Can Money Buy Happiness?

It’s a quintessential question—Can money buy happiness? Google that phrase; all manner of research pops up. The answer may be, yes, no, or maybe!

The first role of money in your life is security. If you are not earning enough money to pay the rent, feed your family or yourself, if life is one constant rat race where there is “too much month at the end of the money” (as my mother once declared), of course, you will feel happier if you get a raise or see more money coming in. But if a person has poor money habits such as overspending with too much debt, they are likely to dig a deeper and stress-filled hole.

Raised by my grandparents until age 10, I learned much from my grandfather who was of Scottish ancestry and, by nature, careful with money. He paid cash and bought things only when he had the money. I recall great rejoicing when the mortgage was paid off. He worked all of his career with the Borden Milk Company in New York City and was a regular saver. He contributed to his church and helped relatives in difficulty. He raised my brother and I while my mother struggled and my stepfather was in the Pacific during WW II, and he supported their efforts to get situated after the war. It seemed to me that generosity and service to others made Clyde and Charlotte Rea happy.

Does your money run your life, or does your life run your money? Young people burdened by college debt are learning that too much debt does not make one happy. Set up a plan to pay off expensive debt first with a timetable to eliminate consumer debt as soon as possible. A fixed-rate mortgage is a prudent use of OPM (other people’s money), but resolve to be debt free by your targeted retirement age. The cash flow impact of having no mortgage payment while turning on Social Security at your full retirement age (FRA) is equivalent to the cash flow derived from a little over $1 million in savings. Do the math. “That ain’t nothin!”

Resolve to create a Freedom Fund—a minimum of one year’s living expenses in a money market fund as a foundational financial strategy. That provides peace of mind (fundamental to happiness) in case of a job reverse, illness, or other setback. A certain measure of liquidity, i.e., quickly accessible funds, is key to a secure base.

Having your living and testamentary estate in order is important to security. Wills, trusts, powers of attorney for assets and health care, along with adequate life, health, disability, property and casualty, and liability insurance are components of a well-thought-out plan. Business owners and key persons should have a contingency and succession plan relative to business interests that are components of wealth. A plan to handle long-term care expenses is important to “making the money last” in retirement.

Serving others made my grandparents happy. Research shows that giving money away, helping others, makes people happy. As people retire, the search for meaning becomes significant. Say you are completely retired. It is 10 a.m. on Wednesday morning. What are you going to do today?

Financial freedom in retirement allows you to serve, not just with financial support, but with time and talent. All manner of community and religious outreach efforts are supported by personal generosity. There are numerous ways that financial resources can be directed to sustain worthy causes in a tax-efficient manner. People do not mind paying taxes, but often they are unhappy with the way tax dollars are spent. Saving on taxes while doing good in a directed manner makes people happy!

Research shows that experiences make people happy compared to possessions. Too many material goods can weigh one down. As a financial advisor, I have seen clients glow with happiness as they recall trips with family and grandchildren, a mission trip that they took along with a son our daughter, or some other enriching activity. Experiences linger long in one’s memory, far outlasting the momentary pleasure of a new toy.

“What is the money for?” Your answer to that question has much to do with your “happiness quotient.” Mahatma Gandhi listed “Seven Deadly Sins” that revolve around money and the pursuit of wealth and power: “Wealth without work, Pleasure without conscience, Science without humanity, Knowledge without character, Politics without principle, Commerce without morality, Worship without sacrifice.” Amen to that!

Lewis Walker is President of Walker Capital Management, LLC. Certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with Walker Capital Management, LLC. lewisw@theinvestmentcoach.com