HOW MUCH money do you really need to be happy? Would we all be happier if we were millionaires?

Would we be happy if we could afford that latest smartphone, that luxury trip to the Maldives, or perhaps buying that designer handbag?

Luckily there is a lot of research on the relation between happiness and wealth and it is much more positive than you may think!

For many of us, a certain increase, will obviously make us happier by improving our quality of life: better healthcare, housing, clothing, more leisure time and overseas trips. But that doesn’t require a million bucks.

Once we are “pretty well off” on these items, more money no longer increases our happiness as much.

A US study found that once a household income reaches US$75,000 (RM300,000), any additional income doesn’t increase your emotional wellbeing.

Due to the difference in spending power, that number is likely lower for Malaysia, even though many will still be far from it today.

To put it into context: a RM1,000 salary increase will make someone earning RM 5,000 much happier, while it would barely register for someone earning RM50,000.

The reason? Hedonic adaptation: the human tendency to get used to things that once made us happy. Whenever we do something often, be it driving a Ferrari, flying Business Class, eating fresh sushi, or wearing designer clothes, its ability to lift our spirits diminishes over time.

Even the excitement of becoming a millionaire will eventually wear off.

It will make you feel happy as long as it is new, but once the novelty is gone, you will return to your ‘happiness baseline’, it will become your norm and it will feel routine.

Foodies will certainly recognise this when their first taste of their perfect chocolate dessert is much better than their twentieth. Nothing compares to that first bite!

This means that in the short term, yes, people who suddenly become a millionaire will become happier. But after one, tow or five years down the road, they will return to their “normal” level of happiness.

For day to day happiness, astonishingly, your wealth matters very little.

Traffic and red lights don’t discriminate between an expensive and a lower priced car.

 Also people with and without money have worries about money: how to get it, how to keep it, how to grow it.

Did you know a shorter commute will make us as happy as a 40% salary increase? Similarly, a holiday paid by our boss will make us happier than if we would get the equivalent amount of cash.

Typically, more free time will make us happier than more money. Yet somehow, we always seem to choose money over the other pleasures in life.

 If you feel these trade-offs are wrong, it might be because, as a species, making forecasts about our own emotional wellbeing is a pretty new skill (from an evolutionary timescale), which means we are prone to make errors.

Yes, money can buy you happiness, but you need much less money to achieve happiness than you would think.

The positive thing you should take from this research is that you don’t need to be the next Marc Zuckerberg to become happier.

Much smaller – and hence more achievable – financial achievements will do most of the trick!

Mark Reijman is co-founder and managing director of http://www.comparehero.my/ dedicated to increasing financial literacy and to help you save time and money by comparing all credit cards, loans and broadband plans in Malaysia.

TAGS / KEYWORDS:
Economy , Investing

Source:
http://www.thestar.com.my/business/business-news/2016/11/06/happiness-is-not-as-expensive-as-you-think/