Does being rich make you happy? Fed Chairman Ben Bernanke says here that it does to some extent, but that there’s more to life than chasing after money. Of course, Mr. Bernanke is not the only one to have this view on money and happiness. Numerous studies on happiness support his conclusions. A few thoughts on the points Bernanke makes in his speech:
Basic Human Needs Must Be Met
When people say that money does not buy happiness, they generally mean “extra money”. I think we can all agree, and research supports this view, that people whose basic needs for shelter, clothing and food are not met, will find it very difficult to feel happy. Of course, there are exceptions, including people whose religious beliefs dictate that they should be happy with as few material possessions as possible, but for most of us, we can only be happy once our basic needs are met.
The Joneses Cannot Be Escaped
Happiness research shows that when people determine their level of happiness, how much they have compared with others is more important than how much they have in absolute terms. Again, this is assuming basic needs have been met. Although rich people in a given country generally feel happier than poor people in the same country, rich people in a rich country do not feel happier than rich people in a poor country, even though in absolute terms, they have more. So, we tend to feel happy once our basic needs are met and we have more than the people surrounding us.
This means that while keeping up with the Joneses could be destructive if we let it go too far, it is also part of human nature to want to feel at least on the same level, financially, as those surrounding us. However, we should not allow ourselves to get caught up in competing with our neighbors on external signals of “I have more than you do” which really mean nothing, because a big house and a big car and an expensive vacation could simply mean that one is in serious debt, and not that one is “well off”.
But You Should Escape The Rat Race
To me, the most important takeaway from Bernanke’s speech is the importance of staying out of the rat race. So yes, you need to work hard, get the education you need to land a good job and work long enough and hard enough to get to a place where you can easily meet your basic needs.
What are basic needs? For most middle or upper middle class Americans, basic needs are not very basic anymore. We expect to be able to provide a family of 4-5 with adequate shelter, new clothing, plenty of food, health care and education, while also saving for our retirement. This isn’t straightforward, certainly not in the US where people basically need to fend for themselves and there’s much less government support than in other countries (but also more freedom for businesses and entrepreneurs, less government regulations and lower taxes).
“Meeting basic needs” requires effort and dedication, but once those basic needs are met, take a good look at your life and at your career choices. Work-life balance is important. It doesn’t make sense to kill yourself, emotionally and physically, working 40 hours per week for 40 years in a job you hate and living for the weekend. Can you find a job that you actually like? Can you start your own business? Can you work less hours, accepting a pay cut but improving your quality of life?
For most of us, once our basic needs have been met, happiness is achieved when we engage in activities that are interesting to us, spend time with friends and family and stay active. Making money for the sake of making money does not make people happy – on the contrary.
Ideally, these are questions that should be answered when you’re still young and just starting out. Don’t wait until your midlife crisis to realize that half your life has passed you by and you’re still unhappy.
Over to you now. It’s a big question, I know… but do you feel happy? Do you think your happiness is tied, at least to some extent, to your financial situation?