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Spending and Saving for Happiness
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Spending and Saving for Happiness

Many assume that building wealth alone will create greater contentment—but social science shows that how we use our money is the key to lasting joy and satisfaction.

Illustrations by Olivia Fields

S ix years ago, Imani Day was living the dream. Or so she thought. An architect in New York City, Day was working for some of the most prestigious firms in her industry, learning from a series of brilliant designers, and building a résumé that would help her climb the career ladder and make a lucrative living. But there was just one problem.

“I was absolutely miserable,” Day says.

Many people believe that increased wealth will invariably bring them happiness—that just a few more digits in one’s paycheck or bank account will act as a one-way ticket to deeper joy and lasting contentment. I wanna be rich, go the lyrics from a chart-topping 1980s pop song. For a little love, peace, and happiness.

However, social science suggests that this expectation is misguided. Researchers studying human happiness consistently have found that other factors—namely, relationships, our faith, and our sense of purpose—are far more important for our sense of well-being.

As for the role of money? That’s more nuanced. By itself, studies show, increased income has a real but limited and diminishing impact on how happy we feel. After a certain level of prosperity, in fact, just having more cash doesn’t seem to make us any happier.

Instead, what matters is how that money facilitates the parts of our lives that are more likely to produce happiness. While wealth in a vacuum can’t buy satisfaction, purposeful spending, saving, and investing can build and strengthen the foundations of a life well-lived—enabling and empowering us to pursue and find happiness as we each define it.

“People who have more money are generally happier than those who do not—but money just doesn’t make as much of a difference for happiness as people assume,” says Elizabeth Dunn, a professor of social psychology at the University of British Columbia who studies happiness and co-authored the book Happy Money: The Science of Happier Spending. “So my research focuses on what people are doing with that money. How are they spending, saving, using money as a tool? That is what it’s all about.”

When it comes to happiness, money matters. Social scientists such as Dunn long have understood that having too little can make people unhappy, and many studies have linked poverty to higher levels of misery.

Similarly, high levels of debt seem to be especially harmful to how we feel—emotionally and physically. One recent study that tracked almost 8,000 American adults for more than a decade found that those who carried consistently high levels of unsecured debt, largely via credit cards, were 76 percent more likely to have joint pain or stiffness that interfered with their daily life than people who did not.

Dunn says that a study conducted by Happy Money, where she serves as Chief Science Officer, found that people with no credit card debt reported 40 percent less financial stress than those who had a “revolving door” of it. “Debt is a real drag for people’s happiness,” she says. “We even see that with married couples. The ones with more debt have more conflicts, not just about money but pretty much everything, from in-laws to intimacy.”

Brandy Mickens, a Cleveland-based Executive Vice President, Mid America Branch with Equitable Advisors, has seen debt cause comparable stress for some of her clients. “One of the biggest things about debt is that it prevents people from doing the things that they want to do,” she says. “Buying a house, saving money for their kids for college, saving for retirement—they feel like they can’t do that, because the debt is holding them back.”

Once people have enough money to not stress about lacking it, however, the relationship between wealth and well-being changes. On average, wealthier people tend to be happier. But just how much happier is less than you might assume. In a famous 2010 study, Princeton University researchers found that the closer people’s annual income was to $75,000, the less unhappy they felt on a daily basis. But once their incomes exceeded that benchmark, their sense of daily well-being didn’t substantially increase. (A more recent study found a comparable happiness plateau at an annual income of roughly $100,000).

Some of this likely stems from what psychologists call the “hedonic treadmill,” the idea that while our individual levels of happiness rise and fall in response to life events, they tend to move back to a baseline level. Beyond that, there’s a simple explanation: money doesn’t guarantee happiness. Not when other life factors are far more significant.

The Elements of Happiness

What makes people truly happy? While every individual is unique, social scientists have identified three key elements that are fundamental to our well-being:

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One
Family and Friendship

Whether it’s close friends, children, spouses, or extended family, nothing has a more positive effect on our long-term life satisfaction than healthy, loving relationships. A 75-year study that followed a group of college graduates into their 90s—looking at all aspects of their lives including health, wealth, and career success—concluded that “Happiness is love. Full stop.”

