Does money buy happiness?

        I recently read the book, David and Goliath, by Malcolm Gladwell. One of the author's contentions was that money buys happiness in an inverted U-curve sort of way. The gist of the U-curve is that having the right amount of money can make a big difference in your level of happiness. If you have too little money, you might obsess over how to get more of it to meet your basic needs. On the other hand, having too much money can create a separate set of issues that decreases your happiness. See the graphic below to illustrate:

   

        Gladwell didn't come up with this concept out of thin air. Researchers at Princeton examined Gallup poll data from nearly 500,000 US households and found that higher family incomes were related to better moods on a day to day basis. However, the positive effects of money had no effect on people’s happiness and moods after a level of $75,000 was attained.

         Basically, the difference in happiness between earning $75,000 and $100,000 is negligible. The person earning a little bit more maybe drives a nicer car, eats out more, and has access to a few more luxuries. However, none of those things necessarily makes a person happier.

 

Why poverty is not ideal

       It's probable that most Americans would agree that being below the poverty line is not ideal to happiness. When I was in college, there were days and weeks that I was flat broke. It was unrelenting, draining and stressful particularly when I felt deprived of material comforts.  

       On the other hand, the happiest poor people don't obsess over what they don't have. They are content with what they do have and value relationship building as a higher indicator of happiness than building wealth. This state of mind is something we should all strive for.

      The lyrics of the song "Through Heaven's Eyes" comes to mind when considering the value of material possessions. When all you have is nothing, there's a lot to go around. Life is much simpler if you lose it all. We can't take our "stuff" with us when we inevitably pass on. Here's a great version of that song:

 

The 3 basics of personal finance

        There's a reason why most women want security in marriage. Life is less stressful when you don't have to worry about money on a day to day basis. If you are financially secure, you can put a lot more time, energy and thought into other priorities that bring contentment.

       To this end, there are 3 basics of personal finance that are important to a person's peace of mind: a savings account, a retirement account, and a positive cash flow. These three basics take care of today, tomorrow, dealing with the unpredictable events that require money to resolve, and the far future. You won't lose sleep if you have no debt or manageable debt and have all three basics set up and in progression.

        Heber J. Grant had this to say on the topic:

If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means. And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet.

Conclusion

       Money is a vital part of life and potentially a significant factor in how happy we are. However, there is a happy medium that we should try to reach in not emphasizing money so much that we lose out on irreplaceable time with our families or placing too much importance on "stuff", which we think will become a replacement for true happiness. There will always be a crossroads in your career choices where you have to determine your emphasis on money or relationships.