How to Buy Happiness With Money
What would you do if you won the lottery? Personally, I’d pay off my debt, quit my job and move to Japan. It’s a fun scenario to think about even if it’s never going to happen. Statistically, you’re more likely to give birth to quadruplets or be crushed by a meteor than win the lotto. That is unless, of course, you’re Evelyn Adams. In 1985, Adams won a $3.9 million jackpot from the New Jersey state lottery. Just four months later, she won again, bringing her total payout to $5.4 million, nearly $15 million in today’s money.
Adams was the first person in American history to ever win multiple million-dollar prizes. Basically overnight, she went from working in a convenience store to being worth more than some CEOs. With her newfound wealth, Adams paid off bills, set up a college fund for her daughter, bought a car, and lavished friends and family with gifts. You’d think a story like this would come with a happily ever after finale, but you’d be very wrong.
Soon after winning, Adams noticed her privacy rapidly disappearing. She felt that she couldn’t go anywhere without being recognized. And while some people celebrated her good luck, others resented her for it. Still more came to her asking for money. She put a stop to her plans to go to school and study music, made several bad business deals and ended up giving away a substantial portion of her wealth. By 2012, she had lost her entire fortune after gambling away the last of it at the casinos in Atlantic City. Today, she lives in a trailer park.
Adams would later say about her experience: “I won the American dream but I lost it, too. It was a very hard fall. It’s called rock bottom.”
The story of Evelyn Adams isn’t unusual. Multiple lottery winners have found their supposed good luck quickly turn sour as the sudden influx of cash ruined their lives. I guess the saying is true. Money can’t buy happiness. Except, it isn’t. Scientific research has demonstrated a positive correlation between wealth and individual happiness. The key, it turns out, is knowing how to use that money to buy happiness, and not just having it. But to understand this, we need to first answer the question, what is happiness?
You’d think it would be fairly simple to define, but from a psychological perspective, happiness is actually quite complicated. There are hundreds of different neurotransmitters that contribute to our unique understanding of what feels good. Each one plays a specific role and is responsible for a range of different emotional experiences. But by far the most important of these are dopamine, serotonin and oxytocin.
Dopamine is strongly tied to our reward center. Serotonin helps us relax. Oxytocin helps us bond and form relationships. Taken together, these three molecules could be called the happiness trifecta – a potent chemical cocktail responsible for feelings of excitement, bliss, contentment and every other positive emotion. Neurochemistry aside, our subjective interpretations of happiness can roughly be divided into two categories: pleasure and purpose.
Pleasure is the short-term, day-to-day happiness that we get from a good meal, spending time with friends or going for a jog. We might refer to this more simply as “mood”. Purpose is the harder to define sense of fulfillment we gain when we feel that our life has meaning. This delineation goes all the way back to Aristotle, and scientists today still use it as a way of evaluating an individual’s overall happiness. There’s a significant difference between pleasure and purpose, and just because a person has one doesn’t guarantee the other.
Take a new college student for instance. They may experience frequent daily pleasure in the form of spending time with friends, attending social events and enjoying a much greater level of personal freedom and independence. Yet, this same person may struggle to figure out what exactly they want to do with their life. This causes them stress and contributes to low levels of life satisfaction. Conversely, a successful CEO or entrepreneur can feel that sense of purpose in their work, while having low amounts of daily pleasure.
The burden of running a massive company weighing on them and sucking the joy out of even their favorite hobbies. Happiness then is when we experience both pleasure and purpose simultaneously. A truly happy person is someone who is able to find enjoyment in their daily experiences while also working toward larger goals that give their life meaning. If we are going to use money to increase our happiness, we should then consider using it to enhance both our pleasure and purpose.
You may think the simple solution is to just make more money. I mean, if I have more money, I can spend it on things that give me pleasure while using those same resources to pursue my purpose. Right? Well, kind of. You see, there is actually some evidence that supports this. Unfortunately, once you really start digging into the data, the picture gets a bit messy.
A now-famous 2010 Princeton University study has often been cited as finding that there is a limit to the amount of happiness money can bring us. Specifically that $75,000 appears to be the ceiling, and beyond that the benefits plateau. Except, this isn’t what the study found at all. What it actually demonstrated is that while daily pleasure caps at $75k, overall life purpose continues to grow alongside income. It’s a classic case of the media focusing on the sensational while ignoring the larger context. And here especially, the larger context is key.
Another survey conducted in 2018 reinforced the original $75,000 figure for pleasure, but also reported a second ceiling of $95,000 for purpose. It’s important to note that the 2010 study only evaluated around 450,000 people in the United States. The 2018 survey meanwhile included 1.7 million individuals from around the world and found a substantial variation between cultures. In wealthier countries, for example, caps appeared higher, and in certain regions, incomes beyond this limit were actually associated with decreased happiness.
