Money buys happiness if you know how to spend it
Is money the secret to joy? If so, how much do you need and what should you spend it on? Science has the answers, and they’ll surprise you.
While the science might not be able to confirm trusty proverbs like ‘What goes around comes around’ (don’t you wish it could, though?), it is challenging the adage ‘Money can’t buy happiness.’ Multiple studies show that wealth can offer both instant gratification and long-term satisfaction, provided it’s spent meaningfully. So, once all your basic needs are met and bills are paid, how much dough do you need to feel all warm and fuzzy? Here’s what the experts have to say.
1. Happiness hits a plateau at a certain point:
Imagine you get to eat as much chocolate as you like. You’ll wolf down the first bar, go easy on the second, and feel saturated by the third (we conducted this experiment recently, purely in the interest of science). Money follows the same pattern, according to a study by economist Angus Deaton and the psychologist Daniel Kahneman.
They found that happiness increases until a certain threshold and then holds steady; in some cases, it could even slide. In the US, this level is $75,000 per year, while in India, the magic number hovers around ₹10 lakh per annum.
It makes you think about wealth creation differently, doesn’t it? If money can only satisfy you up to a certain point, wouldn’t you rather spread your investments out to also cover those once-in-a-lifetime experiences? Set up funds for retirement and healthcare, but don’t forget to put something away for holidays and hobbies as well.
2. We’re happier when we spend on others:
So, how do you factor this titbit into your financial portfolio? It’s as easy as setting up a separate fund for your child’s education and saving up to care for your parents as they grow older. If you have a favourite charity, you could set up a short-term fund in order to make a significant donation at the end of the year. Have you been eyeing an expensive gift for a loved one? You could invest in a 3-month or 6-month fund to help save up. The Basis app offers customised investment portfolios for durations from 1 week onwards! Think of it as your very own digital piggy bank.
3. Spend according to your personality:
Does having money in the bank give you a quiet sense of satisfaction, or are you happiest when splurging on a rare experience? A combined study by Yale and the University of Cambridge found that we feel better when our spending patterns are in sync with our approach to life.
So, if financial security is your priority, focus on buying a house, investing in long-term funds and a PPF, while also saving up for retirement. If, on the other hand, you’re all for living in the moment, try short-term funds with high liquidity to bankroll your next spontaneous adventure. Whatever your goal, you’ll find it on the Basis app. The app can tailor a financial portfolio based on your specific goals, taking into consideration the duration and investment amount, as well as your risk appetite.
We’ve always either believed that more money brings more happiness, or that the two are perfect strangers. The truth lies somewhere in between; the best part is, with the right financial planning, happiness is absolutely achievable.
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