Can money buy happiness?

According to research, money actually can "buy happiness," but only to a certain point.

We have all heard the phrase “Money can’t buy happiness.” The real question should be, however, how does financial stress affect our level of satisfaction? Does our level of satisfaction increase with age? According to the Federal Reserve Board: Insights into the Financial Experiences of Older Adults: A Forum Briefing Paper the answer to both questions is yes. According to the study, 70 percent of those aged 70 and older are “completely/very” satisfied with life, while only 53 percent of those in their 40s and 50s reported at the same level of life satisfaction.

With major financial stress comes decreased life satisfaction. According to the same forum study, 58 percent who said they were “not very” satisfied with life stated they were having major financial stresses in their life. This is opposed to the 27 percent who said they were satisfied even though they had financial stresses. So, is it possible that if we are not having financial stress we will be more likely to be satisfied with life? Looking at the numbers above, one could argue yes.

So how does one gain happiness/satisfaction from life with money? First, you must answer the following question: are you a life experience (experiential) buyer or a material buyer? Experiential buyers spend money on things that come in the form of an experience. Material buyers spend their money on material items. Former studies have concluded that you will be happier if you spend your money on life experiences. More recently, though, research conducted by San Francisco State University has discovered this to not always be the case, and that “extreme material buyers” are not happy with any kind of purchase they make. According to the San Francisco State University research, you have to be “authentic to who you are” and make sure your spending habits are in line with your “personality” and “identity expression” to gain satisfaction from money.

On the other hand, though, according to a 2010 Princeton University Study, happiness will increase when the person earns up to $75,000. The study found that with any higher income amount, people felt their life was progressing but they were not necessarily any happier than they were prior to when they were making less than $75,000. According to Princeton University, the answer may be yes, money can buy happiness up until $75,000. Anything after that is just gravy.

For additional information please read High income improves evaluation of life but not emotional well-being and Damned if they do, damned if they don’t: Material buyers are not happier from material or experiential consumption

Michigan State University Extension offers financial management and home ownership education classes. For more information of classes in your area, visit MI Money Health.

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