Episode Summary

Neuroscientists, psychologists, and experts have examined it, while other professionals have speculated and pursued the truth. Today, we delve into the age-old question: Can wealth genuinely make you happy? In this episode, we examine the correlation between money and happiness, explore happiness beyond financial means, and look at the factors that contribute to a truly happy life such as human connection, relationships, and experiences over material possessions. We’ll also explore the psychology and neuroscience behind the fusion of money and joy, and debunk some common misconceptions along the way. 

What You’ll Learn in this Episode:

• What happiness might look like when basic needs are met
• Why the wealthiest clients aren’t always the happiest clients
• How technology can help with needs but also interfere with happiness
• The importance of slowing down and embracing change
• Some common traits the happiest clients share
• Why discomfort is necessary for change and growth
• Things to think about when focusing on happiness
• The reason you must identify your values and align your goals with those values

Resources Mentioned on the Show:

• Does more money correlate with greater happiness? 
• Experienced well-being rises with income, even above $75,000 per year
• Finding Your MoneyZen with Manisha Thakor

Stay Connected:

• Join the Abacus community by connecting with us on Facebook, Twitter, Instagram, and on LinkedIn
• Connect with Mary Beth on Twitter, Instagram, and on LinkedIn
• Connect with Neela on Twitter, Instagram, and on LinkedIn

Transcript of the Episode

Neela [00:00:14]:

Hey there. Welcome to the If Money Were Easy podcast, the show where we teach you how to expand what’s possible with your money. We’re your hosts, Neela Hummel –

Mary Beth [00:00:22]:

And Mary Beth Storjohann – 

Neela [00:00:24]:

Certified Financial Planners and Co–CEOs of Abacus Wealth Partners. Today on the show, we’re going to talk about “Can money buy you happiness?” But before we jump in, a brief disclosure from our compliance department. This podcast is for educational purposes and is not intended as investment, legal, or tax advice. Any opinion shared is not the opinion of Abacus Wealth Partners. Let’s go for it. 

Mary Beth [00:00:51]:

Hello, Neela. 

Neela [00:00:53]:

Hi, Mary Beth. 

Mary Beth [00:00:54]:

Good to see you, hear you. 

Neela [00:00:55]:

It’s so great. I’m so happy to be back talking about maybe one of my favorite topics ever, which is basically how money and psychology and neuroscience and people all mash up in a blender and what it all looks like. 

Mary Beth [00:01:10]:

I was like, positivity and happiness. 

Neela [00:01:14]:

People, rainbows, and money. Is that it? 

Mary Beth [00:01:19]:

So I love this idea of can money buy you happiness? And we’ve seen the studies that have come out. A new study was just published. So why don’t you start by giving us an overview of the baseline study that was done years ago and what some of the new research has told us.

Neela [00:01:35]:

So about 13 years ago, some neuroscientists, Daniel Kahneman and Angus Deaton, did a study where they basically said, “Yes, money can buy happiness, but only up until a certain income level.” And they identified that as a $75,000 threshold. So basically until you make $75,000, each incremental dollar that you make contributes to greater happiness. But then you kind of hit this point of diminishing returns over that. So everybody that is in a high cost of living, city or state, is like, “Right, great.” 

Mary Beth [00:02:14]:

For those of us that live in California, what have been the thoughts around that? 

Neela [00:02:19]:

What are the adjustments? What are like the cost of living adjustments for these different areas?

Mary Beth [00:02:23]:

As planners right, because I know we’ve known this number, we’ve known the $75,000 number from the research for years. But when we’re talking about it, we’re adjusting, right? For cost of living. We’re adjusting, totally. State we’re adjusting you. So $75,000. That seems nice, but it also seems out of touch.

