Money Can Buy Happiness.

It is commonly said that money can’t buy happiness. I used to hear this a lot as a kid when I talked about wanting to be rich. As I got older though I’ve come to learn that money really can buy happiness. Just not the way most people think of it.

The Problem With Buying Happiness.

The problem with the money buying happiness thing is that most of the people that say money can’t buy happiness are thinking of people that win the lottery then end up miserable. People that say that may also think about how you can’t buy true friendship with money the way you can buy a fancy car. And buying new trinkets doesn’t really make you happy. Certainly not truly happy in the long run. While that is true, that isn’t how money buys us happiness. It’s also not why we want it to.

The Psychology.

So what’s the point of money then? Well, it lets us buy things. But that’s not why it can buy happiness. This really goes back to something called the Hierarchy of Needs. In 1943 a psychologist named Abraham Maslow published a paper called “A Theory of Human Motivation.” The paper proposed a List of needs that people have. The needs range in order from physiological needs like food and water to more abstract needs like self-actualization.

So what does a paper from 1943 have to do with buying happiness? Everything. You can buy happiness by using your money to satisfy your needs at each level. By meeting each level you increase the stability and completeness in your life.

The Needs.

So, how does that work? Basically, the hierarchy of needs lists different needs that people have. As they fulfill some needs they move on to others.


The first level is physiological needs. These are things like food and water. The basic things that keep you alive. Minimum shelter and basic clothing would fall into this category as well. Most people in developed countries meet this need, but not all. Going from nothing to meeting this need will increase your happiness. It will also give you hope.


The second level is safety. This covers physical and psychological things like personal safety, violence, war, stress and other threats. This also includes things like financial security, fear of job loss, and political stability. This is where most people live. This is also the need that most financial advice addresses.

Meeting this need begins with things like a savings account. It can also mean learning a new skill that can make you more valuable to employers. You can use money to increase your security, both physically and emotionally, which satisfies this need.


Once your basic physical needs and safety needs are met people tend to want to improve their relationships with others. This includes things like marriage, family and friends. Money can buy happiness here when it’s spent on spending quality time with people you care about. This might mean taking a vacation, or just taking time off of work to spend with your family. This could also include spending money on activities that you enjoy such as sports or clubs.


Once you belong to a group you want the group to care about you and respect you. That’s where this level of the hierarchy of needs comes in. This is where a person gains respect and recognition within their group. This includes both respect from the rest of the group as well as self-respect. Even though you really can’t buy respect you can use your money here to meet this need and lead to more happiness. Spend money here to improve yourself and improve those around you. People respect those who have accomplishments, talents and abilities. Money can be used to help gain those. People also respect those that use what they have to help others. Use your money to help other people learn and become better. You can also use your money to support causes that you believe in.


This is after all of your needs are met. You don’t have to worry about where your next meal is coming from. You can sleep safe at night. You have friends and family that love and respect you. So where do you go next? Now it’s time to accomplish some of those goals you’ve been putting off. At this level you work to become the best that you can be. This may mean learning something knew that you’ve always wanted to learn. You could become an expert at something that you enjoy. You might want to be the best parent that you can be. Money can be used to meet this need by helping you fund these things.

So, How Does Money Buy Happiness?

Buying trinkets doesn’t buy you happiness. Blowing your money on temporary things that don’t have real value to you does not buy happiness. What buys happiness is using your money to fulfill these needs. Especially if spending the money can move you from one level to the next. For example, money can buy happiness when you save up enough to pay for that dream vacation. Yes, the vacation may be temporary, but the experience and memories can be very fulfilling. Even life changing. Another example would be getting a college degree in something that you are interested in after you already have a career.

The point is that money can buy happiness when you use it to improve your life; whether it’s building your retirement account or putting your grandkids through college. If it helps fulfill the hierarchy of needs or even pushes you to the next level the money spent will buy true happiness.


Do you spend your money buying true happiness? Is there something else that should have been included?

If Money is Important then Make it a Priority.

There’s an old saying that I haven’t found the original source to. It goes something like this: “Show me a man’s calendar and his checkbook and I’ll tell you what his priorities are.” Though Gandhi may have said it easier when he said “action expresses priorities.” However you express it, you’re saying that it doesn’t matter what people say is important to them. People spend their money and their time on what actually is important to them.


So what does this have to do with money and retirement? Studies have found that more than 90% of people know that they should save more money for the future. Unfortunately most people don’t save much money. The average person in the US on saves about 5.20%. This means people are barely saving any money even though they all know better. So why is that? Priorities. If you want a secure future. If you want to pay off debts and eventually fund a retirement then you have to make it a priority. It doesn’t work if you just say saving is important then spend your money on things that aren’t important.


What’s stopping you from making savings a priority?

The most common reasons say people say that they can’t save is that they don’t have enough income, they have too many bills, and too many obligations. You do have certain things that you have to spend money on. You also are limited by the amount you make (not really, but that’s the subject of another post). You also have obligations to your kids and others. But are these things truly requirements or are they self-imposed? Look at them to see. If your future is a priority you can make it work.


What does it mean to have a priority?

At the simplest level, if something is a priority then you will make sure it happens. You will put that goal above other, less important things. If something is a priority you will sacrifice the unimportant things to make it happen. Once you have saving and your financial future as a priority you can use that to help make decisions about money.


How to set a priority or goal.

To set a priority you need to set a goal. These should be written down. So grab paper and start writing out your goals. For each goal write what you will accomplish, when you will do it, and how you will do it. For example, “Pay off my credit card within 2 years by putting an extra 200 per month to the bill each month and not charging more on the card.” Do this for anything that you want to accomplish. If you have more goals than time or money you may need to rank them. If you put them in order of importance now while you’re not faced with a question it can be easier to make a rational decision. Then when you’re faced with a situation you can look at your goals to help you decide if it’s worth it.


I recommend writing down any other priorities that you have. Writing down your goals helps make them real. Giving yourself a deadline helps keep you focused. Saying how you’ll do it will give you an actionable plan. Without these things it’s just a dream not a goal.


Make it a priority.

Make these goals a priority. Instead of buying something that you don’t really need, like going out to eat lunch when you could bring your lunch to work, think about your goal. Taking your lunch is cheaper and will make it easier to put the extra money towards your credit card. When faced with a decision like this consciously decide which is more important, your goal or what you’re about to do. You can do this with any decision that affects your goal. If what you’re about to do is more important to you then go ahead, but keep in mind you may be sacrificing your goal to do it.


If you want to have financial freedom, or even if you just want a little extra cash in your account at the end of the month you have to make that a priority. When faced with a decision look at the priorities and goals that you wrote down. Does the decision help you reach your goals or does it take you further away from them. Use that you help you make the right decisions.


Have you set financial goals? How are they work for you?