Psychology

The hidden cost of having too much money.

If the world was our oyster, we would want to live a comfortable life where our “wants’ are all satisfied, while our happiness is maximized.  There is a point of nirvana whereby – borrowing the theory of Adam Smith’s economic model to help me resolve the “happiness quotient” – we obtain the highest level of happiness and fulfillment by increasing happiness in relation to each level of life’s hardships.

Many people think that there is no relationship between the two “needs” in life.  They think that every marginal dollar earned, or given, has a marginal benefit towards their happiness.  This theory might work with economic production in capitalistic societies to create efficiencies and economies of scale, but that is where the application ends. When introducing another variable into the equation of life’s true goals – happiness – one must factor and prioritize all the goals in matter of importance.

How important is happiness to you?  To that end, we need to first really think about what’s important in life.  Is it money?  If so, how much money do you need to be happy? A study was done last year and found that the national average of income for a family to be happy is $75,000.  Yes, it does go up in places like New York, California and other expensive states, but not what you would think.  Every marginal dollar earned or given – study after study – concludes that your happiness does not change for the better.  In fact, I will proffer that in many cases it gets much worse.

Another interesting revelation about this study shows that money spent on life experiences (taking vacations, going to a Broadway show, getting a massage, etc) has a more impactful role towards your happiness than the purchases of material items.

In one study, Professor Ryan Howell, associate professor of psychology at San Francisco State University, said the following:

“What we find is that there’s this huge mis-forecast.  People think that experiences are only going to provide temporary happiness, but they actually provide both more happiness and more lasting value.  And yet we still keep on buying material things because they’re tangible and we think we can keep on using them.”

So the evidence is overwhelming that money cannot buy happiness.  Also, material purchases do not give us incremental happiness past a certain point.  We all heard this as a cliché, but now there is scientific proof of it.  However, I would like to get into a more nuanced discussion as to whether or not we would have an easier life with less money.

Would having less money give us less stress and more fulfillment, leading to maximizing our happiness?  In my opinion, there is a “sweet spot” in the amount of money that maximizes our happiness, but we most often do not calculate the true cost in having too much money for ourselves to use.

The happiest countries in the world are socialistic!

Denmark supports parents

Denmark supports parents

Would you be shocked if I told you that the happiest people in the world come from Denmark?  The weather in Denmark is normally cold and rainy. Despite the dreary weather, they manage to put a positive spin on it.  Most people use their bikes to go to work or school.  They live in a socialist economy where they strive for an egalitarian society.  Gender equality is the highest amongst all nations.  They have all their basic needs provided by the government (including full health care which is a civil right).  Their average work week is 37 hours with 5 weeks of vacation time.  Most surprisingly, they have low expectations of themselves.  This low expectation culture produces a society that is non-judgmental towards other people’s occupation or wealth.

All these attributes in Denmark would make us Americans think someone rigged the polls!  We are taught that pure unbridled capitalism creates perfect societies, by harnessing self interests using Adams Smith’s “Invisible Hand” to create optimum efficiencies in the market place that will trickle down to cure life’s ills.

Well, this cannot be further from the truth. It might be the best economic principle to maximize wealth.  On the other hand, maximizing one’s wealth is mutually exclusive to maximizing one’s happiness.

The smiling and peaceful peopel of Vanuatu

The smiling and peaceful people of Vanuatu

To show this point in the other extreme, I present to you the tiny and relatively primitive nation of Vanuatu.  This is a Third World country with very low GDP production.  However, they live on an island that is very fertile, stunningly beautiful and climate that is consistently warm and sunny.  They also have strong family and community bonds, not distracted from the outside modern world with all the hustle and bustle that comes along with it.

The people of Vanuatu are not rich.  In fact, many of them would be considered to live in poverty by Western standards.  However, even the poorest family in Vanuatu can take care of their basic needs by living off their crop-producing land.  Naively, these people seem to us to be “lesser” or “misfortunate” when looking through our “myopic Western lens” of life.  However, they are known to be very happy, stress free, and they think they live in paradise!  These people, as a society, are actually happier than us.