As if all of this isn’t confusing enough, a more recent 2021 study from the University of Pennsylvania reportedly found no ceilings whatsoever. However, this survey drew from a relatively small sample size of just 33,000 Americans. And it also placed a greater focus on pleasure than the previous studies. What all of this data supports though, is that the more money you currently have, the less that future increases in wealth will contribute to your sense of pleasure and purpose. Essentially, each dollar you earn buys us a little less happiness.
Think of it this way: If a person earning $20,000 a year and a person making $200,000 a year both get a 10 percent raise, each will experience a similar boost to their happiness. For the first person, a $2,000 raise represents an increase in their standard of living and potentially their level of comfort. But for the second person, $20,000 is a proverbial drop in the bucket with a much less dramatic effect on their daily life.
What this means is that while there is a positive correlation between money and happiness, it’s one with diminishing returns. Once you’ve passed a certain threshold, it takes increasingly larger amounts of money to trigger the same neurological release of feel-good chemicals as when you had less. So if chasing money for money’s sake isn’t an effective strategy for buying happiness, then what is? Well, in a few words: spending what you already have wisely.
Positive psychology is an entire school of study devoted to quantifiably figuring out what makes life worth living. Its goal is to analyze positive experiences, traits and institutions with the aim of improving quality of life. Not incidentally, it is extremely concerned with happiness. In terms of the best way to spend money, this school of study divides potential purchases into two categories: pleasures and comforts. In some ways, this reflects the Aristotelian distinction between pleasure and purpose.
Pleasures by their nature are transient and short-lived, like biting into a chocolate bar. Comforts, on the other hand, are more permanent but are largely taken for granted, like running water and electricity. We tend not to notice them until they’re gone. In general, investing in comforts tends to be a surer method of raising our baseline level of happiness. They help to prevent and alleviate suffering, ensuring you are able to focus your attention on other pursuits rather than spending all your time simply trying to survive.
Things like a reliable vehicle, a house in a safe neighborhood and for nations without socialized medicine, quality health insurance, are all comforts essential for improving an individual’s quality of life. Perhaps the most important comfort a person can invest in is leisure time. Time is, after all, the only resource we can’t get more of. As such, it has a much higher value than any currency. Having leisure time means we are free to pursue the kinds of experiences that give our life both pleasure and purpose.
Studies have found that these kinds of activities are a more reliable source of happiness than any material purchase. No matter how excited you were when you bought that new smartphone, eventually it will age. The screen will crack, the battery will die and a new model will come along and become the new object of your desire. Just watch my entire video on planned obsolescence, and you’ll understand what I mean.
On the other hand, a once-in-a-lifetime trip to a foreign country will be remembered for years afterward. What starts out as a trip will become a story you share again and again, providing you with a continuous source of joy. Of course, you don’t have to spend a fortune on an overseas vacation just to find a little happiness. Going to a concert, taking a hiking trip or simply getting dinner with a friend offers the same benefits.
Perhaps the best experiences to invest in are those that allow us to improve ourselves at the same time. Learning a new skill or taking classes at a local university creates feelings of personal growth and progress. In fact, skill mastery is an important tool used in cognitive behavior therapy to help combat a variety of mood disorders, from borderline personality disorder to depression. This strategy can be adopted by anyone in order to boost our self-confidence and sense of purpose.
If you can participate in these kinds of experiences alongside loved ones, then even better! Because far and away, what makes humans the happiest is their connection with each other. We are innately social creatures. We want to feel like we belong, that we are loved and accepted. The best way then to spend our money is by using it to nurture our relationships. A great way to do this is through experiences where we can spend time with those we love, engaging in hobbies and other fun activities.
But what’s even more powerful is giving. You don’t have to give all your money away to reap the rewards. So be smart with what you give, and make sure that it’s well within your means. Psychologically speaking, the benefits of giving can be observed in children prior to the age of two. Before many of us are even able to walk or talk, we already understand the joy of sharing. This isn’t just some hokey, feel-good sentiment. Rather, it’s directly related to our neurochemistry.
When we give someone a gift, we are rewarded with a surge of oxytocin. This improves our mood, decreases stress and gives us a feeling of security as we strengthen our social connections. Oxytocin also has the added benefit of boosting serotonin and dopamine, further contributing to an overall positive emotional experience. This process is an evolutionary adaptation meant to promote the kinds of prosocial behaviors that contribute to the overall well-being and survival of the tribe.
This in turn helps ensure our own personal survival as we’re seen as a valuable member of the group. Giving then is kind of like a life hack for happiness. Buying a gift for a friend or donating to a charity produces a dependable source of both pleasure and purpose. These don’t have to take the form of grand dramatic gestures. Everyday acts of kindness can allow us to reliably tap into this natural biological process. Considering this, maybe the adage should be: Money can buy happiness, so long as it is spent on someone else.
Keep this in mind in case you ever win the lottery. But even if you don’t, even if you never founded a Fortune 500 company or come up with some revolutionary new invention, the money you do have can still make you happy. By investing more in comforts than pleasures, spending more on experiences and nurturing the relationships around us, we might just discover that we’re richer than we could have ever imagined.