Ms ZiYou money and happiness

Correlation between money and happiness

Lately, I seem to be writing a lot of posts about money. I’ve covered net worth updates for June 2018, my investment portfolio and why $1m net worth is not enough for me to retire. But despite all those words about money, I don’t actually believe money is the key to enjoying life. Money doesn’t equal happiness, does it? But there is somehow a correlation between them in my life.

My money vs my happiness

I’ve been reflecting over my life and when I have felt more or less happier. As a child, I was materially happy and content. I felt secure and safe and was well provided for. But was I truly happy? I’m not sure, I always rebelled against growing up in such a small place and always felt that my family did not understand this.

I absolutely loved my time at university, as it gave me some freedom and a chance to experience the big city. And to go out without someone checking up on me. Nonetheless, these simple pleasures were balanced with a busy timetable of 35 hours a week at uni, 20 hours a week working leaving not a lot of time to fit in studying and partying.

M ZiYou Money vs Happiness Graph

After university, I’d say I was less happy, as my ready-made social crowd dispersed and I entered the real drudgery of work. This made me less happy. There were a lot of years in my twenties when I did wonder what the point of life was and thought there had to more to it. And then it all got better, and my happiness rose exponentially.

So, in order to demonstrate these, in true geek style, I have prepared a quality graphic -plotting my wealth /money against my happiness at those times. And I’d call that a direct correlation.  Which is troubling – because money is not happiness is it?

I’m getting richer

I’ve been lucky to never have any serious financial challenges and to have the type of student loan that is a tax rather than a true debt. Therefore, in the graph above I’d judge my wealth as gradually increasing through my early years, as I was a kid that hoarded and saved. Increases in wealth initially can be attributed to some astute property purchases, that despite their small values, increased my wealth.

There is no doubt that over the last five years or so I have been getting seriously richer. And this has to be attributed to my income – by earning over six figures for five years now, I’d been able to save more. I now have the frugal budget dialled down enabling me to invest. Moreover, my investments are automated and just feel like a part of normal life now.

And also happier

Ms ZiYou Happy?

And this is the part I want to concentrate on for this post. My happiness. It’s really interesting and revealing to look back on my life, and try and work out what made me happy and what did not. The big wins that have allowed me to exponentially increase my happiness seem to be a mixture of age mellowing me and embracing stoicism.

Honestly, things that would have driven me mad and really consumed me 10 years ago are just treated as minor irritations nowadays. I concentrate on what I can control, and boy I have a lot of options there. My aim is to spend my time wisely, improving my mind and body. And this philosophy has really improved my happiness levels.

Correlation or causation?

From looking at that graph, even the non-mathematically minded can see an epic correlation. The graph suggests my happiness and wealth are directly correlated, that they increase and decrease together. But is that true? And what came first, the money or the happiness?

My Theory

Whilst not an expert in these areas, I am proposing the following theory:

The mindset that allowed me to make money allows me to be happy

These mindsets have proven to be inextricably linked for me – the exact same skills that have permitted me to earn money, have also permitted me to feel much happier and content.

And what mindsets am I talking about here? A growth mindset is the key, moving away from feeling like I am fixed and can only doing things one way. By leaning into my own personal challenges I was able to learn what I was truly capable of and leap ahead. Rather than saying “I cannot x” I moved into “I have never done X but would love to learn”. And this shift has been mindblowing. And once you start, you are truly on the roll, with momentum growing with each new item you try.

When I was younger I assumed having more money in itself would make me happier, but now I believe that is untrue. When I started making six figures I thought all the expensive holidays and home improvements would bring happiness. While they did fleetingly, they did not make an overarching difference to my baseline levels.

Happiness in a Capitalist Economy

I believe it is not the money in itself and the abundance of wealth that makes me happy. However, I believe the security of having enough money is critical in achieving super high levels of happiness in a capitalist society. I know that I need funds to cover my security needs, to provide food, water and shelter for myself.

