Can Money Buy Happiness?

For generations, individuals have pondered the question of whether money can truly buy happiness, and several recent studies have responded with a qualified “yes.” For example, a 2010 study by two Princeton professors indicated that happiness or contentment with how one’s life was going increased as a person’s income increased up to $75,000 per year, and then it plateaued.  Another study, published this past summer, indicated that higher income was correlated with less sadness on a daily basis, without any limit on the level of income that might have this influence.  However, regardless of your level of income, the academic research on this question indicates that there are several ways of using your money that can actually boost your happiness.

Since this week is centered on being grateful for the gifts that we have been given, and the “season of giving” follows close behind, we will focus on one strategy for using money to maximize your happiness–namely, giving your money away.  Several recent studies have shown that spending money on other people makes us feel happier than spending money on ourselves.  In fact, giving money away is even correlated with better mental and emotional health.  In particular, giving money away repeatedly (a habit, not just a one-time event), giving to or spending money on those who are closest to us or charities with which we have a personal connection, and giving that makes a big impact on the other person or organization (regardless of the amount of money spent) tends to boost our happiness the most.

Many of our clients hope and plan to leave assets to their children, grandchildren, other family members, churches, schools, or valued charities when they pass away.  However, if you want to gain the most happiness from the money that you have worked hard to save over the years, perhaps you might consider putting that plan into action early to enjoy witnessing the fruits of your generosity.

At PFS, we do not encourage clients to focus on accumulating wealth for wealth’s sake.  Rather, we want to help clients identify their life goals, and then manage their investments and advise them in ways that enable them to accomplish those goals.  If one of your life goals is to make an impact on the lives of family members or the work of a charity through gifts from your assets, we can help.  We can talk through the possibilities of how to give a gift that makes a big impact, we can help ensure that it benefits others without endangering your financial future, and we can strategize on how to do it in the most tax-efficient way as well.  In this season of gratitude and giving, consider how your money might be able to buy some extra happiness, for you and for those that you love.