Two
Faith in Something Bigger Than Ourselves

Studies have shown that actively religious people are more likely to be happy—and less likely to suffer depression—than people who are not believers. In 2015, European researchers surveyed 9,000 adults and found that participating in a religious organization was more beneficial to “sustained happiness” than volunteering, taking classes, or playing sports.

Three
Serving a Purpose—And Others

In 2013, researchers studying how more 250 American metropolitan areas responded to the Great Recession found that the communities that most vigorously pulled together by volunteering and helping their neighbors out were happier than those where people did less for each other. This wasn’t surprising. Many studies have fund that both helping those in need and having a sense of purpose in life are associated with increased happiness—in fact, imaging has shown that giving to other people activates the same parts of the brain that are stimulated by food and sex.

D ay, the architect, experienced this firsthand. For most of her life, she fretted about money—not because she grew up without it, but because she lacked financial understanding. “I always felt I never had enough,” she says. “I was a person who would stare at a phone bill from across the room and feel anxious, and literally not even open it.”

Day didn’t become an architect to become rich. She entered the field because she felt a creative passion for it. The more she worked, however, the more money she earned. “I never thought I would have money to manage,” she says. “Suddenly, I realized I needed to be more intentional about managing whatever money I did have.”

Only that realization didn’t boost Day’s sense of well-being. Often working long days that could last 18 hours or more, she didn’t have time to enjoy her money—or have any kind of life outside of her job. In 2015, she moved to Detroit, seeking a better work-life balance and more socially impactful projects in a city with a majority Black population. “The pace of life was different, and my mental and general health improved quite a bit,” Day says.

Happiness remained elusive. Working at a new firm, Day continued to thrive, winning business and clients. But she was trying to align her sense of purpose with her work, her desire to do good in the surrounding community with climbing the corporate ladder. As a Black woman in a profession with very few people who look like her—just 2 percent of registered architects in the United States are Black—Day didn’t always feel like she could bring her full self to her job. Entrepreneurial by nature, she longed to go into business for herself—the better to work on the kinds of small business and neighborhood development projects she most cared about, especially those serving communities of color.

All the while, Day continued to build wealth. Problem was, she wasn’t sure what to do with it. “For years, I let anxiety drive my relationship with money,” she says. “And I didn’t realize how crippling and detrimental financial illiteracy could be.”

When Dunn was a graduate student researching happiness, wealth was hardly at the top of her mind. “I made no money whatsoever,” she says with a laugh. “Just enough to survive.”

That changed when Dunn landed a full-time faculty job—and started earning what she calls a “normal, median, grown-up salary. I was like, ‘Oh my God, this is so much money.’”

Like any curious professor, Dunn turned to the academic literature for guidance, assuming existing happiness research would offer clues about how she should spend her newfound wealth. “There was almost nothing,” she says. “So much of what had been studied was on how much money you had, and so little of it was on what people were actually doing with that money.”

Dunn has since worked to fill that knowledge gap. Along with other researchers, she has discovered that the ways individuals use money can have a significant impact on their happiness.

Investing in Happiness

Looking to use your money in ways that are most likely to increase your emotional well-being? These five areas can provide the greatest happiness returns:

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One
Invest in Experiences
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Invest in Experiences

Cars, jewelry, clothing, gadgets—all of these things can make you happy, particularly at the moment of purchase. However, there’s a catch: researchers have found that the happiness produced by acquiring material things decreases over time. By contrast, the satisfaction associated with experiential purchases—like vacationing with a spouse or attending a sporting event with friends—increases as time moves forward, in part because we seldom do things alone.

“It’s a pretty robust finding in the research,” says Elizabeth Dunn, a professor of social psychology at the University of British Columbia who studies happiness and co-authored the book Happy Money: The Science of Happier Spending. “Going to a concert, taking a trip, any unique experience that is very special can make us feel more connected to people we love.

“At this moment in time, as people are coming out of having empty calendars, many of us have felt quite starved for enjoyable experiences. Even if you’re not quite ready for it, now is the time to start planning a future trip.”

Two
Buy More Time For What You Love Most
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Buy More Time For What You Love Most

An old saying holds that time is money—yet when people have money to spend, they seldom think about purchasing themselves more free time. That’s an oversight. Studies have found that people who save travel time by buying more expensive grocers from a closer grocery store have higher life satisfaction than those who don’t; that employees who are allowed to schedule their own office start and stop times are happier than whose who aren’t; and that people who bought their way out of cleaning, cooking, and other household tasks were happier, regardless of income level.

