Money and Happiness: The Real Relationship

David Krueger MD

Money can solve many problems, or at least make them easier. Someone once told me, “I’ve never seen a problem that money has made worse.” With the exception of drug addiction, he probably has a point.

But then we overreach, to make money address more than it should. It gets pressed into service because it’s a commonly accepted social and personal resource—it makes people feel self-sufficient.

The idea that more money will bring more happiness is one of the most pervasive and persistent money themes in modern culture. Is there any truth to it?

Our relationship with money assumes that we know what money can do for us—that we know what we’re giving and getting for money. Some things do work this way: the more you pay, the more you get, such as a car, hotel, or house. But not so with other things such as happiness, love, and authenticity—which may at times even have an inverse relationship.

Research suggests that money, like Prozac, doesn’t make you happy. Both, however, can prevent certain forms of unhappiness. Money, for example, allows us to afford better medical care, safety, neighborhoods, gadgets, and at times, a better mood.

Dr. Daniel Gilbert, a Harvard psychologist, has demonstrated that both greater wealth and actual purchases have little permanent impact on happiness. His research shows those events we expect to make us happy often prove less exciting than we anticipated. The increased happiness and pleasure that we predict might come from a raise in salary, for example, or a new gadget, typically fall short of our expectations. And even in those cases where financial gain does bring about a better mood, the good news doesn’t last long. University of Illinois psychologist Dr. David Myers found that after an initial excitement with a burst of good fortune, such as inheritance, lottery, or job advance, people revert to their initial set point of happiness or gloom.

Consistent evidence shows that experiences (such as vacations, theater, or dinner) make people happier than material possessions they spent money for. One reason is that the process is more social: when you spent money on dinner with a loved one or a vacation with family, you create an entire experience. When you spend for a possession, you quickly grow accustomed to it and it loses the pleasure, simply because a different neurochemical system takes over once the purchase is made. This drop in dopamine after you buy accounts for buyer’s remorse. (The same drop before you buy is called coming to your senses).

Money is the legal tender of desires. We use to it measure success as well as to try to buy happiness. We use money to communicate, to carry messages. So, in regard to happiness, as well as many other promises of money (of course, money doesn’t promise since it can’t speak—it doesn’t even know who owns it—we project our desire onto it like a Rorschach ink blot), money is the cover story: it offers you one thing, but seemingly promises another.

When we compare our inside to someone else’s outside—we think money can bridge the differences. Money is a ceaselessly renewable promissory note for possibility. But happiness is not a goal or reward. It’s a consequence.

We need money in order to know what can’t be purchased.