Neela [00:02:40]:

Totally. And I think what the study was really getting at is once you have your basic needs met, if you can afford health care and shelter and food and those kinds of basics, each dollar beyond that is icing on the cake, but doesn’t actually move the needle. But if you think about Maslow’s needs hierarchy, I think it was really going for make sure your basics are really taken care of. But as you mentioned, we all had so many, so many questions. So there was another study done about eleven years later, and I think it was out of the University of Pennsylvania, and they actually reversed that study and said, “Actually, income does correlate to happiness. And it doesn’t drop off in the same way that we have seen before.” And so they kind of debunked the $75,000 number and they were like, “It really goes up until the several hundred thousand dollars income level.” 

Mary Beth [00:03:38]:

Which feels more realistic, right? Especially when you look at home prices. You look at especially what’s happening with inflation now. I bought groceries this weekend. That’s crazy costs. So with the several hundred thousand dollars, that feels more realistic. But let’s talk about, “What does happiness mean?” Like, what are we talking about when we’re talking about this concept of happiness? What switches over? So we have the basic needs met and then what am I looking for in my life? What are you noticing from your clients that are happiest? How are you seeing this show up for them? 

Neela [00:04:14]:

So if this study played itself out perfectly, I would notice that my wealthiest clients were the happiest. I don’t necessarily see, I think, you know, you go back to when we interviewed Manisha Thakor and she talked about the things that actually do contribute to the true sense of wealth oftentimes are the things that money can’t buy. Things like human connection, relationships, family, intimacy, some of those things that don’t actually carry a dollar sign. And so I think what we’ve actually seen is, “Does money make things easier?” You bet. But money by itself is not the predictor of whether you are a happy person or not. In fact, there was a caveat to the most recent study where it was, essentially, if you take an unhappy person and give them a bunch of money, that does not make them happy. Which is like, “Okay, so happy people continue to be happy or get happier with more money. But unhappy people putting more money into that equation doesn’t actually move the needle.” 

Mary Beth [00:05:24]:

That tracks. That tracks. Because I’ve always said this idea of manifesting, manifesting more money in your life and manifesting these things, you can manifest all of the money that you want, but if you don’t have the skills to actually manage that money, that’s not going to do anything for you or make you happier. So if you don’t have the skills or the mental health or the tools to kind of create that happiness and shift your thoughts, more money isn’t going to total that problem. 

Neela [00:05:52]:

Money is like a piece of the pie. It’s not the whole thing. 

Mary Beth [00:05:55]:

Right. So what are you noticing then? Who are your happiest clients? What are they doing with their lives? Where are they spending their time? 

Neela [00:06:02]:

So I think the happiest people that I see, they feel like their needs are met. They don’t really feel like they’re just kind of squeaking by. So I do believe that having some degree of a safety net matters. And we should also say that a lot of times the clients that we’re able to have are the ones who have been saving and investing. And so we’re already kind of self-selecting to a group of people. But generally, the people who are enjoying themselves the most are not the people who are buying the most expensive houses, buying the most expensive cars, buying the most expensive stuff. It’s where they spend their money and how they spend their days, where they get the most out of it. And I think I see it the most in two areas. One is experiences over things. So they’re investing in travel, they’re investing in visiting family who are spread out across the country or even the world. And then they’re also incredibly generous with either their time and or their money. And so they’re the ones who are donating money, they are donating services, they are giving back, which neurochemically actually releases pleasure hormones. When you donate money, it actually directly contributes to your enjoyment. 

Mary Beth [00:07:18]:

Yeah. So I love this idea of those that are happier, even for the happy clients – we go through periods of transition, right? We have this life that we want to lead and we have these values that we like to align our lives with, and that still takes work. And so I think that’s an interesting thing to think about, is even the happiest clients still get uncomfortable, right? It’s not easy. Just because they’re happy doesn’t mean their lives are easy or that they haven’t had to put in the work to be happy. I think being happy takes work, right? You have to be intentional to actually achieve that happiness. I’m thinking of clients right now that are taking a huge leap in their lives and moving cross country and doing some big, uplifting, uncomfortable things for themselves in the effort to make themselves happier. But getting to that point of giving themselves permission to make this change has taken years of working together and talking about things, and now they’re in the middle of doing it. And it’s work, right? It’s work to kind of get yourself settled into this new thing that will bring you happiness and then the happiness kind of comes over time. 

