One of the strange things about modern life is that people burn a huge amount of energy trying to earn more money and then spend it all.
People must be doing this for a reason….I assume they’re hoping it will bring them happiness?
Yet this doesn’t seem to make us all happy. Studies show that we’re not really any happier now than 50 years ago when incomes and spending were much lower.
But if working and commuting and spending wasn’t making us happy, we’d stop and try something else…right?
Over the past 20 years or so, there have been enough academic studies for scientists to have figured out what works in making people happy. Spoiler alert: its not spending!
And the results are clear. This is not like diet studies many of which have been misleading and contradictory. When it comes to diet studies, The Daily Mash headline says it all: All Things now healthy and unhealthy at the same time.
The results of studies on happiness and income are much more consistent. They show that increasing income tends to improve happiness only up to a certain point. In a well known 2010 study in the USA, Daniel Kahneman (Nobel Prize winner, all round smart dude and author of Thinking Fast and Slow) found that happiness only increased with household income up to about $75,000 (about £50,000) per year.
So if a household consisted of 2 people on an average UK salary of about £27,500 ($41,250) then it would be earning £55,000 ($82,500) and so would already be over the level at which additional income moves the needle on happiness.
This is not an argument for giving up all work. Nor for turning down higher pay. Kahneman found that people were more satisfied with their career progress as their income rose… even above $75,000…it just didn’t change people’s day to day happiness.
This makes sense from an evolutionary perspective: back on the African Savannah we would have taken satisfaction (and gained resources) from achieving increased status in the tribe. But money and shops didn’t exist then and haven’t been around long enough to shape our evolution.
These findings are also consistent with UK studies and the work of those (rare) economists that study things that matter in the real world. Like Richard Layard, economist at LSE. Or Andrew Oswald, economist at Warwick University, and author of The Hippies Were Right All Along About Happiness.
This evidence suggests that in the West its relative income that influences happiness and that the effect mainly works in the negative. So if we feel poorer than everyone around us, that’s no fun. When it comes to money, it may feel better to be a big fish in a small pond than a small fish in a big pond.
If the relationship between income and happiness is weak, the effect of spending is even more marginal. Any boost to happiness from spending will be short lived. You can’t buy happiness but you can buy chocolate… and for a few minutes it may be hard to tell the difference.
But after that initial sugar rush has gone, you are gonna need another hit. Its like needing to run just to keep up with a treadmill. This treadmill effect is due to hedonic adaptation which is a strange and powerful force causing our happiness to revert towards a “baseline”.
Imagine you take two groups of people with similar levels of starting happiness. Half of these people then suffer a life changing injury e.g. amputation. They may experience depression and struggle to adjust to a new life for a while.
The other half win the lottery and become millionaires. They experience an initial surge of euphoria as they tell their boss where to stick his job and start to burn through their money.
But the evidence shows that after a big initial divergence, the happiness levels of both groups will have converged back to the starting baseline after about 1 year.
It turns out that the biggest factor behind a person’s happiness is their own character….in other words their predisposition towards happiness based on genetics and upbringing.
This may help explain why some people always seem grumpy. Their mood varies up and down but always around a low baseline. As the philosopher and poet Taylor Swift put it in one of the anthems of financial independence : Haters gonna hate, hate, hate…
Other people have a happiness baseline which is set higher. Annoyingly for the rest of us, they always seem happier.
The happiness boffins at Action for Happiness reckon that about 50% of our happiness is based on things like genetics and upbringing that we can’t change.
That leaves ~ 50% up for grabs and capable of being changed based on how we live our life.
That 50% can be split roughly as follows:
- 10% determined by money / income (material environment)
- 40% determined by activities and relationships.
These concepts may seem a bit imprecise to some. But to me, it doesn’t matter if those percentages are a bit out. Its better to be roughly right than precisely wrong. I have no idea how many degrees centigrade the inside of the Sun is…but I wouldn’t want to stick my hand in it.
It also doesn’t matter that I can’t precisely determine my own happiness all the time. I know there’s a lot I can influence and that it’s worth optimising for happiness.
There is a big difference between what we spend most of our time, money and energy on and what actually makes us happy. The things which seem to work in terms of delivering sustainable happiness include:
- Getting enough sleep
- Diet and health
- Head space and time to think
- Helping other people
- Better relationships with friends, family, community
- Learning or trying new things
- Creating stuff
- Setting and achieving goals
Note that of these are all either free or potentially income generating.
Even after reading some good old fashioned common sense like this, its easy to get stressed and forget it in the moment. There is a world of difference between knowing something intellectually and understanding it emotionally. We only really know something when we have either lived through it directly or put it into action.
I first started to get interested in the science of happiness when I was not happy despite earning a high salary (and spending too much of it). I was stressed by my job and being the sole breadwinner with what felt like more children to support than UNICEF.
I was motivated by financial security for my family but not by a high income or high spending for its own sake. To think about this, we can divide motivation into two broad types:
- Away from
“Away from” motivation is what drives us to move away from things like fear, discomfort, pain, poverty.
“Towards” motivation is what drives us to move towards things like wealth, achievement, status and other trophies.
Everyone is different but, for me, “Away from” was a far more powerful motivator than “Towards”. I worried about ensuring my children would not starve to death, no matter how unlikely the rational part of my brain knew this was.
This fear of poverty had the happy side effect of prompting me to earn as much money as I could, reduce our ridiculous spending and start to build a compounding machine. I had a vague idea that it would be nice never to have to work again but who really knows how that will feel until we’ve experienced it for ourselves?
So about 12 years ago, I got serious about cutting my spending whilst continuing to push on hard at work. Imagine my surprise as I started to realise that cutting spending did not cut my happiness. In fact, cutting spending started to make me happier. Once I started to make spending and other important choices consciously, I felt like I had more control over my own destiny.
Moving towards a goal of financial independence provided meaning and motivation. There was no deprivation as I felt like I was moving in the right direction along The Path.
For years, most of us have been trying the strategy of adding ever more stuff into our lives. But if that isn’t working for you, why not try thinking of happiness as a process of subtraction. Try eliminating some of the noise and toxins from your life. Things like advertising, long commutes, office politics and battles over status.
The more shit you remove from your life, the more time and space you make for your happiness and creativity to flourish. Since I removed a 60-70 hour a week job plus commute, I’ve had way more time and mental energy to try new things, let the world know where its been going wrong via this blog and laugh at my own jokes.
Finally, if happiness seems fleeting and elusive, I heard a great analogy for this recently in a Mad Fientist podcast.
You can think about pursuing happiness a bit like getting a cat to sit on your lap. The cat has a mind of its own and its used to coming and going as it pleases.
You can’t force it to stay with you (you’ll just get scratched). But if you sit still for a bit, you can create an environment where the cat is more likely to spend time with you.
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