A recent study of 2000 Americans has me scratching my head a bit about money and happiness.
It revealed that one in five would rather spend an hour in jail than work out a long-term financial budget.
Nearly one in five Americans think it would be easier to break up with their partner than change banks.
It gets worse. Nearly one in six adults would rather awkwardly sit through a steamy sex scene with their parents than tell them about their worst financial mistake.
One in four people would rather experience pain than move money to a new financial institution.
About 1/3 would prefer to go to the Department of Motor Vehicles (DMV/license bureau) than work on a financial plan.
These study findings suggest that managing our money is not a happy experience for many people. This has me wondering “Why?”
We think about money a lot, but we don’t take time for money knowledge.
I understand that money is one of the most private parts of our lives. At MPower Co, we often strategize about how to help people feel more positive about talking about money and taking action for a positive financial future.
Generations ago, it wasn’t considered lady-like to be knowledgeable about finances and be an active decision-maker. Surely men and women are well beyond that belief today.
I would suggest that most of us have been so busy with other aspects of our lives that we may not take the time to become well-informed about personal finance. That’s why we don’t always feel confident making well-informed decisions or even talking with others about finance.
All of us have the ability and, hopefully, the interest to be savvy financial decision makers. However, many of us are so busy with our employer’s work, keeping our homes functioning, and nurturing relationships, our finances get slighted when there are just not enough hours in the day.
Professionals in the banking, investment, accounting, insurance, and legal professions, are also responsible for part of the lack of financial confidence that most adults have. Instead of explaining principles and products in plain English, professionals tend to use too many big words that wear us out and end up leaving us confused. Examples are words like fiduciary, double-indemnity, credit freeze, FICO score, annuities, trusts. The list of $10 words goes on and on. Is their priority profits or providing the best solution for our needs?
Rather than educating and helping people build confidence and competence, our experiences with professionals often causes us to retreat and avoid financial matters much like we want to avoid a bad cold. In these situations money and happiness very clearly don’t seem to go together.
Managing Money to Make you Happier
What if you approached money with a goal of helping it make you happier? It could be a game-changer! MPower Co is a leader in bringing the research and best practices of personal financial management and positive psychology to find solutions for people who would rather go to jail than talk about money and make budgets.
While there are many studies and best practices about how money and happiness go hand-in-hand, let me start with just two to perk your interest.
Things vs. Experiences
A priority for money is to address basic human necessities like food, clothing, shelter, safety, transportation. Once those necessities are met, explore how you are using discretionary money. Sure, it is fun to buy some of the things you want. The research suggests, though, when you can redirect some money from buying “stuff” that clutters up your life to buying experiences for you and loved ones instead, you are happier. There is momentary pleasure in buying things; however, that tends to wear off quickly as we move on to focus on what else we don’t have that we want.
The research suggests that the memories and pleasure of funding experiences are greater and last longer. There are three happiness boosters for positive experiences – looking forward to the experience, experiencing the activity, and then remembering the experience. Redirecting some money to positive experiences can help money increase your happiness.
Does Money Buy Happiness?
Well, does it? A study from Princeton University suggests that whether you think the answer is yes or no, your right! Whaaaaat?
It depends on how much money you have and how you spend it.
Research shows that emotional well-being rises along with income, up to a point. A 2010 study at Princeton University looked at surveys of 450,000 Americans and found that participants with higher incomes reported higher emotional well-being, up to an annual income of about $75,000. After that, it drops off. More is better, but only to a point.
Interestingly, if we adjust that $75,000 for inflation the past decade, that number is now closer to $90,000.
Two Ways to be Rich
So, if you’re looking for the magic formula of how happiness and money are related, there are two ways to be rich. One is hard; the other is much easier.
The first way is to spend your life chasing money, believing that more is always going to be better.
The second way is to have fewer needs. Sort out the difference between your needs and wants. Make sure your necessities are met. Seek contentment and focus on enjoying what you have.
Meet Dr. Thia, MPower Co’s Director of Education
This article was authored by Dr. Cynthia “Thia” Crawford, MPower Co’s Director of Education. She has over 40 years of experience in adult education and is a specialist in both personal finance and positive psychology. She is a true pioneer when it comes to combining these fields. She is the author and coach of the online financial course Richer Retirement and the online well-being course Happiness Habitudes.
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