I don’t want money and wealth for money’s sake. Furthermore, I do not aspire to be mega-rich and wealthy  – I feel my current lifestyle is abundant enough. And this has been a fascinating learning for me personally. Living in a capitalist economy, it’s very difficult to achieve that security without funds to cover it. So, I believe you need the security of money to be happy, and enough money to use as a tool.

Alternative Happiness

Ms ZiYou Alternative HappinessHowever, this capitalist happiness theory only holds up in developed countries. One thing that travelling a lot has taught me, is that people can be very happy even if they live in what my perspective calls abject poverty.

And that is fascinating to me. I love to learn how people live differently, and it really gets me to challenge my perspectives. I learn that my skill-set would not get me far in a different culture, but with a growth mindset, I could slowly adapt and learn the new culture and what they valued. And that is something I can keen to learn once I FIRE and begin really travelling.

Over to you

  • How about you?
  • How do you feel happiness and wealth intersect?
  • Does your personal experience show correlation?

Thanks for reading – please leave a comment below and join in the conversation. You can also connect on Twitter. Looking forward to your thoughts and ideas – all are welcome. 

22 comments on “Correlation between money and happiness

  1. Nice post Ms ZiYou. I think for me, money and happiness didn’t really correlate, but what you say about alternative happiness and growth mindset definitely applied. When I was my mid-20s I managed to secure myself a 40% salary raise with a job that I hated with every fibre of my being… It was only when I left and started earning £400 a month working with refugees in Thailand that I really felt happy. I was surrounded by incredibly brave people surviving on such little, and the job enabled me to learn from them each day.

    1. Hi Mindy, thanks for sharing – I really wanted to hear other perspectives. I can understand hating the job that paid more and i’m so glad you found your happiness working with refugees – that sounds so rewarding and humbling.

  2. Nice post & i feel i share v similar sentiments. I think also there is something about being slightly more selfish with your time as you get older, so you tend to do less things that are not interesting for one.

    If you’ve not seen it, the documentary film “Happy” is v much worth a watch.

    1. Hi LCIL – I agree, as we get older we are much more defensive with our time. I think I might have seen that film, it looks very familiar – thanks for sharing.

  3. I was happiest as a school kid, and even in college. I only did exactly what I wanted to do. I didn’t worry about consequences, and was sure (don’t ask me why) that my life was going to turn out great.

    And then, I met my husband when I was 18, and he is too practical, and just can’t dream. Over then next 5-10 years, he convinced me that life wouldn’t be happy just because I thought it was going to be. On an average, we are perfect – a right balance between reality and fantasy. And knowing each other for about 20 years has brought us both closer to that average.

    But for me, it made me aware of the reality. And the responsibilities and the uncertainties. That inversely correlates with my happiness… But our money has grown like yours.

    And all I want in life is to be able to do everything I want to. And that means jumping from one thing to another every few months/years. I will be out of this in five more years. I am sure that five years will be quick, but it doesn’t feel like that right now.

    1. Thanks for sharing BusyMom – I love that you had such a fun and happy childhood, that’s ace. And your enthusiasm that life would be great is amazing.

      Your husband sounds like the perfect match for you, such a great balance and perfect team.

      I feel you on wanting to do everything and jumping from one thing to another – that’s me too!

  4. For me I’m happier with money but it’s not the act of having more money. Instead it’s the removal of fear of running out of it. Money is an enabler to confidence for me. The removal of worry of what I’d do if I lost my job.

  5. I think there’s a base level of security that Money – or wealth – that will add to your happiness because it removes the stress of not having enough. But being content is something that really seems to live outside of money.

    1. Hi Angela, love that concept of base level of security – it really is that safety net that helps us feel secure.

      And yes, contentment is definitely outside of money and the capitalist system itself.