Neela [00:08:22]:

Yeah, that’s such a good point. Happiness is not a destination. It’s not like, “Oh, I’ve achieved happiness. Now we’re good. Next 45 years, we’re all set, right?” It takes ongoing work. And I think your point about ‘it almost takes discomfort to feel comfort and happiness’ is a really good point. It brings up this idea of comparison that if you get so comfortable being comfortable, eventually that almost becomes uncomfortable. And so it is this ongoing work that you have to do, like a mindset shift. But one of the other things that I think is fascinating about this concept of “Can money buy you happiness?”is the role of absolute wealth plays compared to relative wealth. Because if you think about where we are as human beings, we are in an incredibly thriving, privileged time. We can open up the refrigerator and there is enough food to eat. 

Mary Beth [00:09:27]:

Your refrigerator can play a song in some cases, right? You can listen to Spotify on some refrigerators. 

Neela [00:09:35]:

Yeah, right. Like where we are technologically and for the most part we are able to really meet our needs. And so especially in the developed world where you have those needs being met for the most part – of course, there are still issues, different populations in terms of food scarcity and poverty, et cetera – but overall, if you think about the human condition and where we are evolutionarily, we have tons of food, we’ve got tons of great structures and so we really kind of have our needs being met. And so what you start to see psychologically is this shift to focusing more on, “Well, how much do I have compared to other people versus are all of my personal needs being met?” And so this comparison game has started to really pop up and it’s really been exacerbated, I think, by social media, by just the prevalence of that. And so this relative wealth is almost what people are thinking about more because they’re seeing other lifestyles and people that have so much more than they do and that is actually contributing to their unhappiness. 

Mary Beth [00:10:41]:

Yes, I agree. I think the social media, the comparison factor, and also the fear mongering that exists on social media as well, there’s a lot more scarcity, fear, that contraction within. You’re seeing it with finances, too. We’re seeing clients who are more anxious about their money now, you’re just reading the newspaper, local news, there is negativity no matter where you open your computer. Wall Street Journal, I mean, I love reading the Wall Street Journal, but it is negative headline central. Nobody is like, “Everything’s going great, there’s not an exciting headline to be found in a lot of areas.” So I think that’s interesting. The social media one is huge and this idea of our world has changed so much, like you mentioned, and there’s so many benefits to it, but also so many people are so uncomfortable with change. So there’s fear around the change as well. A lot of people are going kicking into the evolution, like AI for example. There’s fears around all of this stuff instead of embracing it. So I think that impacts the happiness as well. It goes back to the mental health and the speed at which we live our lives. This fast pace, this fast clip, this constant hustle, “What’s next? What’s next? This trip, that trip.” The happy clients that I see are the ones that really are intentional, the ones that are slowing down, that are thinking through “What’s best for me, what’s best for my family. How can I do this in a strategic way?” That’s what I’ve tended to see, those that are coached through it with a planner really know it and kind of have those things that are highlighted to them of like, “You’re saying you want this thing, but I’m seeing your spendings over here and these other things,” or “This is what you said, this is still true.” Having that other voice there, I think, helps a lot of people to live more intentionally. But those that are powering through, even who have the most money, that doesn’t create happiness because you’re not stopping to actually live in the present and be mindful of what’s going on. 

Neela [00:12:28]:

Totally. What I love about what you just said is it sounds like the people that are happiest and most successful are the ones who are focusing inward as much as they can. What works for me, what works for my family, they’re not the ones coming in and saying, “My neighbor just bought a more expensive car. I want that car.” 

Mary Beth [00:12:49]:

Right? Yeah, “It must be nice for them, right? But I’m over here doing…” 

Neela [00:12:51]:

“Am I the sucker? Am I not doing this? Was my raise not big enough in order to do that?” when it’s tuning out all of that noise. 

