Fact: Once you satisfy your basic needs, spending more for expensive houses, cars, clothes and vacations does not add to your happiness
It’s the age-old question. The answer depends upon whom you ask. People without money say “yes”. People with money say “no.” If you don’t have enough money to pay the rent, you’ll be anxious and worried. If you have a lot of money, you may also be anxious and worried: anxious about holding onto your money and worried that people only like you for your money.
New research confirms that people with higher incomes are generally happier than those who struggle to get by. While this may come as no surprise, the old research still holds up: once you have enough money to cover your basic needs, buying a more expensive car or dining at fancier restaurants will not make you happier.
If you want to be happy, having money is not enough. How you spend it is the determining factor. If you use it to fill your home with more and better stuff, you will not be any happier after the initial excitement wears off. Due to something psychologists call hedonic adaptation, no matter how good something new makes you feel, you stop appreciating it over time. As it fades into the background and becomes part of your new normal, you drift back to where you started emotionally.
Spending money on experiences like dinners with friends, concerts, and travel, which tend to strengthen social connections, will make you happier than buying new furniture. According to Cassie Mogilner, associate professor at the Wharton School of Business, having strong, stable connections with others is the single most important ingredient for well-being. Likewise, when you gift or help others, you derive greater and longer lasting satisfaction that when you gift yourself. This is true across all income levels, because, generosity evolved as a survival instinct. When you help a family member or friend, you strengthen the social network that supports you. In other words, when you help others you help yourself, which enhances your well-being and makes you happy.