Jonathan Clements in his book How to Think about Money mentions 5 truths about money and happiness that I found particularly enlightening:
“Money can buy happiness, but not nearly as much as we imagine”
When I was in medical school living off of student loans, I didn’t have lots of money. I barely had enough to make ends meet and although I was relatively happy with lots of close friends and family support, I always believed that I’d be even happier if I had more money. Clements, in his book How to Think about Money provides some insight on this idea. He attests that although we can use money to increase our happiness, we can only do so up to a certain extent. A certain level of money will allow us to live more comfortably. We won’t have to worry about paying our bills. We can live in a nicer area, afford meaningful trips with our loved ones, and can purchase more of the things we like. However, that increase in happiness only goes so far. Although our happiness can increase with more money, it usually doesn’t increase to the level that we anticipate.
“We place too much value on possessions and not enough value on experiences”
Many of us have, at some point in our lives, thought that if we had more money we could afford the thing(s) we want. While that may be a true statement, Clements, warns us against this type of thinking. Many of us overestimate how happy we will be when we purchase certain things. Unfortunately, any increase in happiness we get from purchasing a material possession is usually short-lived. To find more lasting happiness, Clements’ suggests that we focus more on experiences. Whenever we spend money on an experience, like a trip overseas, a visit to family, or a getaway vacation with our friends, we have much more happiness and it tends to last longer. We have joy in anticipation of the experience, happiness during the experience itself, and also have fond memories after the experience has ended that tend to get better with time. This is why Clements suggests that if we have extra money, we should forgo buying material things and instead opt for more experiences.
“Spending money on others can deliver greater happiness than spending it on ourselves”
Ironically enough, when we use our money on our ourselves, we get less happiness than if we were to use the money on others. It sounds odd, but many people find that they have lasting joy when they do things for other people. It’s as if knowing we have helped someone else makes us think more positively about ourselves and the kind of person we are. The idea of being a kind and doing something to enhance someone else’s life brings us joy that lasts a lot longer than the temporary happiness we may get from buying ourselves something. Giving is one of the key ways to achieve lasting happiness.
“We adapt quickly to both good and bad developments in our lives.”
This quote may seem a bit odd but has a lot of truth. As humans, we are great at learning how to adapt. Life circumstances may change but we change and adjust accordingly. Although our mood may sway from time to time, the majority of us, have a natural inclination to adapt. Our flexibility is good for survival but can really make us scratch us our heads in regards to money. If we are living in poverty, living with less may bother us initially but we quickly learn to adjust to our life circumstances and find some sort of happiness, even while working harder to improve our finances. In contrast, if we find ourselves in a position where we are upper class, making more money than average, we adjust to that as well. Clements’ point is that our life circumstances, and “becoming rich” won’t give us the long-lasting happiness we may expect. The key, he states, is to focus on intangible sources of happiness like family, experiences, and giving to others.
“Happiness depends on how we stand relative to others and we each have genetic ‘set points’”
Another truth in Clements’ book is that our happiness is shaped by our comparisons. If we are doing the same as, or better than, people around us, we tend to feel much happier about ourselves. However, if we are doing worse than those with whom we compare ourselves, we tend to be less happy. Our baselines degree of happiness or “set point’ is based on genetics and how we were raised. If we come from an optimistic happy family, we tend to be happier at baseline than others. The point is to be mindful of your happiness set point and increase your happiness by refusing to compare yourself to others, especially to those you perceive may be doing better than you.