It isn’t how much you earn that makes you rich, it’s how much you keep—your net worth. And it isn’t how much you are worth that makes you happy, it’s what you spend it on.
Charles Dickens’s fabled Ebenezer Scrooge embodied this truth. He was very wealthy, no doubt in part because of his frugality. He didn’t spend money socializing, going to plays, or entertaining. He ate the diet of the poorest in society, lived in a cold and draughty house, and barely had enough light to see by. If Scrooge were living today, he would most certainly eat stale cereal and generic macaroni and cheese, keep the thermostat at 64, and only buy 40-watt light bulbs.
Yet Scrooge was not a happy man. Dickens described him as “Hard and sharp as flint, . . . solitary as an oyster,” and said he “carried his own low temperature always about with him.” While he understood how to save, saving money didn’t make him very happy. And if we can believe modern research, we might conclude one of the reasons he was so miserable is because he didn’t have a clue how to spend.
Before all you spenders start rejoicing, let me be clear. Spending in itself does not beget happiness. Spending money on the wrong things can bring much unhappiness and suffering into one’s life. It is spending money on the right things that brings happiness.
Certainly, defining “the right things” is somewhat subjective. Research tells us, however, there are a few things in life that are almost guaranteed to increase happiness or well-being. Spending money on a healthy diet, adequate shelter, clean clothing, good medical care, and reliable transportation is sure to increase happiness. We also know that spending money on experiences rather than things—a family vacation, say, rather than a new bedroom set—will increase happiness.
Some new research has found something else to add to the list of “right things” we can spend our money on that will significantly increase happiness. According to an article published June 4, 2014, at PsyBlog.com, researchers at the Universities of Manchester and Warwick found that therapy was 32 times as cost effective as money in making you happier.
The researchers compared people who had spent money on psychotherapy to those who had experienced large increases in income. They found that the increase in happiness for someone who spent $1,300 on therapy was equivalent to the increase in happiness for someone whose income grew by $42,000 a year. The researchers concluded that the importance of money in improving our well-being and giving us greater happiness is vastly over-valued.
While this is great news for therapists, who incidentally are among the lowest-paid professionals, don’t expect to see long queues in front of their offices anytime soon. While most people will tell you they don’t believe having money will make one happy, most simply don’t really believe it. If you need proof, just ask the next ten people you meet which they would choose: spending $1,300 for therapy or getting a $21,000 raise (the equivalent of half the happiness value of the therapy).
If spending money on standard psychotherapy is 32 times as cost-effective as money, is the impact of financial therapy significantly more? The field is new, so for now we just don’t know.
Too bad we can’t all be like Scrooge, who, true to his frugal nature, had the best of both worlds. The therapeutic intervention of Marley and the Ghosts of Christmas Past, Present, and Future transformed Scrooge into a very happy man. And it didn’t cost him a cent.