“Money can’t buy happiness,” is a platitude I heard on repeat growing up. Although there is a valuable nugget of wisdom buried in this statement, there is also some inherent danger which is often overlooked. It is a good reminder that happiness comes within, and not from external things. However, taken the wrong way, this statement can unintentionally cause people to forgo pursuing valuable self-improvement. So what’s the answer to the all important question? To answer that, we will need to take a dive into some philosophy, psychology, and finance.
As a general rule, money cannot buy happiness. Happiness comes from within. Anyone has the ability to be happy regardless of their income, or station in life. However, money can purchase the thing which is the most correlated with happiness; and that is the freedom to do what you want, when you want, with the people you want, for as long as you want.
So why is the claim “money can’t buy happiness” both helpful and dangerous? Let’s take a deeper dive to understand these important concepts.
Freedom and Happiness
As stated, there is a strong positive correlation between freedom and happiness. In his absolutely amazing book which I have read twice, The Psychology of Money, author Morgan Housel writes “money cannot buy happiness but it can buy us the thing most strongly correlated with happiness; and that is the freedom to do what we want, when we want, with the people we want, for as long as we want.” If we understand how intertwined freedom and happiness are, it makes framing this money discussion a lot clearer.
One of the most important things to understand is that humans have a tendency as they gain more money and ability to earn income, one of the first things they do intrinsically is buy back their time. An example of this would be buying a dish washer instead of spending the time to hand wash dishes. Or purchase a robot vacuum, or paying someone to mow your lawn. All of these luxuries are purchased with the thought of having more time to do what we want to do.
But there’s a trap so many people fall into when leveling up their income. Let’s take a look at two scenarios to explain and then we will bring home the grand point.
Scenario 1 – Using Your Money to Buy More Things
Meet Bill. Bill started his career as a computer tech earning a modest wage and through study, taking exams, and work experience he eventually earned several certifications in network security and architecture and has now quadrupled his income in 10 years. Good for Bill.
So Bill did what a lot of people do, upgraded his toys. He bought a nicer car, bigger house, a boat, a swimming pool, and a gorgeous salt water fish tank for his home. Bill has bought into the lie that bigger, better, nicer things are what brings happiness. If Bill had read this article, he would have known it’s freedom, not nicer things, which is most strongly correlated with happiness.
Now Bill spends his weekends having to take care of his much bigger yard, tend to the swimming pool, and he had no idea how much maintenance and care that boat would require! And the salt water fish tank? That thing is a money and time sink he did not anticipate. Without even realizing it happened, Bill became a servant to his own things. He makes more money than he’s ever made, but he’s miserable and has no freedom except but to take care of these expensive responsibilities he’s added to his life.
“The things you own, end up owning you.”
-Tyler Durden, Fight Club-
Don’t fall into the Bill trap. And this exact scenario is the wisdom of the statement “money cannot buy happiness.”
A Warning and Disclaimer
At the end of the day, I do not personally care for the aforementioned platitude “money cannot buy happiness.” I feel like it’s often used as a way to assuage the discomfort or jealousy of not having money. It’s often a thing poor or middle class people say to make themselves feel better about their station, rather than understanding that taking action and having a plan would do much to remedy their misery.
Before we go any further, I think it’s important to state a strong disclaimer. Make no mistake about it; poverty is hell. Being born into poverty is one of the biggest predictors of future stress and misery. Poverty is strongly correlated with poorer mental health, lower life expectancy, and much higher levels of stress. So I do not want to give the impression people in poverty have the same chance of being happy as someone with a lot of wealth. However, these facts still align with my exact point. People in poverty have virtually no freedom, and very little chance to buy freedom like wealthier people do.
That being said, what we do with our money matters. And if people in poverty used their money with the idea of buying freedom, they have a much greater chance at happiness than did Bill in the previous scenario.
Scenario 2 – Using Your Money to Buy Freedom
Meet Alyse. Alyse comes from a poor family, but she did manage to get a modest scholarship, student loans and was able to earn a 2-year LPN nursing degree at her local community college. Luckily for Alyse, she both understands that using to money to buy freedom is a good pathway to happiness, and she’s read the timeless book “The Richest Man in Babylon.” So now she has both awareness and a plan (these two things alone will get you far in life).
Instead of buying expensive phones, clothes, cars and other luxury items, Alyse focused on investing and purchasing items which buy back her time and freedom. Anytime she splurged, it was for an item which saved her time, not caused her to be committed to more time like Bill did. She purchased items like an Instapot, a robot vacuum, washer/dryer, dishwasher. She bought items in bulk, which saved her money in the long-run, cut coupons, and stayed disciplined.
In addition, Alyse spent time automating as much of her life as she could. She set up all of her bills on autopay, setup a grocery delivery service which automatically refilled her order with the same basics each week. Her investments were automatic, the robot vac ran on an automatic schedule, and groceries showed up at her door automatically. She threw a bunch of ingredients in a slow cooker on her way to work, and dinner was ready by the time she got home each day.
Despite all of these things, she barely had time to work out, read books, and walk the dog. So she did all three at once. She invested in some earbuds to listen to audiobooks to help advance her career while running, with the dog. She purchased a desk bike so she could exercise while working.
Does this sound like a lot of effort and energy? Absolutely. But remember, as we often say here at The Arise Tribe, we all have choose the pain of discipline, or the pain of regret. For more on this, check out this article on Is Leadership Difficult? where we dive into more detail on this topic.
By the way, if Alyse commits 10% of her income per year to investing, at a modest 5% return she will have a portfolio worth almost half a million dollars by age 55. Assuming an 8% return, that same portfolio will be worth a whopping $810,000!
Go and Buy Your Happiness
So you want know what happiness looks like? It looks like having enough money in the bank to tell your boss you are not going to put up with their mistreatment. It looks like being able to take sick days or vacation days without the stress of wondering if your bills will get paid. It looks like being able to take some days off of work because your kids need a chaperone for their band competition out of state. It looks like being able to take a job for less money because it will be less stressful. It looks like being able to invest in your little sister’s startup because you want to. It looks like generosity. It looks like being able to donate to a homeless shelter. It looks like being able to sponsor pet adoptions for people who otherwise could not afford it.
So yes, the old platitude is technically correct. Money cannot buy happiness. But it absolutely can buy the thing that can buy you happiness; your freedom.