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How much money do we need to be happy?

When one is free of things that cause misery, the link between money and happiness changes.

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The links between money and luxury, money and possessions, money and status, money and fame, money and fine-dining, are well-established and undisputed. But money and happiness?

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"Nearer to the modern day, psychologists would agree that the happiest people are those with friends, family, close communities, health, fruitful and caring lives, and love." - Peter Triggs.

IF someone offered to give you as much money as you needed to be happy, it would be natural to start thinking of some pretty large numbers.

I would fall into a quiet daydream that featured deserted islands, days of leisure, houses around the world, and private jets. I would upgrade my car (an Aston Martin Vantage would do for a start) and my property. Where would I choose to live? As for the amount: A S$1 million, S$5 million, S$10 million, $S100 million, S$1 billion. Why stop there?

The links between money and luxury, money and possessions, money and status, money and fame, money and fine-dining, are well-established and undisputed. But money and happiness? This gets a bit more interesting.

If we have not given this much thought, we may by default fall into behaving as though this link is also clear.

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Our working environment encourages us to work harder and harder for the next promotion, a bigger bonus, more status, more money, more 'progress'. In our home environment, we compare ourselves with our neighbours. We may fear anyone gaining an advantage over us ('kiasu' being a well-used adjective in Singapore).

Psychologists will tell us that we compare ourselves naturally with a 'peer group'. These may be our neighbours, work colleagues, relatives, school cohort. If we earn more, have a better house, are better looking, have more senior positions than our peer group, then we feel happy. If we have 'less', then we are discontented no matter if (by any global standard) we have great abundance.

The marketing world also suggests to us that by buying more stuff, we can find great happiness. Clothes, handbags, cars, the latest phone. Still not happy? Then clearly you don't have enough yet. Keep going.

But let's think about this for a moment.

Philosophers have considered the nature of happiness for many hundreds of years. One of the most famous was Epicurus around 300 BC. For him, happiness was linked closely to pleasure. For this, he acquired a 'bad rep' as the adjective 'Epicurean' has been linked to excess, over indulgence and wild pleasure-seeking pursuits.

In fact, his reality was quite different. For him, for example, the pleasure in a meal came not from having fancy and expensive food, but in selecting carefully whom he had a meal with, and the quality of the conversation. A bowl of lentils with the right people could be a meal of complete pleasure.

True happiness for Epicurus was really linked to friendships, companionships, conversation, simplicity ("Nothing is enough for the man to whom enough is too little") and sharing thoughts on life. (Here I refer the interested reader to the book The Consolations Of Philosophy by Alain de Botton).

Nearer to the modern day, psychologists would agree that the happiest people are those with friends, family, close communities, health, fruitful and caring lives, and love. A job you enjoy is a huge factor, staying busy, helping others, and feeling recognised, appreciated and loved. (As someone once said, "happiness is: something to do, someone to love, and something to hope for".)

Of course, your life must be free of things that actively make you miserable. Ill health, or that of a loved one; serious debts; a job you hate; an abusive boss or spouse. Some of these can be helped by money (such as getting special health care, or having a safety cushion to risk changing jobs), but once these are tackled, the link between money and happiness changes.

In the book I mentioned, there's an interesting graph. The vertical axis represents happiness and the horizontal axis represents money spent, or perhaps wealth. The shape of the graph shows the link between money and happiness.

Now, I think it is clear that it will be hard for someone whose basic needs (food, water, shelter, basic healthcare) are not met, to be really happy. If someone cannot feed their children, obtain basic education for them, and keep them healthy, life could be pretty miserable.

At this level, I believe money and happiness will be directly correlated, and the graph will be almost a pure correlation at 45 degrees. For someone on an income of S$2 a day, S$500 could be life-changing. (This is the idea behind micro-finance). Money can also help mitigate the problems above, so the graph will remain positive.

But once basic needs are met, and serious problems removed, the slope of the graph will start to level off. A car would be nice, a better school for the children, private healthcare, but the incremental happiness brought by the extra S$500, or even S$5,000, is smaller. Gradually the graph of incremental happiness flattens.

In fact, I would make a small adjustment to the graph in de Botton's book. After 30 years of dealing with very wealthy people, I actually believe there comes a point when the happiness graph turns downwards.

One has got away from the problems of poverty, but moved into the area of the problems of wealth. (Arguably, the problems of wealth are preferable to the problems of poverty, but they are still problems).

Problems of wealth

  • Maybe people like me only because I am rich;
  • Everyone is after my money;
  • Will people steal from me, especially when I am old;
  • My life is becoming too complicated;
  • How do I motivate my children;
  • How do I protect them from gold diggers;
  • Might I be kidnapped, or become a target for criminals;
  • I don't need to work and I'm bored.

We have seen major families that have become dysfunctional with family disputes, lawsuits, drug problems. With wealth, it is also natural to become more isolated, travelling in a private car or plane rather than with other people. I'd go on a holiday in exclusive resorts where I don't need to meet other people. I'd surround myself with sycophants who'd do my bidding and agree with my every word. And ordinary people start to give me a wide berth.

I may not end my days in strange, eccentric isolation like Howard Hughes, but I may be somewhere along that path. (Even walking around with my eyes stuck on my new phone, and avoiding human contact, might be the first little step towards lonely isolation - and loneliness is one of the great happiness-killers.)

So, the results of great wealth are often actually to move one away from what the psychologists tell us are the real drivers of happiness. It is certainly my experience that the truly wealthy seem no happier than the rest of us, and often less so.

I will make an assumption about the readers of this article. I will assume that most of us are somewhere in the middle of the happiness graph. We are not wondering where the next meal is coming from, nor are we suffering under the fears that may accompany great wealth.

We are probably able to deal somewhat with most of the major problems that life has brought us so far. We are in the zone where it is nice to have more money, but the dial of true happiness when we get more money is not really moving. Here, we will make (consciously or unconsciously) one of two assumptions.

I may conclude that I am not getting happier because I just don't have enough money yet.

I just need a bit more, then a bit more, then a bit more. But, in fact, not only does 'enough' never come, but I'm not sure that the concept of 'enough money' can be found in today's world. In my constant pursuit of this holy grail, I will spend more time away from my wife and children, I don't have time for my friends, I am too tired for meaningful conversations, I don't have time for any volunteering. I am on a mission that never ends.

The second assumption I can make is that I have sufficient funds for a worthwhile life.

Winston Churchill said: "You make a living by what you get. You make a life by what you give."

If my wealth has removed me from the problems of poverty, and I am able to cultivate friends, family, an emotional life, a spiritual life, and lead a truly considered and meaningful life, then true happiness beckons. I may find it a revelation to spend some time volunteering or carefully giving to others.

So, how much money?

If you want an ocean-going super yacht, you should probably target US$1 billion. A private jet? First get about US$200 million. Multiple properties around the world, US$30 million would be useful.

But how much money do I need to be happy?

Here is the answer that perhaps you didn't want: You almost certainly already have enough.

  • The writer is senior adviser, Wealth Planning, DBS Private Bank