Money and Happiness

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Money – give some of it away and increase your personal happiness!

In this article from the Irish Times of 10.04.2008, Prof. William Reville of UCC discusses new research on the link between altruism and happiness.

You should pay close attention to my article today, because it tells you how to increase your happiness. In a nutshell, you can become happier by spending more of your money on others.

Like so many great truths (eg “Truth emerges more readily from error than from confusion” – Sir Francis Bacon, 1561-1626), this is simple and counter-intuitive. The matter has been carefully researched by EW Dunn, LB Aknin and MI Norton, and is reprinted in Science (March 21st, 2008), Vol 319, No 5870, pp 1,687-1,688.

We all want to be happy and most of us believe that having lots of money will do the trick. Unfortunately, this belief is in error. The correlation between money and happiness has been well researched over the years, and is well understood at this stage. If you have scarcely enough money to keep body and soul together, you cannot be happy, and acquiring more money will increase your happiness for sure. But once you have enough money to satisfy basic needs, the correlation between acquiring more money and further increasing happiness is surprisingly weak.

Real incomes have dramatically increased in recent times in the developed world but happiness levels have not increased. Obviously, spending more money on consumer goods does not increase happiness.

Research, quoted by Dunn and colleagues, has shown that thinking about money in itself promotes behaviour that is inimical to personal happiness, making one less likely to spend time with others or to help charities or acquaintances, the kinds of behaviour known to be positively correlated with happiness. On the other hand, if you have money, investing more of it in helping others should increase your happiness. This was the hypothesis investigated by Dunn and colleagues.

The researchers looked at a nationally representative US sample of 632 people, and asked them to rate their happiness levels, report their annual income, and estimate how much they spend per month on bills and expenses, on gifts for themselves, gifts for others, and donations to charity.

Dunn reports: “Regardless of how much income each person made, those who spend money on others reported greater happiness, while those who spent more on themselves did not.”

The study also looked at employees in a company before and after they got a profit-sharing bonus of $3,000 to $8,000. Those employees who spent more of their bonus on gifts for others or on charity reported greater happiness than employees who spent the money on themselves.

In another part of the study, 46 people were each given an envelope in the morning containing either $5 or $20 and were asked to spend the money by 5pm that day. Half the participants were instructed to spend the money on themselves and half were asked to spend the money on a gift for somebody else or to donate it to a charity.

The happiness of participants was measured in the morning, before spending the money, and in the evening, after spending the money. Participants who spent the money on others were happier at the end of the day than those who spent the money on themselves, regardless of whether it was $5 or $20.

“These findings suggest that very minor alterations in spending allocations – as little as $5 – may be enough to produce real gains in happiness,” says Dunn.

The authors’ results harmonise with recent theoretical work on the architecture of achieving sustainable changes in happiness. We readily adapt to stable circumstances in our lives and these circumstances tend to have limited long-term effects on happiness.

Most of the happiness associated with a big house, a big car, a big boat, and so on, comes in the anticipatory period when you are saving up to buy them. You get a boost of happiness when you buy them, but then you quickly get used to them.

On the other hand, deliberately chosen acts of kindness represent a more reliable route to lasting happiness.

So, the way we spend our money is probably more important to our happiness than our total income. Unfortunately, most people focus on total income and on the pleasure that spending money on themselves will bring. The authors surveyed students’ opinions as to whether spending money on themselves or on others would make them happier, and the majority plumped for spending money on themselves.

Dunn’s research has produces important knowledge and, given the double benefits to both the giver and the receiver, official policies should encourage pro-social spending. And, you don’t have to give away all your money to be happy – just be generous. Remember that the oft-quoted Biblical injunction “Money is the root of all evil” is incorrectly quoted. The correct quotation is: “The love of money is the root of all evil”.

Article reproduced by kind permission of the Irish Times.