Could it be that our traditional views on money and happiness are completely wrong?
The traditional path to happiness looks something like this:
- Work hard
- Earn more money
- Use that money to buy a better lifestyle
- Find happiness in that better lifestyle
I certainly think this way myself a lot of the time. Especially as I work to grow this business, I often think about all the ways that increasing my income would allow me and my family to get more of the things we want, with the assumption that those things will make us happier.
But is that assumption right?
I recently read the book Happy Money by Elizabeth Dunn and Michael Norton. It’s a quick and fun read that summarizes a whole lot of academic research into five principles for how we can better spend our money in ways that make us happy.
And I came away from it thinking that the true path to happiness may be much different than what the traditional view suggests.
Today I’d like to share two important principles I learned from this book and how you can use them to create a happier life no matter how much money you have.
Principle #1: Humans are pretty darn adaptable
How likely would you be to turn down the opportunity to:
- live in a nicer house?
- drive a nicer car?
- make more money?
Not likely, I would guess. I know I would tempted by all three. I’m actually actively working to increase my income, and while I like our house there are certainly some things I would change if I could.
But here’s the thing: the research actually says that for the most part, none of those three things will make you any happier.
Here’s what the research shows, according to Happy Money:
- People who moved to a “better” house DID report higher levels of home satisfaction, but there was NO change in their overall life satisfaction.
- When car owners were asked to reflect on the last time they had driven their car, there was NO relationship between the level of enjoyment reported and the cost of the car.
- In the US, an increase in income has NO affect on happiness once that income exceeds $75,000, and even below that amount the relationship is weak.
There’s even a study, not mentioned in the book, showing that 12 months after the fact lottery winners were no happier than people who had not won. Heck, they weren’t even much happier than people who had recently become quadriplegics.
The bottom line is this: more money and nicer things don’t actually make us happier.
A lot of this has to do with basic human adaptability. We’re very good at getting used to our circumstances, both good and bad. As Dunn and Norton write, “the more we’re exposed to something, the more its impact diminishes.”
It makes a lot of sense when we think about our own lives. I remember being really excited about getting a new phone a few months ago. It was a big upgrade over my last one and it was fun playing with all of the new features.
Now? The phone works. I’m certainly satisfied with it. But I don’t derive much day-to-day happiness from using it. It’s just become a normal part of my daily routine. This phone is no longer making me any happier than I was with my old phone, despite the temporary bump in excitement when I first got it.
All of this means that we’re just as likely to be happy with a simple lifestyle as we are with a luxurious one. Either way we’ll get used to it and derive about the same amount of daily happiness.
Principle #2: We love treats and unique experiences
The first two chapters of Happy Money explain that we are happiest with both things and experiences when they either feel like a treat or when they feel unique.
Or to put it the opposite way, “too much of a good thing” is an obstacle to happiness.
They cite all kinds of research that shows this to be true:
- College students who were given a piece of chocolate in successive weeks enjoyed it most the first time.
- The possibility of winning a dream vacation produced more excitement from people who rarely traveled than from people who traveled frequently.
- Couples who were velcroed together at the wrist and asked to complete a series of strange physical challenges subsequently reported higher levels of relationship satisfaction than couples who had been asked to perform simpler activities like rolling a ball back and forth.
In all three cases, people were happiest when the experience felt rare and exciting. The more we’re exposed to something, the less enjoyment we get out of it.
And again, it’s pretty easy to think of examples where this is true in our own lives:
- One of the reasons I love Christmas is because it only comes once per year and because it’s one of the rare times that my entire family is in one place.
- Most of my favorite memories are of unique experiences like going to Costa Rica with my wife and making a last-minute road trip to Indianapolis for a basketball game with a friend.
- On a day-to-day basis, I honestly take many of the nice things I have for granted (a comfortable house, a yard, my cell phone, and even my family from time to time).
Whether our daily routine is simple or luxurious, many of our happiest moments come from doing things outside of our personal norm.
What this research means for you
There are two big takeaways in all of this research that can help you make financial decisions that lead to a happier life.
First, a more luxurious lifestyle is NOT a path to a happier life. You’re just as likely to find day-to-day happiness with a simpler, less expensive lifestyle.
Second, a simpler, less expensive lifestyle makes it easier for you to “treat” yourself for two reasons:
- Because less money is needed to support your daily lifestyle, you have more money available for treats and unique experiences.
- Because your daily lifestyle is simpler, it doesn’t take as much for something to feel like a treat.
That first point is pretty straightforward. But it’s the second point I find most interesting.
When your daily life is relatively simple, even small treats can feel like big ones. And you therefore have more opportunities to create small moments that increase our happiness.
Here’s kind of a silly example from my own life, but I think it illustrates the point well.
My daily routine includes a homemade cup of coffee. I enjoy it, but it’s nothing fancy. And every day it’s pretty much the same.
A few weeks ago I was getting ready to meet a friend of mine for breakfast and I realized that I was really looking forward to some diner coffee. Now, I had been to this restaurant before and the coffee was good. But it certainly wasn’t anything that people were traveling great distances to come and get.
So why was I so excited? Really, I was excited for the simple reason that it was a deviation from my routine. It felt like a treat simply because it was different than my regular homemade cup of coffee.
And while that may sound silly, I think there are three important points here:
- My regular daily routine is inexpensive, simple, and enjoyable (if not thrilling, but what daily routine is?).
- This thing that felt like such a treat was also simple and inexpensive. It was an easy way to add a little happiness without breaking the bank.
- If my daily routine instead included a fancy cup of coffee from wherever, this breakfast out wouldn’t have felt like a treat and wouldn’t have added to my overall happiness.
In other words, the simpler your daily life, the easier and less expensive it is to treat yourself and add a little happiness to your life.
Now, this doesn’t mean that you forgo big treats like a trip to Europe. According to Happy Money, those big, unique experiences are actually one of the best ways to create lasting happiness.
But a simple lifestyle means that you don’t HAVE to go big in order to create a unique experience. When even simple pleasures feel like a big treat, it becomes easier to introduce moments of increased happiness into your life.
A counterintuitive path to happiness
Based on everything above, there’s a strong argument to be made that the traditional view that “more money = more happiness” has it all wrong.
Instead, I would propose the following:
- A simple lifestyle leads to just as much daily happiness as a luxurious one.
- A simple lifestyle makes it easier to save money, build financial security, and create financial independence.
- A simple lifestyle makes it easier to “treat” yourself and introduce little moments of increased happiness into your life.
What do you think? Does this counterintuitive path to happiness make sense? What parts do you agree or disagree with?