My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, June 22, 2015

How Much Money Does it Take to Make You Happy?

Have you ever wondered if money brings you happiness? You are not alone in this thought. I find this topic fascinating and as such, I have written several blog posts on the relationship between money and happiness/success, including:

Last summer I was teamed up with a high-end money manager at a golf tournament. During the round my interest was piqued when he provided me with his thoughts and observations on wealth as it related to happiness and unhappiness.

His general observation was that “Money makes happy people happier and unhappy people even unhappier” (keep in mind, he deals with the wealthiest segment of the population).

It was his contention that people who are happy to start with, have the ability to receive pleasure through spending, sharing and giving. Happy people enjoy the material things they can purchase. They also can be generous to others and receive satisfaction seeing the benefits of their generosity. Overall, they receive pleasure observing the betterment of themselves, family, friends and the community.

Conversely, he opined that unhappy people, considered money to bring added stress and a burden that manifests itself into further unhappiness. He felt the cause of this unhappiness resulted from the worry that people judged them and there was often paranoia that people wanted access to their money. For the most part, he had observed that these people don’t get real pleasure from their money and don’t enjoy spending, giving and sharing.

While I appreciated his insights, I was concerned about the applicability of his findings given the wealth of the people in his sample and his limited sample size. This caused me to look for studies with more of a representation of the average population to determine if “happy people” were able to reach a certain level of happiness due to their financial success. This led me to a 2010 Princeton University Woodrow Wilson School study by Angus Deaton and Daniel Kahnemen.

Princeton Study

Deaton and Kahnemen analyzed the responses of more than 450,000 Americans to the Gallup-Healthways Well-Being Index. They found that “emotional well-being” (essentially your day to day contentment based on the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one’s life pleasant or unpleasant) and “life evaluation” (the thoughts that people have when they think about their life) are not necessarily correlated.

The authors found emotional well-being increases with income, but does not progress past $75,000 (or $90,000 Cdn :). However, more money boosts how you assess your life. As Mr. Deaton told Randolph Schmid of the Associated Press "Giving people more income beyond 75K is not going to do much for their daily mood ... but it is going to make them feel they have a better life."

Personally I wonder how all this translates regionally. Am I as happy with $75k if I live in Flin Flon as I am with $75,000 in Toronto? How about if all my friends make $300,000,does my life evaluation become so negative it impacts my happiness?

Anyways, if you believe in the findings of the Princeton study, the money manager’s view is essentially corroborated and at $75k, you’re bopping around the house singing “Happy” just like Pharrell Williams.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.