I showed you two extremes.  A developed county of Denmark and a relatively primitive country of Vanuatu.  Their definitions that make their populations happiest are different. However, what we do know is that their results are the same.

Now I want to see a virtual raise of hands…Who want to emulate the cultures of Denmark and Vanuatu?  I don’t think many hands are being raised.  It’s just a hunch.  That is our problem.

Let’s go Americans…Take on the challenge to be part of a happier place!

Americans are continuing to decline as a society in the happiness quotient.  As a country, we have more wealth than ever.  Our system of capitalism seems to be the superior economic model…but to what end?

Far too often, I see the true cost of “wanting it all” and never being satisfied with what one presently has.  We think that people with great wealth, who can buy things at their whim, are happy people.  If you have a nice luxury car, does that second luxury car give you anymore happiness?  It might be cool to own a Ferrari as your second car, but the feeling of that fades pretty quickly.  Material things do not attach anything to the heart.

In my catering career, I often noticed that the people with the most amount of wealth, used for their own benefit and not for others, were less happy than others with less money.  Their life cycle parties were not as meaningful, sometimes lacked feeling and emotion, and had fewer close friends than other people’s parties who spent less and appreciated what they had more.  Their money would be focused on buying “things” to impress their guests more than using the money to create a better “experience, ” such as more attentive service and more interesting food choices for their guests interests.  Many dance sets would lack a real energy because the “material things” associated with the party clouded and overpowered the meaningful things.  How and what you spend your money on has much more impact than one would think.  There is a point where every additional marginal dollar spent actually created a party with less fulfillment and happiness.  This is another economic term called the law of diminishing returns, and it not only applies as an economic principle but also as a “happiness quotient” principle.

Then there is the issue of “competing with the Joneses.”  Do you really think that such competition creates more happiness and fulfillment for you?  Not only does it not, but it actually creates vices like jealousy and pressures to show others that they have accumulated a certain level of wealth.  How can that be a healthy lifestyle?  The stress alone, in my humble opinion, would cause a reduction in one’s happiness.

When finding a soul mate in a relationship, how do you measure which characteristics are most important?  Now I am not suggesting that you should find someone who is lazy , un-driven, and below a comfortable standard of living, but far too often the amount of money someone has is the driving force in getting married.  I often hear women say, “That guy is really wealthy, he has a yacht, two homes (one in New York City, the other in the Hamptons), wears designer clothing, and vacations at the finest destinations and hotels all the time.”  Yes…that is nice, but what about the guy’s personality or character?  Is it just “OK” if the guy is nice?  Shouldn’t his character and personality really what matters to you?  Where is the scrutiny and priority assigned to that part of the person?  Just being “nice” is a euphemism for accepting him at the lowest bar to justify the material benefits that come with the package.

Inevitably, your husband will have some sort of downfall.  It might be a sickness, a downturn in his wealth, or most probably, a revelation in his personality and character that you did not see coming.  At that point, do you stick around with him anymore? If he still has wealth, do you stay miserable because he is your provider?  In this sense, how can you say you are truly happy?

Watching reality shows such has “Bachelor Millionaire” sends the wrong message and will lead to bad choices based on the wrong emphasis.  We need to put the right value on our own happiness and the costs associated with the accumulation of material objects.

So for all of you who think you are happy, ask yourself the following:

  1. If you are currently very wealthy but had to give up 25 percent of your wealth, still being above the national threshold of the “sweet spot” of happiness, would you be more happy?
  2. If you agreed to live with 25 percent less money than you already have, would you gain more time being with your friends and family, developing and investing in human relationships that are the signs of true richness?
  3. If you donated a significant portion of your wealth (while you are alive) to a cause that is near and dear to your heart, would you feel happier knowing that you are helping others that are less fortunate?  Note: Studies also show that giving creates more happiness than receiving or consuming.
  4. For every additional dollar that you have over the median national happiness income of $75,000, how much are you giving up to live in the moment?  How much value do you ascribe to a great and meaningful day which will never come back again?  I think that cost might be incalculable.

We can learn a lot from Denmark and Vanuatu.  All it takes is self-reflection and a change of perspective to achieve the maximum happiness. May you all achieve that goal!

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