Does money buy happiness?

SOMETIMES, when I’m alone with my thoughts, I like to play a game that I’ve called ‘Imaginary Lotto’. This is when I imagine I’ve won a large sum of cash – say, $12 million – and then fantasise about how I’d spend it.

The game starts pleasurably enough: I buy a massive house by the sea, drive a couple of sports cars into swimming pools and go on some exotic holidays. But within minutes, things get heated. Money is given to my parents and various family members, then I start stressing out that I don’t have enough left over to give the various cousins, friends and relatives I’d long left for dead.

Various Turks scream into the phone: “Why you only give me $50,000 when you give Mehmet $75,000?” My six-year-old soon discovers cocaine and, before I know it, everyone’s squabbling and we all hate each other. The game ends with me wishing I’d never won the lottery in the first place – not even in my imagination.

Admittedly, my relationship with faux riches is messed up, but at least I’m not James Altucher. He’s an entrepreneur, author, hedge-fund manager and real-life billionaire who penned a rather depressing post titled What it feels like to be rich on his site, jamesaltucher.com. “I thought if I could make 10 million dollars, then it must be too easy,” he wrote. “In fact, I honestly thought everyone else had probably already made 11 million dollars, so then I felt poor again. I now needed $100 million to be happy.”

Across the globe, China’s wealthiest man, Alibaba founder Jack Ma, should have plenty of reasons to be happy ($24.5 billion, to be precise), but he told CNBC last year that not only is “spending money more difficult than making money”, he’s also down in the dumps these days. “It’s a great pain because when you’re the richest person in the world, everybody surrounds you for money,” he said, adding that the pressure to perform in his position is overwhelming.

While neither Ma nor Altucher will ever know what mortgage stress or having a maxed-out credit card feels like, it seems being mind-bogglingly wealthy is not without its own set of problems. Researchers at Boston College’s Center on Wealth and Philanthropy interviewed people with a personal fortune exceeding $33,772,500 for a paper titled Secrets of the super-rich and found many of them exhibited anxiety – over their children becoming ‘trust-fund brats’, the expectations of buying gifts, and even feeling like they’ve lost the right to complain about anything. One of the respondents even reported feeling financially insecure unless he had a spare billion dollars in his bank account at all times. So could grandma have been right all along in saying that money really can’t buy happiness? Well, it depends on the kind of happiness you’re after, it seems.

In 2010, Princeton University managed to single-handedly shoot down our collective hopes and dreams by publishing a research paper announcing the ‘official’ figure of how much we need to be earning to be at our happiest: $101,500 annually per household – enough to cover living expenses, plus a little extra for play. (Yes, seriously.) According to their research, the lower your family income falls below that magic figure, the more stressed and anxious you’re likely to feel as you struggle to access better quality housing and education for the kids, while meeting general living costs (clearly they’ve never visited Australia).

But start earning above that magic mark and your happiness levels flatline, with subjects reporting no further increases to their emotional wellbeing. What’s with that? “It comes down to the fact that there are actually two types of happiness,” says Professor Thomas Gilovich, a psychology professor at Cornell University who has studied the correlation between money and happiness for more than 20 years. “There’s your day-to-day mood, which can change depending on whether you’re stressed or not, but there’s also a much deeper satisfaction you feel about the way your life is turning out,” he says. “This particular study shows that while earning more than $101,500 doesn’t make you a ‘happy’ person per se, we now know that the more people make above that figure, the more inclined they are to feel content with their lot in life.”

According to the Australian Bureau of Statistics, the average Australian full-time wage is $80,371 before tax, edging us towards the ‘satisfied’ category. But, let’s be honest – many of us really aren’t.

A survey of 1200 people, commissioned by comparison website finder.com.au, found 71.4 per cent of people still believed a pay rise would make them happier, with one in five saying it would take an increase of between $31,000 and $100,000 for them to achieve a feeling of contentment.

On a larger scale, the results of a ‘happiness income’ survey commissioned by global financial institution Skandia International in 2012 were also insightful. The findings revealed that the global average for folks to feel happy was $161,000 a year, with residents in Dubai insisting a salary of $373,879 would turn their frowns upside down (Singapore wasn’t too far behind at $373,713).

Michelle Hutchison, a money expert at Finder, says she’s not surprised. “People are always going to want what they don’t have and it’s human nature to think the grass is greener on the other side.” But what if we go all Yoda-like and tell you that the answer to the happiness riddle may not be centred around how much you earn, but by how you spend what you already have? “Messing with your head, it is,” (said in your best Yoda voice, if you please).

Anyone with a spare three hours and limitless funds can tell you that throwing money at shop cashiers can light you up on the inside, but a study conducted in collaboration with Cornell University, the University of California Berkeley, and the University of California San Francisco reveals when it comes to ‘buying happiness’, spending money on experiences rather than material items might be better.

Professor Gilovich, one of the authors, explains: “Experiences tend to meet our underlying psychological needs; not only do they contribute to your sense of identity far more than possessions ever can but, when shared with other people, experiences give us a greater sense of connection.”

He adds you’re also less likely to feel anxious about ‘keeping up with the Joneses’ when scrutinising shared experiences with others.

“The tendency to compare material goods is common and invites stress and tension but, while you might feel a little disappointed I stayed six nights in Port Douglas when you only stayed five, you’re never going to want to trade your memories for mine, and there’s a happiness to be found in that,” he says.

The study also revealed we get more pleasure out of anticipating experiences, such as planning and waiting for a holiday, than the acquisition of something new from the shops. “The joy you get in purchasing a material item is momentary and the feeling will disappear not long after you’ve put the dress in your wardrobe. But the joy that comes with planning, going on and then reliving your holiday can last for years.”

But if you’re hard-up for cash, how do you capture these feelings without taking out a loan for flights? Spend some time every day consciously fostering appreciation and gratitude for what you do have, regardless of your salary, says psychologist Dr Lissa Johnson. “You can do this by verbalising your gratitude to others, keeping a gratitude journal, or even just spending two minutes in the shower every morning saying a silent thanks for the life you have,” she says.

Although we may never stop aspiring to the dream of diving into a pool of gold coins, it could be worth remembering the fact that, yes, money may make life easier, but it can never really buy happiness. That part is completely up to you.