Do you remember that cheesy television series, Lifestyles of the Rich and Famous? The show featured the opulent lifestyles of entertainers, athletes and moguls. We watched the parade of excess for over ten years.
Sometimes we wished we could be like them. At other times, we salved our envy with the question, “Yes, but are they really happy?” We all want the most for our money. After all that hard work and disciplined saving to build wealth, there’s got to be something to show for it. We want to do more than just survive, we want to thrive!
Will Money Make You Happy
According to research from a team led by Nobel laureate Daniel Kahneman, increased income can bring increased happiness—up to a point. Kahneman, a psychologist and pioneer of behavioral economics, identified that point as $75,000 in yearly income for Americans. The study indicated that until household income gets to about $75,000, making more money seems to make us happier. However, increases beyond that amount don’t.
Think of the $75,000 as the average threshold for “enough” among Americans. Once you cross it, chasing more money for money’s sake doesn’t make you happier. In fact, some studies suggest it can actually reduce your happiness. This is not to say that you can’t be happy with a higher or lower income. The difference between being rich and enjoying wealth has a lot to do with the motive that led to your fortune.
Will Achieving Your Goals Make You Happy?
Research led by Edward Deci and Richard Ryan sheds even more light on the money-and- happiness perspective. They found that having any goal increases your likelihood of success, but the type of goals you’re chasing actually determine your happiness level (more on the self-determination theory here). If your ambitions have to do with something extrinsic—like riches or fame—those goals actually won’t make you happy (or happier) even if you achieve them. In contrast, people pursuing more intrinsic goals tend to be happier and more fulfilled. They also tend to achieve their goals. Intrinsic goals involve connecting to something beyond your own little universe, helping people, doing meaningful work and making the world a better place.
Are You Thriving—or Just Surviving?
My Moneymentals course talks about having a “Spend” account and a “Save” account. We can re-name Spend and Save to “Survive” and “Thrive.” Here’s why:
Your Spend account is a lifeline for survival. You need it for things like food, clothing, bills, transportation and basic creature comforts. Hey, I’m sure I’m not the only one who can’t do without a morning cup of coffee! With a new baby at home, it’s a need, not an option.
Whatever your personal non-negotiables are, they’re part of surviving happily. Your Save account helps you accumulate money for thriving. Once you’re meeting your Survive threshold, you enter “survival-plus” mode where you’re saving money to do things that make life meaningful. That’s the Thrive part. Our friend Henry David Thoreau sums it up: “Wealth is the ability to fully experience life.”
The way you use your Thrive money has a tremendous impact on how happy it will make you. Buying to accumulate things or competing with the neighbors can make it appear as if you’ve got more riches, but you’ll get a lousy deal on the happiness factor.
What’s Your Ratio?
You can use money to make you “rich” or to enrich your life. Check to see how much you Survive vs. Thrive by asking yourself what percentage of your earnings, your precious life energy, you use to really Thrive in your life. When you reward yourself for saving, choose something that truly maximizes your happiness.