Money + Happiness
A unique description of the "hedonic treadmill" and understanding how a simple change in spending can change your life!
I have a super easy question for you: Would you be happier winning the lottery, or becoming a paraplegic?
No-brainer.
Studies show lottery winners become happier, by about 21%. People who become paraplegic become less happy, by about -12%.
Makes sense, right? Wrong.
A year after winning the lottery and after becoming paraplegic, researchers revisited these groups. The results blew their minds: Happiness between the groups became nearly identical.
The only longer-term change was with lottery winners, who took less joy in everyday activities. In other words, long term, the paraplegics become the happier group.
The authors of this groundbreaking study dig deeper:
“Eventually, the thrill of winning the lottery will itself wear off. If all things are judged by the extent to which they depart from a baseline of past experience, gradually even the most positive events will cease to have impact as they themselves are absorbed into the new baseline against which further events are judged. Thus, as lottery winners become accustomed to the additional pleasures made possible by their new wealth, these pleasures should be experienced as less intense and should no longer contribute very much to their general level of happiness.”
This comes from a concept known as the hedonic treadmill. It’s a human tendency to get used to things that once made them happy.
We’ve all felt this: after we bought a new car; the new job title we received; the big raise we got; the new outfit we bought. After time, those things no longer make you as happy as they first did.
This confirms everything we have been taught, but none of us believes: money can’t buy happiness.
I can still hear my mom telling me, “Don’t chase money, it won’t buy happiness,” which I blew off as something all parents of lower middle-class families tell their kids. It’s classic sour grapes.
It turns out my mom was only kind of right. Acquiring money will never make us happier, but new research shows how we spend it can make us happier.
So how can money make us happier? I see three ways.
1. Buy experiences, not things.
A year and a week after we got married, Anna and I saw a billboard on a trip to Michigan that said, “Want to luge?” Anna and I looked at each other and emphatically responded out loud: “YES!” (For those uninitiated to the luge, it is the Olympic sport where people sled down hills at 90 mph).
So, Anna and I drove up to Muskegon, Michigan, and we learned how to luge. And it’s a blast. After the third run, they start timing you. Anna and I are in the middle of a heated competition of who is the fastest. On the last run, I take the lead!!!
I’m waiting at the bottom of the hill to watch Anna’s last sled down, and I see her start ping-ponging against the walls of the luge track. HOORAY! I’VE WON!!
Not so fast.
When Anna gets to the bottom of the hill, she has tears in her eyes. I immediately panicked that she got hurt. She holds up her hand, and shows me her glove with a hole in it.
When she hit the wall, it popped the diamond out of her engagement ring, and flew out into the ice and snow.
Imagine searching for a clear diamond on a luge track in the snow. It makes the needle in a haystack seem shockingly easy.
But here is the thing: We talk about that trip to Muskegon, Michigan, all the time. We laugh about losing a diamond ring in the ice. I brag about my come-from-behind victory. We had an amazing time, and we relive it all the time.
You know what neither of us care about: the diamond. I replaced it with a $60 blue stone. I asked Anna yesterday which she prefered, she said immediately, “the blue stone- it has a better story”
It turns out that experience gives us happiness. Things just keep us on the hedonic treadmill.
2. Buy time
Time is the only non-replenishable asset we have. We’ve talked about this many times before, so we won’t go into all the reasons here. But time is worth infinitely more than money.
How do we buy more time? Pay someone to mow our lawn. Skip standing in line at the grocery store and pay to have groceries delivered to your house. Pay for the wifi on your flight so you can work on the airplane instead of during your vacation.
More time to go to the park with your kids, or on dates with your wife, I promise you will make you much happier than cleaning your bathrooms.
3. Give it away
If there is one thing you take from this note, I want it to be this: if you want to improve all aspects of your life, give away money.
Studies have shown it will have the following benefits:
• Make you happier by 43%. (That’s a bigger increase than winning the lottery!)
• Make you healthier by 25%.
• Reduce stress.
• Increase life expectancy.
• Make you more physically attractive (yes, you read that correct. People who see other people give away money are viewed as notably more physically attractive).
And in the most shocking twist of all, studies show for every $1 you give away, you will receive $3.75 in return. Charity leads to prosperity.
If you want to be healthier, happier and wealthier, give away your money. And if you give it to a place such as the Illinois Policy Institute, you will also have the benefit of changing the world.
Sounds like a much easier path to happiness than becoming a paraplegic.