# How to Make Money Buy Happiness

## By Mr. Money Mustache

## Mon, 14 Apr 2014 18:12:07 +0000

What are you spending all that money on?

After reading this blog for a while, you already know what’s good for you, but there is still the odd slip-up. A few hundred disappear here and there for the odd fancypants luxury, or a few thousand on trips or keeping the BMW X5 around because hey, you deserve it, and Mr. Money Mustache can’t actually see you driving it and bike over to punch you in the face.

And if it’s not you, it is your spouse. You were born with spartan tendencies and actually enjoy line-drying your clothes and chopping wood on a crisp winter day. But he or she was raised differently and just feels better with those leather seats, or the extra-large sports television, or the nutritious $10 single servings from Whole Foods or the air conditioning set nice and cool all summer. You’ve tried to bring the issue up gently, but a marriage is worth more than money, right?

The best way to get to the root of all this spending is to realize what we are all really trying to buy. In fact, it is the reason for every single action we take in our lives. It’s happiness.

When you finally upgrade to that 4500-square-foot custom dream home you have always wanted, you are not doing so because it will provide more space for your family to gather, or for the killer parties you can host there. You’re also not doing it to earn admiration and respect from your colleagues and neighbors. The whole deal is signed because of the feelings you anticipate it will bring you.

When we buy anything beyond the most basic ingredients for life, we are just buying feelings.

If this sounds like a stretch, consider the counterpoint: Let’s say that the mansion on the golf course did indeed have more room for family and friends, and it even impressed others. But it made you feel like a horribly wasteful idiot every time you looked around at all the empty rooms, and the worries kept you up at night. Imagine that its very presence in your life was a constant drain on your happiness. Would you still make the purchase?

Of course not! And indeed, this is exactly the feeling I happen to have about giant luxury houses, which is why we’re moving to a place that is 1000 square feet smaller next month now, despite an increasing level of wealth. Better feelings.

Two different people can have opposite feelings about exactly the same situation. And in fact, one person can completely reverse his or her own feelings about exactly the same situation in a surprisingly short time. This is an enormous clue in the puzzle we are trying to solve here.

So let’s solve it. If we are really just buying feelings, who has the best ones on sale at the lowest price? Different people approach this problem with different levels of sophistication.

At the bottom of the pyramid, you have people who seek stuff at all costs. Long ago, some of my rental house tenants could not pay the bills and had debt collectors coming at them from all directions. They spent their entire short tenure in my house trying to put up a smokescreen to dodge me, their creditors, past landlords, and everyone else. And yet inside the modern luxury house they had rented from me was the latest designer furniture, sleek electronics, high-end clothing and a completely customized brand-new Corvette. They were good at fooling me and fooling themselves, but as the sheriff unceremoniously kicked them out on the street after the eviction court case, they may have briefly realized they were not buying happiness.

Slightly higher on the consumer thrills ladder is the new slogan of, “Don’t buy things, buy experiences! Travel! Take Cruises! Go to all the happy hours!”

It’s a nice idea, and it does work to a certain degree: experiences are more memorable than things. After all, your favorite trip still glows warmly in your memory, even while that iPad2 you purchased just a few years ago is hopelessly outdated now and sitting in a storage bin under the shipping boxes from your iPad3 and iPad4.

In the mainstream media, the analysis ends there. Spending on experiences is better than spending on stuff, so just spend all your money on experiences and you’re set.

But there’s an even more satisfying thing you can do with money, which is rarely mentioned: not spending it.

Huh? But what about all the slogans “Money is no good if you don’t spend it”, “You can’t take it with you when you die”, and “It is better to spend money like there’s no tomorrow, than to spend tonight like there’s no money“?

It turns out that these catchy bits of folk wisdom aren’t in line with much of the science. More recent research on the matter* is revealing that people with money in the bank (or its more Mustachian form of productive, growing investments) receive much more happiness from it than people with the more fleeting pleasures of a high income or high levels of consumption of stuff or experiences.

From my own perspective as a lifelong saver, this seems completely obvious. The average consumer now lives a life that is balanced upon the razor-sharp bleeding edge of just-in-time cashflow. Incoming paychecks are closely matched with a nearly-equal list of mandatory outflows. Rents, mortgages, loans, utilities, subscriptions, gas, and “fun money”. If the inflow of money is cut off, even for such a trivial period as a single year (and let’s be honest, in most cases a single week), the consumer slips on the blade and you have a whimpering pile of entrails on the floor complaining about how difficult life is for the middle class these days.

While most people assume that this is just a normal modern life, it is actually a life of incredible and completely unnecessary stress. Families with young children get torn apart, abdomens balloon, arteries clog, 45-minute commutes occur, cars crash, and crimes are committed, all because of the imminent financial doom that lurks over almost every shoulder. Even your average earnest, educated, hardworking high-income adult endures daily stress, decreased health, greatly reduced freedom and a generally less happy life, all over the very simple issue of an extended shortage of money.

The solution is equally simple: keeping your money. Quite contrary to the bartender’s advice, every single dollar you manage to keep for yourself contributes to your wellbeing. The dollars bring peace, because they eliminate the worry of not having enough of them. They bring freedom, because you can wield them like a sword to cut new paths for yourself in life that were formerly closed. When invested properly, they multiply automatically and decrease the amount of your time you need to devote to earning a flow of them. You don’t have to be an early retiree to feel this effect, because benefits begin immediately. Every dollar you manage to save between zero and financial independence contributes to this peace and happiness.

Of course, it is possible to screw up even this simple equation, so beware:

- Dollars saved beyond the level of “Enough” don’t bring you even more happiness, because Enough is Enough.
- People with fully secure and happy lives may not need the psychological crutch of financial independence to live completely free from worries**.
- And those who cross the line from “Frugal” to “Cheap” may end up compromising personal relationships in pursuit of dollars, which is an unprofitable tradeoff.

But the point remains: if you are currently in search of more happiness and wondering how to put your growing professional income most efficiently to work in this search, the first thing you should might look into buying with that money is Nothing.

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* This is just one paper from one individual, but I enjoyed the pretty thorough take on connections between savings and happiness: http://www.r2research.com/Home_files/Roth_2011.pdf

**For some of us, this can be a chicken-and-egg problem: I was more prone to worry in my youth, because I didn’t know much about life. The freedom offered by financial independence gave me time to relax, read, and build closer relationships. This led me to learning much more about happiness. Now I know enough that I could be happy even without all this money. But I give the money the credit for getting this whole process started. And now I get the fun of giving it all away over my lifetime!