In one experiment conducted by happiness researcher Elizabeth Dunn, people were given $40 on one weekend to spend on a time-saving purchase, like a home cleaning service. The next weekend, they were given $40 to spend on things, like new clothes. When asked how happy they felt after each, spending money on time left people in a better mood.

“Our happiness is about what we do with the days and minutes of our lives,” says Dunn. “And we see that people who prioritize time over money are happier than those who prioritize money over time.

“Why does this work? It’s a very common experience to be so rushed and busy that you don’t have time to do the things you like, or have the mental bandwidth to really appreciate them. Buying time creates space for the things that you really love to do.”

Three
Invest in Other People
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Invest in Other People

Study after study shows that altruism produces happiness—in fact, we gain a greater sense of well-being from investing our money into friends, family, and charitable causes than from spending it on ourselves. Remarkably, this finding holds across countries—in a survey of people in more than 130 nations, donating to charity in the past month was one of the top six predictors of life satisfaction—and income levels. In imaging studies, charitable donations even appear to activate reward centers within the human brain.

To get the greatest benefit out of giving, says happiness researcher Elizabeth Dunn, it is important to do it freely—not out of a sense of moral obligation, but out of feelings of generosity and joy. “That’s perhaps especially relevant now,” she says. “Charitable donations have dropped significantly over the pandemic. It’s a great time to give back.”

Jazmin Williams, a Charlotte-based Financial Professional with Equitable Advisors, often helps her clients incorporate giving to others into their financial planning. Arranging for future gifts, she says, can produce happiness dividends as powerful as those that stem from giving in the here and now. “I have a lot of clients saving for their children’s college educations, or putting things in place to leave behind for their loved ones,” she says. “Putting money toward your family’s future creates a lot of happiness.”

Jazmin Williams offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN). Annuity and insurance products offered through Equitable Network, LLC.GE-3934614.1 (11/21)(Exp.11/23)

Four
Protect Yourself by Saving for Security
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Protect Yourself by Saving for Security

When Melissa and Gino Brogdon Jr. take time near the end of each year to plan their budget for the next, they have many things to consider. A married couple in their mid-30s who live in Atlanta, the Brodgons work together in a family-owned law firm, run a property management business, and recently co-founded a software startup that provides specialized workflow software to legal mediators. They also give to charity and volunteer in their community.

Before they allocate money for their various projects and interests—or for fun activities, like vacations—they always set aside money for three things: retirement savings, life insurance, and an emergency fund that covers 12 months of expenses.

“We really want the freedom to invest in experiences,” Melissa Brogdon says. “Traveling, going to concerts, things like that. But a part of having freedom is making sure those other boxes are checked. You never quite know what the future is going to look like, and that is a huge part of our planning on big financial decisions.”

Saving money can produce a sense of security—the knowledge that if the future brings unexpected challenges, you have the resources to meet them. In turn, feelings of financial security have been linked to greater happiness. In one study conducted by Happy Money, people who had just $400 in emergency savings reported higher levels of life satisfaction than people who didn’t.

“If things go off the rails in your life, [savings] helps prevent your happiness from going into free fall,” says happiness researcher Elizabeth Dunn, Chief Science Officer for Happy Money. “Think of [it] as a security blanket.”

Five
Make a Plan—And Forge a New Path
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Make a Plan—And Forge a New Path

Just as high levels of debt are associated with increased stress and unhappiness because they restrict one’s choices in life, high levels of self-efficacy—that is, control over your life—have been linked to greater happiness.

With careful planning and forethought, says Stephen Dunbar, an Atlanta-based Executive Vice President with Equitable Advisors, money can buy empowerment: the ability to follow a dream, pursue a passion, or simply say yes to what you want and no to what you don’t. During the pandemic, he says, he has seen many clients reevaluate what makes them happy in life—and adjust their financial planning to pursue it.

“Before the pandemic, it was almost like people felt self-indulgent using the word ‘happy,’ that doing so meant being naive like a little child,” Dunbar says. “But it’s good to orient your life around joy. What the pandemic did was make us confront mortality. When you have that sense that this could be my last day, you realize that if you’re going to do something, you’re going to do it now.

