Betty's Wedding #1. Spoiler alert: This was not the last!
My grandmother Betty, known to us as “Grandbetsy,” was a devout Christian (and in fact dubbed “Bible Betty” behind her back, which she loved), a leader (ran for US Congress) and funny. One time when we were shoe shopping, the store clerk asked us what our shoe sizes were. Without skipping a beat, Betty responded with: “Well, my size is 8, but 9’s are so comfortable, I wear a 10.”
Most notably, Betty was a woman who lived on her own terms. That is, she married 5 times. And, with each marriage, her net worth went up.
What is financial wellness? And how can we achieve it? Or, more specific to Betty - did marrying up increase her happiness? Can money buy you happiness?
I often pose this question as an entrée into a discussion about financial well-being in my workshops and talks. And, usually the responses are divided between "Yes" and "No." Up until recently, I’ve said: “Well, you’re both right.” Now, that may no longer hold water. A new study came out showing that actually, the answer is more “Yes” than “No.”
I, like many others, based my earlier response on a widely cited 2010 study conducted by Princeton economist Angus Deaton and psychologist Daniel Kahneman. Their findings revealed that money can make us happier but only until we hit the threshold of $75,000 a year. After that, our levels of happiness seem to plateau.
The more recent study largely upends this notion of the “plateau” effect and instead reveals that (a) the threshold is higher (now $85,000 a year) and (b) levels of happiness continue to rise as one’s net worth increases. That means that while we’d all like to believe that “money can’t buy happiness” or that you “can’t buy me love,” these beliefs are probably not true. As Harvard psychologist Dan Gilbert explains, “This sentiment is lovely, popular, and most certainly wrong.”
So, bringing this all back to Betty, does this mean that she definitively was happier as she married up? Not so fast. The key is not just net worth, but also how the net worth is spent. Gilbert explains that as our net worth increases, so do our opportunities for happiness. Then it’s up to us to actually leverage these opportunities. How we spend our money – given the opportunities we are afforded – matters.
Too many of us squander these opportunities. As our wealth accumulates, many of us fall victim to the “keeping up with the Joneses” grind, which in scientific circles is known as the “hedonic treadmill.” That is we leverage our resources to buy that new car, new house or new outfit and we get a giant boost of pleasure. But, that pleasure is short lived. Soon afterwards, we feel disappointed as that new car becomes, well, just another car. So then, we seek out the next new purchase hoping for happiness, only to be let down again.
So, what kind of spending does result in more happiness? Scientists will tell you that there are two kinds:
1. Spend money on others over self. Giving to others is a gift that keeps on giving – to the giver.
2. Spend money on experiences over things. You’re better off putting money toward a vacation or a dinner than you are spending it on a material item.
Betty did both - and was happier for it.
But, what about if you’re below the threshold, and you’re struggling to make ends meet?
(I can relate!) Here are the top 3 techniques recommended by Peter Frampton, author of The Joy of Accounting and Co-CEO & Co-Founder of WealthVox, a company that teaches business and personal finance around the world:
1. Create automatic savings systems. For example, next time you get a raise, ask your employer to put part of it toward your 401K or Health Savings Account.
2. Boost your financial consciousness. Know what you’re earning and know what you’re consuming. Take time to reflect on your “money story.” What were you taught about money when you were growing up? Consequently, what are the messages you tell yourself now?
3. Talk with your friends. Peter suggests that you create your “money circle” of friends, and in doing so, you will generate social pressure to begin saving. You will also build an avenue to unload your financial anxieties and create a safe space for brainstorming money solutions.
Amazing things can happen when we talk about the taboo topic of money with our peers. Case in point, my sister got a whopping tax penalty and was trying to figure out what she could do. In a casual conversation with one of her equestrian riding mates, she opened up about her financial situation. “Why don’t you refinance your house?”, her friend asked - something my sister hadn’t even thought of. That one conversation generated the solution
to her financial quagmire.
So, it turns out money can buy happiness if we leverage our opportunities and choose our spending wisely.
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