“Money doesn’t buy happiness” is a phrase that gets loosely thrown around. Put simply, it’s the notion that the art works and candlestick holders we accumulate throughout our lives and place neatly on our shelves isn’t the magic formula for happiness, but that one’s happiness comes from within. The narrative follows that the digits in your bank account or investment portfolio don’t equate to happiness. And to an extent, that’s probably true.
But then it gets one into thinking: what if you’re not rich? What if you’re living paycheque to paycheque? Type “money doesn’t buy happiness” into Google and you’re met with dozens of articles advocating for this moralistic standpoint. But according to CEO of the Happiness Research Institute and author of the global bestselling book ‘The Little Book of Hygge’ Meik Wiking, and contrary to our idealistic worldview, money does in fact buy happiness. Let’s unpack that.
GDP figures suggest money equals happiness
Finland, Denmark and Iceland were recently crowned the three happiest countries in the world following findings from the 2023 World Happiness Report. What’s also interesting, is that they sit comfortably in the 10 richest countries, with $53,745, $68,094, $74,417 of GDP per capita respectively. So if they’re some of the richest and happiest countries, surely the idea that money doesn’t buy happiness doesn’t stack up.
According to Meik: “We can see that richer countries are on average happier than poorer ones - so yes GDP per capita matters. However, there is a lot of difference in different country’s ability to convert wealth into wellbeing.” So it’s not as simple as saying wealth equals happiness. And this is evident in the fact that the US and UAE are up there in wealth, but embarrassingly low on the happiness scale. Some countries may have more or less the same level of GDP, but have very different happiness levels.
So why is that? As Meik puts it: “The Nordic countries are better at converting the wealth they have into quality of life for their people. Universal health care, social security are some of the reasons for that.” With this perspective in mind, national economic growth for the sake of growth doesn’t translate into further wellbeing. So we shouldn’t all work ourselves into the ground to boost our economies. That won’t get us anywhere without our individual and collective ability to convert it into something meaningful. A BMW won’t crack the code to happiness.
It’s our ability to convert money into happiness that matters
So what does translating money into happiness look like? Well let’s take a leaf out of the Scandinavian book and dive into Meik's expert area: ‘hygge’ (something of a cultural fetish nowadays). The concept of ‘hygge’ has hacked its way into the mainstream, and is a very simple ideal to strive for: taking time away from the daily rush to be together with people you care about - or even by yourself - to relax and enjoy life's quieter pleasures. In a nutshell, and according to the Oxford dictionary which added the word in June 2017, it’s creating high-quality social interactions and intentional intimacy. Those waving the Scandinavian flags have mastered it.
How we manage and spend our money matters.
It’s not buying designer clothes or fancy cars that whip up feelings of happiness. Instead, Meik says “happiness consists more in small conveniences or pleasures that occur every day, than in great pieces of good fortune that happen but seldom.” A bike ride, warm lighting, a nice cup of coffee with others are more cost-efficient ways to boost your wellbeing. The good news is you don’t need to live in Denmark or have tons of money to achieve hygge.
Research on hygge has found that in Denmark, it’s integral to people’s sense of wellbeing. And if Denmark currently stands as the second happiest country in the entire world, then the power social connection has over materialism holds significant weight.
The impact of money on happiness stagnates
But whilst we can see that money, and the ability to convert it into wellbeing can help turn our frowns upside down, the effect varies depending on levels of income. And let’s be clear – there’s no doubt that being without money and not being able to put food on the table is certainly a source of unhappiness. However, “richer people are on average happier, but the needle moves more going from low income to mid income than from mid income to high income” says Meik.
You may have heard $75,000 is the magic household income for happiness. That was thanks to a University of Princeton study. Its findings suggest that money can boost your levels of "life evaluation", because as income levels increased, these measures tended to rise along with it up until a person earns $75,000 annually. And at that juncture, our happiness levels reach a dead end. These results therefore paint a pretty sobering picture: that a single person earning $75,000 per year would have just as much life satisfaction as an individual earning $1,500,000 per year. So you can find solace knowing that whilst the Jeff Bezos and Elon Musk’s of the world are parading around in multimillion dollar yachts, they’re not happy. In fact, they’re probably quite miserable.
As Meik puts it: “The more we have of something, the less pleasure we get from one additional unit. First slice of cake, great. Slice number seven, not so great. The same with money. If you’re already making a million dollars per year and get an additional thousand dollars, you end up buying some stupid thing like a serenity dog pod for your pet.” And let’s be honest, a dog pod for your pet isn’t the most fulfilling consumer purchase.
So whilst money might not be the magic fix for all of life's woes, it’s an important reminder that financial stability can make a real difference to our wellbeing when moving from poverty to comfort. But for those of us still chasing the elusive $75k mark, well, at least we know we don't need to keep striving for more once we get there!
Money causes stress unless managed effectively
So is there a link between money and happiness? Absolutely. But that’s particularly for those at the bottom of the pay scale. Wiking says: “Being without money and unable to afford basic necessities like food and shelter can cause immense unhappiness.” Various studies have shone a light on the fact that financial concerns are a leading cause of stress among adults - so we can’t deny its place. And it's not hard to see why. Bills to pay, debts to manage, and unexpected expenses can all add up to a considerable amount of mental strain.
However, it's important to remind ourselves that we don't have to let our wallets control our happiness. By taking practical steps such as setting a budget or seeking financial advice, we can empower ourselves to take control of our finances and reduce the stress they may cause. So the phrase “money can’t buy happiness” does have some merit. But it’s not the amount of money you have, but its taking the steps to manage it effectively which is transformative.
The solution isn’t more money, it’s how we use it
That’s why Wiking holds that “the solution is not to blindly chase money as the ultimate source of happiness. Rather, it’s about understanding how to use money in a way that promotes happiness. More money may just lead to what I call the one more million then I will be happy syndrome. Perhaps Marcus Aurelius said it best. happiness is not a lot of possessions, but having few wants.”
In fact, an 80-year-long Harvard study finds relationships are more important to contentment than money or success when it comes to happiness. So perhaps this is the juncture where money and social connection collide and combust to create the ultimate form of happiness and where the handling of one’s money hacks its way into the psyche for the better. “By prioritising spending on experiences and relationships over material possessions, we can create a positive and fulfilling life without breaking the bank.”