Imagine if your job was to think about, and study, what makes people happy. This job actually exists and it belongs to Dr. Elizabeth Dunn, an associate professor of psychology at the University of British Columbia in Vancouver, and co-author of Happy Money. Part of her job is running The Social Cognition and Emotion Lab and one of her areas of expertise is the role that money plays in hindering or augmenting happiness. I had the chance to catch up with Dr. Dunn in between her busy teaching and research positions.
I wanted to know about the top misconceptions we have about money. A truth we may have heard but most people find hard to live by, is that more money does not always enhance happiness or life satisfaction. Dr. Dunn agrees with others in her field that poverty is a major inhibitor of life satisfaction. If our basic needs aren’t met, certainly more money can enhance happiness.
However, once those more essentials of life are provided, the more money we acquire tends to have a waning impact on our happiness. She cites the work of other psychologists like Daniel Khaneman and Angus Deaton who, in a 2010 study, found that more money may cause us to view our lives in a more positive light, but it doesn’t make us happier. The curve starts out steep – the less money you have, the more impact money has on happiness. But as you acquire more, the curve flattens out, and money contributes less and less to our satisfaction. Dr. Dunn explains that as this flattening of the curve occurs, people tend to make poor decisions around money. An example would be taking a job that pays more, but that adds significant commute time. Psychologically, we may be compelled by the increased salary, but in reality, the extra income will be unlikely to enhance happiness.
So is there a magic number, the amount of money we need in order to be happy? Dr. Dunn says ‘to a point’. There is some data out there that shows that after $75,000 of annual household income, happiness tends to level off (that flattening of the curve discussed above). However, that number is based on national data, which doesn’t account for the vast difference in costs of living. $75,000 won’t go far in San Francisco, but it might be plenty somewhere else. She says the take-away from the data is that there is a certain point at which increasing income does very little to make us feel better about our lives.
Since acquiring more of it is unlikely to make us happier, what single change could we make around money that would impact our happiness? Spend more on others. It turns out, the money we shell out for ourselves brings less happiness than the satisfaction that comes with giving. Dr. Dunn points out that we tend to think of money in terms of our ability to afford the things we care about. To a point that’s true, but overall, spending money on others tends to be more satisfying.
On a national level, one of Dr. Dunn’s dreams is to see Canada’s ground-breaking law, known as A Group of Five (G5), become easier to utilize. First enacted in 1979, the law permits five citizens to sponsor a refugee by grouping together and pooling resources in order to help refugees start new lives. Dr. Dunn sees this policy as at the heart of what prosocial spending is all about. She’d like Canada, and other nations, to remove the barriers to putting this law into practice.
Yet spending on ourselves isn’t fruitless. Dr. Dunn suggests that there is a “psychological barrier to using money to buy” ourselves “out of things” we “don’t enjoy doing,” such as hiring someone to clean once a week so that we are free to have dinner with a friend or go the park with our kids. And yet, doing just that would allow us the freedom to spend more time with our children or engage in more rewarding activities. It turns out, experiences tend to bring more happiness than material purchases.
If there’s a theme to Dr. Dunn’s work – it might be the concept of costs versus benefits. Most aspects of our lives require some balance and give and take – money is no exception. And we should be cautious in the sacrifices we make in the name of earning more – it won’t always add up in the way we might hope or expect. On that note, next up for Dr. Dunn – taking a look at whether smart phone use increases inattention and other symptoms associated with ADHD. She’d like to know more about how technology helps – or hinders our happiness.
If you want an even more in-depth examination of how money impacts our well-being, read her fascinating book, Happy Money.
About this Contributor: Cassandra Powers received her Master’s in Nursing from The University of Southern Maine and her undergraduate degree from Brown University. She is certified as a Family Psychiatric Mental Health Nurse Practitioner and works in community mental health in Portland, Maine. She enjoys working with clients from a holistic perspective, helping others gain insight into the connection between physical and mental health. Cassandra was the editor of Yoga Wisdom and also writes about mental health issues; an article she co-authored, “The Will to Thrive”, was published in Issues in Mental Health Nursing. She enjoys living in Portland and its many opportunities to spend time outside.