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Money Doesn’t Buy Happiness, Money Buys Options.

Last week I wrote about the most precious resource in the world. If you read the last sentence in that post I added a quip that money can buy happiness. It’s an altogether cliched statement that money can’t buy happiness, but is it true?

Can Money Buy Happiness?

In a traditional sense, the old adage means that you can’t spend your way into happiness. Material goods and even experiences cannot necessarily make you happy. I’m fully in agreement here. In fact, statistics back me up. In general suicide is much more common in wealthier neighborhoods.  About 4.5% more likely, with those on the lower end of the scale in the wealthy neighborhoods being the ones most likely to do so. The reason, the study from the San Francisco Fed postulates is that comparing yourself to others financially drives unhappiness. I’d say it’s a safe assumption from the data that if you commit suicide, you’re not happy. So clearly whatever the cause of that unhappiness in those neighborhoods was, money, or living around money to be exact, did not solve it.

The second traditional view is that stock piling money will also not make you happy. This is also true. The value of an extra dollar when you’ve already made it to FU money is much reduced in terms of providing happiness. So being a billionaire will likely not make you significantly more happy then being a multi-millionaire.

Money Buys Options which leads to Happiness

And yet I still do believe that up to a point the more you have, the happier you will be. A gallop study even showed this to some extent, noting that up until you make 75K a year, each additional dollar increases your happiness. After 75K though the same study found you just add more stuff.

The same concept applies to your Net Worth. I postulate that the line in this case lies at financial independence (FI) plus a cushion to allow you to sleep at night. Below these points in income or assets, whatever the amount in real dollars, you must always be aware of the risks of losing your job, affording your lifestyle, and paying for emergencies. Each dollar you save earns you less stress from these fears. Since unhappiness is essentially just a type of fear, by earning more towards this point you are increasing happiness.  Now if we pause here for a second what this means is if you practice life style inflation then you’ve essentially increased your exposure to these risks and potential unhappiness.

Also, money buys options. The option to quit your job, take a more risky job, take a sabbatical, move, take a job you are passionate about rather than one for the money, or really anything you so desire. As such money can allow you to follow an option that brings you more happiness than you would have otherwise.

Money Beyond what you need for FI

If you define FI as having enough money to support the life that you determine to maximize your happiness, then you really have no need for money beyond that point. By its very definition you can then afford everything that you truly value. That means FI is specific to you. Only you know what you truly value, and will know when you’re living a life that meets that criteria. Sure there will always be additional things more money can provide. For example, you could buy a Ferrari to drive around Monte Carlo while dressed like Scrooge McDuck with a supermodel in the passenger seat. But unless that is what you really value in life (you never know, I don’t judge), it won’t really buy you happiness. In fact, to return to the San Francisco study again, a lot of psychologists today argue that comparing what you have to others is one of the largest sources of unhappiness. They feel this is the primary driver of the suicide results. This is why it’s important to remember your neighbor, your friend, whatever does not necessarily place the same value on things as you do. So, don’t judge what you have based on others, but rather on what you value. Choose what you value an develop a plan for a life that supports those things, toss the rest.

Money is Not All You Need

Now, obviously money is not all you need. You need friends, family, great experiences, and the bear* necessities of life (Give me a break my kids are obsessed with The Jungle Book). It is just one piece of the puzzle which is unique to each individual. That is why it is so important to find the value you place on what you spend your time and money doing. Then and only then can you maximize your life. As stated in my post, all money really does is remove the obstacles that keep you from maximizing that life. Money buys options.  So the next time someone says to you “Money Can’t Buy Happiness” remember they are only half right and take it as a reminder to keep working towards your end financial goal of financial independence.
Have you used money to buy options?


  1. Jacq
    Jacq January 9, 2017

    My company had layoffs in November, I wasn’t worried for 2 reasons. #1 been there, done that, always got another job. #2 I have money in savings just in case, as this is not uncommon in my industry. I was not happy because many of my work friends and really nice people aren’t there anymore (I wasn’t let go), but it saved me a lot of stress. The decreased worry of having the money, sure let’s a person have room for gratitude and happiness.

    • January 9, 2017

      Glad to hear you survived a layoff round. It always is slightly depressing being the person who survives. I hope for your sake its a one off layoff. Most companies I’ve worked for seem to do these things in waves. Are you going to stick it out or has this motivated you to look for other opportunities?

      • Chris Haas
        Chris Haas January 10, 2017

        Agreed on the waves. I’ve seen that 4 times, and have never seen only 1.

  2. Mustard Seed Money
    Mustard Seed Money January 9, 2017

    When the government furloughed a couple of years ago I definitely wasn’t worried while colleagues were terrified. I remember thinking that I’m glad that I have money in the bank to hold me over and this was a terrific feeling knowing I wasn’t living paycheck to paycheck. While I was lucky others had a lot more difficulty and took them awhile to boot strap back.

    • January 10, 2017

      Thanks for sharing your story, great example.

  3. Go Finance Yourself!
    Go Finance Yourself! January 10, 2017

    I agree with everything you said here. Money buys you control. It allows you to do what you want to do. You can work if you truly enjoy what you do, or you can pursue other passions. It’s the control that really leads to happiness, and money can buy you control.

    • January 10, 2017

      Very true. Do you have a story where it’s kept you secure in a difficult situation?

  4. Jon @ Be Net Worthy
    Jon @ Be Net Worthy January 10, 2017

    Well said FTF. My interest in FI, for example, is not to retire early necessarily, but to have options in the future. If my corporate job is still satisfying in a few years, then why would I leave?

    If it’s not satisfying, then it’s all about having the FU money saved up and it will be time to find a better way to spend my time.

    It’s always good to have options. Few people realize it until it’s too late.

    • January 10, 2017

      It sounds like we are of similar perspectives. I have dates and milestones in place for finances, but leaving my job is more fluid. It will happen one day when it starts annoying me. Till then I don’t see a reason to stop.

  5. Bill @ Wealth Well Done
    Bill @ Wealth Well Done January 11, 2017

    I think you’re totally right. Money doesn’y buy happiness, but it can buy us freedom and opportunities to find the dreams that we seek. For us, the biggest thing money buys is the freedom not to worry if there will be enough. We can focus on finding enjoyment in life rather than being stressed that our enjoyment will soon end.

  6. Wes @ TPOHappiness
    Wes @ TPOHappiness January 12, 2017

    Totally agree, money cannot purchase Happiness! It comes and goes so easily and if your happiness is tied to the $ you have in the bank; well just look at history to see how frequently it evaporates. I know I don’t want my own happiness to evaporate!

    Great post again very glad you shared!

    • January 12, 2017

      So true, easy come easy go so to speak. Thanks for stopping by.

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