Mary Beth [00:13:03]:

Right. There obviously are – there’s real systemic issues and income inequality faced by many people, and so we’re not discounting that. There also is, though, this idea of understanding what outside influences are we letting into our lives that are shifting and impacting our perspective as well. What are you noticing about your least happy clients? What do you see?

Neela [00:13:21]:

Yeah, I think the least happy, honestly, individuals, clients and people that I’ve come into contact with are the ones whose choices, what they’re actually doing are in conflict with what they’ve stated are their values. So if they come in and they say, “I want to spend as much time as possible with my kids,” and we’re like, “Great, in order to do that, we’re going to downsize this house. We’re going to do this over here. We’re going to shift to buying these groceries instead of these groceries.” And you’re like, “Congratulations, we’ve done it.” And they’re like, “Well, yeah, I’m not going to do that.” “But you said this was the goal. I thought this is what you wanted.” Which goes back to exactly what you said is like going inward, figuring out what you really want and then having your choices line up with that. 

Mary Beth [00:14:15]:

Yes, I agree. I think it’s the reflection, and a lot of the times we don’t allow ourselves to kind of live in that transition space. Because like you said, “Here’s all the changes you have to make to get to that thing that you want.” And you’re like, “Oh, that feels real uncomfortable. Really uncomfortable. I’m very comfortable where I am now, so I’m just going to stay here even though I want that thing. I am not comfortable with the change.” People get comfortable and we see it a lot where people with the lifestyle inflation, as incomes rise, you get stuck in your jobs. You can’t make those leaps. Even if you want to downsize, you want to slow down, you want to do these things, but you have a whole family that’s used to the lifestyle now, and so you’re totally guilty and carrying that. That’s the hard part is this idea of how do you choose you and this self-sacrificing type thing that we’ve seen with clients and just individuals in general in the world, putting their happiness on the line for their family’s sake or for whatever’s sake because they don’t want to uproot or change if they’re not totally comfortable with that. 

Neela [00:15:11]:

And you know what’s so funny about that, too, is that oftentimes we make assumptions about what our family actually wants. 

Mary Beth [00:15:18]:

Right. 

Neela [00:15:19]:

How often have you witnessed that conversation where the spouse is like, “Well, I can’t do that to us,” and the other spouse is like, “I’m good, let’s do it. That sounds like an adventure. We were together when we couldn’t rub two nickels together. We’ll be better off than that. Let’s do it.” And there’s almost this check where it’s like, “Oh, that’s right, okay. There’s two people making this decision oftentimes. What do we actually want?” 

Mary Beth [00:15:43]:

Yeah, I think it’s really interesting when you start to see and facilitate those conversations. But it takes work. It takes work and intentionality and time. It’s not something you solve overnight. It’s not a ‘one-conversation-with-a-financial-advisor-plans-are-changed-and-you’re-happy.’ It’s literally an intentional ‘one-step-every-day.’ There’s setbacks, et cetera. But I think that’s what I’ve noticed about my happiest clients is, it’s the ongoing work. There is no checkbox, especially when it comes to money. Money is with us our whole lives. Till we’re out of here. It’s part of our lives that we are paired to it. And so it’s this idea of “What’s the journey that we’re on because there’s no checking off the box.” If you’re going to move forward, you’re going to have setbacks. It’s just part of life. We’ve talked to many people on this podcast, too. Like these transitions, like wealth building to the anxiety of transitioning to spend down. This is the most money you’ll ever have in some cases, and finding your sense of peace and happiness throughout those things. You have to be intentional.

Neela [00:16:35]:

And that you can monitor and check back in without letting that derail your life. That it can be kind of a part of the process and an ongoing part of the process, but it doesn’t mean that you have to be maniacally focused on. 

Mary Beth [00:16:51]:

Yeah. 

