Opinions vary about relationship between happiness and money

By DAVID MOON, Moon Capital Management, LLC
January 2, 2011

Most people pay lip service to the notion that money and happiness aren’t related, yet for the past week everyone has been wishing each other a “happy and prosperous New Year.”

We might not want to admit it, but deep down most of us would like to agree with the sentiment expressed by writer Beatrice Kaufman in 1937: “I’ve been rich and I’ve been poor. Rich is better.”

Of course, it’s difficult to admit to that bit of monetary theology – either in private or in public – because for some of us, some of our earliest childhood memories include lessons about camels trying to pass through the eyes of needles and the love of money being the root of all kinds of evil.

Some studies conclude that money and happiness are generally unrelated. Others determine that money has a direct impact on happiness up to a minimum level of income or wealth, after which the correlation diminishes. Another group of studies finds that the relationship is consistent across all income levels, but is logarithmic, not linear.

Lies, damn lies and statistics.

Here are my observations about money. They aren’t from a statistical analysis, but from thousands of professional observations and an almost half-century-long relationship with the stuff.

Despite the old saying, money doesn’t change people, especially if it is earned money. Significant money that is received absent the required effort or investment to produce that money can impact a person negatively, however.

If a person creates his own wealth, the receipt of the money will have no negative impact on his life, even if the wealth is significant. That money will simply amplify who he already is. If he is a jerk, more money will allow him to be a bigger jerk. If he’s a giving, thoughtful person, wealth will simply amplify that, as well.

I like money, for a couple of reasons. For one thing, it keeps me from being poor. I’ve been poor and, like Beatrice Kaufman, I don’t care for it. Was I unhappy the times in my life I lived in a trailer? Yes, but I’m not sure if that was because I lived in the trailer or not.

But I sure prefer living in a house that doesn’t shake when the washer is running.

Money is also a great way to keep score, if you like that sort of thing. If you’re going to compete, however, let your opponent be yourself, not your neighbor. One sure-fire monetary path to unhappiness is to measure your economic well-being against that of the Joneses. That is a game that you cannot win. Someone will always have more money, a nicer house or a bigger jet.

I’ve always wondered if maybe the causal relationship isn’t the other way around. That is, maybe happier people are more likely to earn more, or are less likely to fritter their money away on foolish things.

After all, we don’t say, “Have a prosperous and happy New Year.” We say the “happy” part first.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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