“I’ve had people tell me, ‘I no longer want to be a consultant or an investment banker—I want to be a teacher or a carpenter.’ Planning can give people the freedom to make those changes.”

Securities offered through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN). Investment advisory products and services offered through Equitable Advisors, LLC, an SEC-registered investment advisor. Annuity and insurance products offered through Equitable Network, LLC, which conducts business in CA as Equitable Network Insurance Agency of California, LLC. GE-3934614.1(11/21)(Exp.11/23)

Within these broadly-shared parameters, every individual defines happiness a bit differently—close family relationships may be especially joyful for one person, while purposeful work may bring the deepest satisfaction for another. Stephen Dunbar, an Atlanta-based Executive Vice President with Equitable Advisors, sees subtle but important differences between his clients when it comes to their relationships with money and happiness.

Some clients, Dunbar says, are spenders: “These are people who feel better at the end of a bad day when they go out and buy nice suit.” Others are savers. “They like seeing a big balance in their bank accounts,” he says. A third group prizes experiences. “Money lets them go on trips or to movies or plays with people they love,” he says.

A sound strategy for happiness, Dunbar says, is to think deeply about the things that bring you joy, satisfaction, and fulfillment. Once you’ve identified them, use your money to make them part of your life on a consistent basis. “In my job, I have to be careful about pigeonholing people when it comes to happiness,” he says. “A big part of it is slowing down to learn who people are and what makes them happy as individuals.

“If I had my dream with every client, it would be to help them craft the purpose for which they feel they exist—and then help them achieve that purpose.”

A fter moving to Detroit, Day increasingly found herself thinking about her purpose. She was happiest working with diverse and entrepreneurial clients and design partners—particularly people of color, who too often were both overlooked and underserved by an overwhelmingly white architecture industry.

“Part of what brings me the most joy is doing what I love for people and clients I feel really strongly about supporting,” Day says. “But a lot of firms are not built to do that type of work. You have to battle uphill and bootstrap it to make sure those clients are valued. There’s a gap in the architecture field that’s waiting to be filled.”

Day’s feelings only intensified during the pandemic, when she found herself working from home and juggling her day job at a local firm, freelance projects, and teaching college classes. The experience was taxing. But it also taught Day that she could manage her own time—and even be her own boss.

“I started exploring going into business for myself,” she says. “For me, there has always been a clear entrepreneurial focus. The question was, ‘will I do this within a large corporate culture? Or will I do it for myself and form my own ideal culture and environment?’”

Day wanted the latter. But she was hesitant—and anxious. Her longtime financial worries still ate at her. Without working at a large firm, would she be able to make a living? Afford health insurance? Pay taxes? Survive a personal emergency?

Day had long conversations with her financial professional. They crunched the numbers, mapping out a plan for her future. You’re in good shape, her financial professional told her. You have the ability to do what you want. There’s no reason to wait. Hearing that gave Day the confidence she needed—and last April, she went into business for herself by starting her own design firm, RVSN Studios.

“I knew that if I didn’t do it, I would wake up in 20 years and say to myself, ‘why didn’t you try?’” Day says. “‘Why didn’t you do something for yourself?’ Unless I was going to crush my dream down, there was only one choice. And to be able to do it and not feel like, ‘if I fail tomorrow, then I can’t eat,’ is an important aspect of feeling good.”

Half a year later, Day describes her life is “a rollercoaster.” Running a business can be stressful, she says, and there’s a lot she’s still “figuring out. For sure, it’s not all rainbows and daisies.” Still, Day is thriving. She is collaborating with clients she cares deeply about, like a Black-owned beauty brand based in Detroit that has expanded nationwide. She’s teaching remote classes for a historically Black university, and bringing her full identity to her work.

“Every one of my clients represents some anomaly in their industry,” Day says. “To be able to serve underrepresented and underserved communities as a Black female architect is fulfilling in itself.”

For years, just having money never made Day happy. But using that money in a meaningful way—to live and work on her own terms—has changed everything. “I feel a really different sense of energy in my life,” she says. “My actual purpose is now aligned with what I do. And I’m wildly happy and grateful because of it.”