Neela [00:16:52]:

I mean, you and Brian probably at the end of every year, because this is how we roll, you’re probably checking in, “Where did we – is this in line with what matters to us from a family values standpoint?” I like going through the exercise because, again, crazy person, I’m like, “Okay, what if our income was cut in half? What would we do now?” We play this, like, what-if game. 

Mary Beth [00:17:12]:

Because I like to live in this idea of scarcity. I like to force that upon myself. If I’m not feeling anxious, I should put the anxiety right back there. Like, what would you do? 

Neela [00:17:23]:

Financial planners are overwhelmingly savers. Let’s just get that out of the way. We have our own biases, and for that we are sorry. 

Mary Beth [00:17:30]:

Mostly sorry to my husband. So let’s switch to a little bit personal. What would you say is the smallest amount of money you’ve ever spent that gave you the best jolt of happiness? 

Neela [00:17:40]:

I actually really love this question because it totally breaks down. We’re millennials and everyone’s like, “Avocado toast and lattes just destroying you all.” And when you think about it, you’re like, “Well, if you do that every so often, is it a meaningful amount of money over time?” Like, it can be, but what enjoyment is that providing you? So I think what I would say is when my husband and I got married, we signed up for a paper newspaper delivery, which makes me feel like punching above my age.

Mary Beth [00:18:16]:

But you already punch above your age. 

Neela [00:18:21]:

And I’m like, it’s not that much money to pay for a paper delivery. But what I love is the experience that it created, is that Sunday morning would roll around, we’d make – this is pre kids, by the way, because this sounds real leisurely – 

Mary Beth [00:18:33]:

Tell me this luxurious story. 

Neela [00:18:37]:

Where we would spend several hours every Sunday morning drinking coffee that we made. And he’d hand me the business section, I’d hand him the sports section. I’d work on a crossword. And it entertained us for hours. It was something that we could do together, but also separate. And it was the return on that paper investment that felt so meaningful for us. 

Mary Beth [00:18:58]:

I remember I remember those days, up until Ellie was born, I think until she was one. I had the newspaper, Sunday morning coffee. It was beautiful. And we don’t have that anymore at all. I don’t even attempt to. 

Neela [00:19:12]:

So now it could be yours, except you have a child knocking coffee all over said newspaper and then running around without any pants on. So it’s a slightly different, totally different vibe. How about you? How would you answer that? 

Mary Beth [00:19:25]:

Oh, the smallest amount of money. Okay, this is probably, I’m just going to say the most recent one. And it’s so funny, but this is where I’m at in life. It was during my sabbatical just recently, and I realized it was pumpkin spice latte season at Starbucks very early this year. But I’m mostly a fan of their pumpkin bread, with the pepita like seeds. And so we walked into Vons to go grocery shopping for something, and I was like, which is like, I don’t do that. I actually don’t buy treats and food for myself. I’m not like, typically a buying sweets person. We walked by it and I was like, “They have pumpkin bread. I really want pumpkin bread.” And so it’s like $4.95 and they warmed it up, and I was so happy. I was so still thinking about this, it was like five weeks ago now at this point, but it was $5 and I was thrilled. I love food, but I don’t typically indulge in sweet type stuff. But it was just like I was to do grocery shopping. I ate it. It was amazing. But it was $5 of pure happiness and joy because I also love fall and then the holiday season. So I think, it’s like, what it sparked for me is changing of seasons. I live in San Diego, so it’s not really going to get cold, but it’s going to get cooler. I can light a pumpkin candle. I can also – fun fact, I like Hallmark movies, even though they’re the cheesiest – it’s just like predictable endings and love and happiness – 

Neela [00:20:45]:

But it’s what the pumpkin bread represents. 

Mary Beth [00:20:51]:

Yeah, it totally was what it represented to me of this changing into this comfy, cozy season. And I felt super ready for it. So it was $5. 

