Raj Raghunathan attempts to unravel the relationship between money and happiness, whether both can go hand in hand, and how to manage it
Can money buy you happiness? Perhaps, to some degree, if you manage it well. On International Day of Happiness on Tuesday, Raj Raghunathan, professor of marketing (consumer behaviour) at University of Texas at Austin and author of If You’re So Smart Why Aren’t you Happy?’, attempts to unravel the relationship between money and happiness, whether both can go hand in hand, and how to manage it.
Money can make you happy to a certain point: It can (money can make you happy), but only up to a certain point (around $80,000 per household per year in the US; considerably less in India). After that point, it doesn’t buy you much happiness.
Money management is more important than quantum of wealth: Money management is very important, particularly if you don’t have enough to begin with, he said. One of the biggest sources of stress in the world is lack of sufficient financial resources and, in many cases, the reason for lack of financial resources is poor money management rather than lack of sufficient funds. A person in debt, particularly if she has had this debt for a long time and is struggling to pay it off, has a “scarcity mindset". Scarcity mindset promotes a set of thought processes and behaviours, including myopia and self-centredness, which are not conducive to being happy.
You can calculate the amount of money to lead a good life: It is difficult to zero in on the exact amount of money you would need to be happy, since one size doesn’t fit all. It really depends on many factors, including spending habit, desires, health and obligations. But that said, the amount of money one needs to lead a “good" life can—and should—be calculated. As a very general ballpark, I would say that, on average, it would be in the $100,000 range for a household (two adults and two children) in the US and about a third of that in India.
Three ways to manage money: There are strategies to manage money and bring happiness in your life. I would begin by keeping track of expenses over a longish period of time (certainly at least a year so that all the “one-time" expenses—like taxes—are included). That will give you a good idea of the main categories of expenses and how much you spend on each. Then, I would estimate how much money I would need to lead a lifestyle that I want to have in the future. (This desired lifestyle could be more expensive than the current one.) Finally, I could calculate how much I would need to save every month in order to have a big enough nest egg after retirement. These three exercises will give you a very good idea of: which expenses to cut, and how much to save every month.
Three ways to be happy: Money is very important. However, relationships are far more important. I would recommend making sure that you don’t sacrifice relationships for the sake of money—that’s a slippery slope that can very quickly get out of control. Another priority should be health, both physical and mental. Make sure you sleep well (at least seven hours a night), eat healthy (no processed foods, low amounts of simple carbs like sugar or white rice), and exercise for at least 30 minutes each day. Finally, maintain a gratitude journal, where you make a note of “3 good things" that happened each day. These need not be (and won’t be) “big" good things like finding a life-partner or getting promoted. But even keeping a note of three small good things—like “a stranger smiled at me today" or “I found 20 rupees on the road" will, over time, make you feel happier. If you do these three things on a consistent basis, I guarantee that you will be happier within a month.