Marketplace Financial Advisor This article appeared in Southwestern Publishing’s August 2009 issues. It is reproduced with permission. © 2009 Southwestern Publishing
Money Doesn’t Buy Happiness
I Carol Ringrose Alexander
By Carol Ringrose Alexander, CFP®, AIF®, CDFA™
t’s official: Money can’t buy happiness. Academic research now validates what your mother always told you. “The relationship between money and happiness is pretty darned small,” says Peter Ubel, a professor of medicine at the University of Michigan. Why doesn’t wealth bring a constant sense of joy? “Part of the reason is that people aren’t very good at figuring out what to do with the money,” says George Loewenstein, an economist at Carnegie Mellon University. People generally overestimate the amount of long-term pleasure they’ll get from a given object. Researchers Andrew Oswald, an economics professor at the University of Warwick in England, and David Blanchflower, Dartmouth economist, have used General Social Survey data to assess what other factors – such as marriage or health – make people happy, either in absolute terms or compared with money. The data allows some fairly certain conclusions, Blanchflower says: “Happiness has remained fairly constant over time, despite rising incomes; women are happier than men, though the gap is getting smaller; happiness is U-shaped, meaning people are happiest when they are very young and very old and least happy around age 40; unemployment reduces happiness, even beyond what might be explained by the reduction in income; and marriage adds to happiness.” The research shows that happy people do better than unhappy people in most realms of life; they have better social relationships, do more volunteer work, have better health and make more money. So money may not make you happier, but being happy may make you more money. Just don’t be too happy. High achievers tend to be only moderately to very happy, not extremely happy. Can the new breed of “happiness economists” offer us any tips for happier living? Much of the advice is pretty slippery. For instance, married people are much happier than single people. So, should you consider getting married? Not so fast. More sophisticated surveys show that the causation runs both ways: Happy people tend to find spouses, while those suffering from depression don’t find it so easy. Not surprisingly, some people do brilliantly outside of marriage, while others are utterly miserable. Oswald also suggests self-employment, if you can pull it off without losing out financially. “Everything associated with self-employment – independence, autonomy – is also associated with being happy.” Both Oswald and economist Richard Layard argue that relationships are more important than money – and that includes professional relationships. “Think about what you have rather than what you don’t have, both materially and in your relationships and your personal strengths,” Layard says. Carol Ringrose Alexander is a financial advisor with Retirement Investment Advisors, which has been recognized as one of the top fee-only investment advisory firms in the nation more than 29 times in national publications.
Marketplace Financial Advisor By Carol Ringrose Alexander, CFP®, AIF®, CDFA™ Carol Ringrose Alexander This article appeared in Southwestern...