Neela [00:20:54]:

I love it. I love it 

Mary Beth [00:20:55]:

That was the narrative. That’s today me, I don’t know what older me would say, but I think that works. 

Neela [00:21:00]:

That’s actually better because it’s not like this fantasy zone before kids. 

Mary Beth [00:21:04]:

It wasn’t fantasy, it was a reality. We’ll get back there. We’ll get back there in about 15 years, is when we’ll be back there. I hear my kids will stop wanting to talk to me in like five years. 

Neela [00:21:13]:

Right? And then it’ll be a whole different slew of problems. 

Mary Beth [00:21:16]:

Exactly.

Neela [00:21:17]:

So if we pulled back and left our leader or leaders, our leaders that are listening, also known as our listeners, you’re all leaders in our hearts. 

Mary Beth [00:21:24]:

Leaders and listeners. 

Neela [00:21:27]:

How would you advise people in how to use their money and what they can focus on to really leverage the most happiness? 

Mary Beth [00:21:40]:

I think it really comes down to knowing what’s important to you, knowing your values and doing the work on your own. So I think we’ve talked about this on the podcast before, but one of the questions I always ask is if we were meeting three, five years from today, what would have had to happen personally, professionally, and financially in order for you to be happy with the progress? That’s like a really great way. So we can list like, family is important to me, travel is important to me, but you can’t really say what that looks like. So I like that the years at least gives you some sort of a framework to move forward. But that question personally, professionally, financially, is a great start for you to figure out what you’re looking to accomplish and then think, “Well, you can’t do it all at once.” You can probably pick two to three maybe and make small incremental steps, and then you prioritize. There’s so many different questions you can find online about “If you had all the money in the world but only two years left to live, where would you spend your time, what would you do?” There’s lots of ways to get at it, but I would say trying to figure out how to live intentionally and live in the moment and being able to have boundaries on everything else. I think that’s the biggest thing is we say what we want and then life comes at us. Life happens. Right? And so we were just talking offline, everything that’s going on, but yet we are happy. And you have to strategically choose to say no to a lot of other things in order for you to get that happiness. So I would advise doing the work to understand what’s important to you, where you’re looking to go, and then being uncomfortable saying no to everything else. There’s discomfort there in actually achieving your happiness because you’re sometimes worried about outside perception or guilt or obligations and other things. So that’s what I would advise is kind of starting that journey of diving deeper. Those are the clients, I think that I see the most happy are the ones who are doing that reflection. 

Neela [00:23:25]:

Yeah. 

Mary Beth [00:23:26]:

How about you?

Neela [00:23:27]:

I feel like I would reiterate everything you said and piggyback on it by adding that focus on what you want, what is right for you and your family, and cut out all the other noise. If you’re following influencers who make you feel bad about your decisions, unfollow. If you hang out with friends who make you feel bad for decisions that you’re making or how they talk to you, those are not people that you need in your life and that you’re going to be the one who knows what you want. And society and the media, everybody’s going to try and tell you something different. So exactly to your point, “What do you want?” And then cut everybody else out who’s not contributing to that. Because if that’s really what you want, then it’s what is the next actionable step that’s going to help you get there? 

Mary Beth [00:24:18]:

Yes. All right. 

Neela [00:24:19]:

That’s it. So, in conclusion, “Can money buy you happiness?” Kind of. Sort of. 

Mary Beth [00:24:26]:

Maybe. 

Neela [00:24:27]:

Maybe it can help but also work on your happiness. And it’s not the panacea. Boom. 

Mary Beth [00:24:34]:

Boom. That’s it. Thanks, y’all.

Neela [00:24:37]:

Thanks for joining us.

Mary Beth [00:24:40]:

Financial knowledge is for everyone. If you enjoyed today’s episode of If Money Were Easy and you’re looking for more tools and resources to expand what’s possible with your money, head to www.LearnWithAbacus.com, Abacus Wealth Partners’ E-learning platform, offering a variety of courses to empower you in your financial life.