  6. Money is not the source of happiness but when you start optimizing your life and making value based decisions you’re level of happiness and fulfillment should correlate. I know that when I really started focusing on my finances I also started focusing on my time as well and only spending time and money on things that bring me joy and value.

    1. Thanks LLLU – I love the way you put that, that value-based decisions should allow correlation. And that concentrating on adding to joy to life is something I can support.

  7. People’s relationship with money and emotions and motivations fascinates me. In particular how hard it is for us to separate what truly gives us lasting happiness vs medicating or filling a void.

    Your graph of happiness correlating with increased income did get a raised eyebrow from me. Usually it’s painstakingly shown that happiness drops off at a certain point. It made me curious when yours didn’t. But you’re right, I think it’s the mindset of abundance that has increased happiness and income. I’ve found that mind shift powerful. It’s taken me from a place of fear and protecting what I have so I don’t lose it to knowing if something isn’t the right fit, I wait until the right opportunity comes along.

    1. Hi Whymances, I agree it is really fascinating and so very individual. And that’s a good point – how do you check your happiness is long lasting not temporary?

      I’m sure I’m due a happiness plateau at some point – just like the market crash, I’m sure it will happen, but no idea when it will arrive.

      1. I think happiness itself is fleeting. In that I mean succeeding at a challenge or pursuit or reaching a goal, the happiness isn’t permanent. It eventually becomes the new norm and you want another challenge. I like Tawcan’s post on deciding to see the everyday joy in life. You could say it’s a play on words but happiness seems more like an emotion to me where joy is a state.

        1. That’s an interesting perspective – if I may paraphrase, that happiness is derived from the completion of something and from achievement. Agree it’s the definition of happiness we are really thinking about here – what is happy? I loved Tawcan’s post as well :).

  8. The correlation is not so straight forward with me.

    Of course, having money is better than not having money – of course, I’m happier debt free than when I was ridden with credit card debt but even then, I can’t say that I was really unhappy – I just couldn’t do what I wanted to do, but I accepted it.

    I continue to infuriate my Mum by being satisfied with having ‘enough’ money, hence I’ve never chased after the higher paid jobs, having always valued job satisfaction over money earned.

    Of course, who doesn’t want to earn more money (or win the lottery) but I don’t know that having a lot of it would make me any happier.

    The times when I’ve been the happiest in my life?

    Two periods come to mind – 1) when I was 10 years old and I loved my school and friends and was blissfully unaware of the teenaged angst to come; 2) when I was 20 at uni, surrounded by my friends, with freedom and independence, blissfully unaware of adult responsibilities!

    When I FIRE, I’d like to aim for a version of 2), except that I’ll have the adult responsibilities part sorted out!

    1. Hell yeah, I fancy a slightly more grown-up version of student times when I FIRE too! It sounds awesome! And is it bad that I am already researching where the middle-aged backpackers hang out?

      I like your point a lot, I think there is a vast segment of the population that doesn’t think about money when they consider happiness. Either they have enough or they really don’t care and are oblivious to their financial challenges and are not concerned.

      And lots of people seem to be happier when younger I am finding it so interesting to see the vast variety of responses.

  9. I don’t really know if having more money has made me happier by itself. Probably., in a way I think it has helped me to calm the f* down, as there was a time when I struggled to sleep because I was so stressed about the prospect of financial ruin if I lost my job amidst the 2008 financial crisis. I wasn’t unhappy per se, I was just really stressed. I’m not stressed now, and a job loss would not result in immediate financial ruin, so now I have more headspace to ponder the meaning of it all, and whether or now I am / should be an island 😉 I wouldn’t call this a happy pursuit in absolute, but it’s certainly more leisurely than worrying about money 😀

    1. Wow, it sounds like the crisis hit you hard in 2008 – I was oblivious and working a mediocre job, but reasonably happy.

      And it sounds like you are having enough financial resources to get to the self-actualising stage. And getting into the meaning of it all? That’s priceless.

What do you think?