycheck may bring a level of satisfaction, they do not equate to being in a state of happiness.
To counteract this illusion, the psychologists devised a way to look at feelings of happiness from moment-to-moment during the day. Every 25 minutes during their daily awake periods, the survey participants were asked to report on their feelings of being happy. The authors call this the “Day Reconstruction Method” (DRM). This enabled the researchers to exclude the “satisfaction=happiness” mis-perception. This is what they said about the DRM findings:
Respondents reported their experiences from moment to moment as well as their annual household income and overall life satisfaction. The new survey found that income was more weakly correlated with individuals’ happiness from moment to moment than it was with their overall life satisfaction.
If people have high income, they think they should be satisfied and reflect that in their answers. Income, however, matters very little for moment-to-moment experience.
Why is there No More Happiness with More Money?
This is an extremely interesting question to me. People focus on making more money then report being “happier” based on the illusion that being satisfied is a measure of happiness. Why were they wrong?
The scientists tried to explain that as well. I think they hit on something big.
The authors studied data from the Bureau of Labor Statistics which revealed some extremely telling information:
Men making more than $100,000 per year spend 19.9 percent of their time on passive leisure, compared to 34.7 percent for men making less than $20,000.
Women making more than $100,000 spend 19.6 percent of their time on passive leisure, compared with 33.5 percent of those making less than $20,000.
Wealthy people, it seems, spend so much time chasing the money that they don’t have enough time left to use in a way that makes them happy. People with lower incomes spend more time enjoying themselves.
The authors said it this way:
Despite the weak relationship between income and global life satisfaction or experienced happiness, many people are highly motivated to increase their income. In some cases, this focusing illusion may lead to a misallocation of time, from accepting lengthy commutes (which are among the worst moments of the day) to sacrificing time spent socializing (which are among the best moments of the day).
I think a lot of us sense that this is the case but we have trouble accepting it 100%. How many of us are willing to downsize our economic life to recapture time for those happiness-generating moments?
How to Apply Money and Happiness Research
As we grow older, many of us come to understand that we have been living to work instead of working to live. Baby boomers (of which I am one) are finally catching on to the fundamental differences between satisfaction and happiness. That’s why a lot of us are looking to downsize our committments to having more money and “stuff” and upsize our commitments to freeing up time and resources to do other things.
The problems come from obstacles to economic downsizing that our earlier life habits have created. The most prominent and obvious of these obstacles is debt. Our super-sized lives have brought super-sized debt. Even if and when we recognize what the research shows about the non-correlation between happiness and money, those monthly payments get in our way.
This is why Mr. and Mrs. ToughMoneyLove have focused on making money for the immediate purpose of eliminating debt. We know that money will not buy us happiness. But the lack of debt will give us the freedom to choose happiness.
Others may have the opportunity to avoid the debt altogether.
The research on money and happiness also seems to undermines the notion that there is an important distinction between “good debt” and “bad debt.” In my opinion, any debt that presents an obstacle to a decision to downsize your economic life – choosing happiness over satisfaction, if you will – is bad debt. That leaves what, exactly?
There probably is a balance to be found – a satisfaction/happiness “sweet spot” – in our life. The key is to not let our desire to be satisfied overload one side of the equation too early in our lives. Otherwise, we could spend a lifetime trying in vain to re-balance.
Source: Kahneman, D., Krueger, A. B., Schkade, D., Schwarz, N., & Stone, A. A. (2006). Would You Be Happier If You Were Richer? A Focusing Illusion. Science, 312, 1908-1910.
Image credit: ZR