Being Rich isn't as Great as it Seems
More Money, More Problems?
I'm not saying being rich is bad, having money is obviously necessary, you need it to survive; at least in western society. The more money you have, the happier you are right? Or is the old saying true: Too much of anything is bad? There's a theory in economics we like to call marginal utility. Basically, it measures how much more satisfaction someone gets with each increasing unit of something.
Let's say you love apples. If I give you one apple, you're utility (happiness level) goes up to 10. If I give you another, it goes up to 20. A third apple brings your utility up to 29, and a fourth brings it to 35. With every apple, your utility is still increasing, meaning you're getting happier, albeit by a smaller amount each time. Eventually, at apple 100, you reach a utility of let's say 50. You now have just as many apples as you want, any more and you won't know what to do with them. You can't eat them all, and you have nowhere to store them all. If I give you another apple, your utility may go down to 49 because you don't want it anymore.
Now you may be thinking, that will never happen with money! I'll just put whatever I don't need in the bank, or invest it or something. And it's true, you can do that, but is the money that's stored away really bringing you happiness? Is there a limit, or will more money always mean more happiness? if you have 5 billion dollars in your bank account, will having another hundred dollars make you happier? Even if you have another billion dollars, would that make you happier?
When Does Happiness Maximize in Terms Of Money?
Studies have shown that the average person only needs a yearly income of $75 000 to reach the amount of wealth needed to sustain happiness. Now you have to keep these things in mind for this figure:
- It's relative to the person. For some people it may be slightly higher, maybe even at around $100 000, whereas for others it would only be $50 000.
- This only refers to happiness in terms of money, ignoring all other factors that effect how "happy" you are.
- This is a long-term figure, if you're making $75 000 a year right now, and all of a sudden you win a lottery for a million dollars, you will be happier for a short period of time. Eventually though, you'll end up back at the same level if you're lucky, but usually you'll be worse off.
Wait, So Winning the Lottery Reduces your Happiness?
In the long-run, it almost always does. Say there's an Average Joe. He lives in a decent house, and can afford to eat out every once in a while. He drives your every day Honda Accord, and can afford to save up for things he really enjoys every now and then. Every summer he can afford a vacation of his choosing, and just last month he bought himself a 54" LCD TV that he'd been saving up for. When he finally gets to go on his vacation, he's thrilled an can't wait for it. He counts down the days as early as a month prior. He's also having a blast enjoying HD football games on his new TV and showing it off to his friends.
One day, he wins a lottery jackpot of $250 000! He's stoked, as anyone would be. That's like 3 times what he makes in a year! He doesn't know what to do with all this money, but let's see some of his options:
- He's going to be smart with his money. He'll add most of it to his savings, and use the rest to pay for his car insurance and mortgage payments. With the extra money he has left over every month, he can afford to buy better clothes, dine at more expensive places, maybe even spend more frivolously on things he doesn't really need like that really cool engraved silver lighter. Over-time this will become the norm, but he'll always want to go a step higher. He'll want to upgrade his car, buy more expensive clothes, dine at even better restaurants. Relative to where he was before, he still wants the same things technically, so he's still not "satisfied."
- He's going to give himself some much needed down-time and take a leave of absence from work. During this time he'll get to learn more about himself, see exotic things, and meet exciting people. He'll end up spending all the money he just won and feel like he's on top of the world. That is, until he gets back to work. Now that he's lived that carefree lifestyle, it's going to be harder to adjust back to his ordinary life. A 9 to 5 will all of a sudden doesn't cut it anymore, he can't sleep in and he's too tired to do anything when he gets back home. Even for his vacations, he has to settle for Florida instead of Australia or Tokyo. He has to think twice about buying something. If he likes two shirts, why can't he just buy them both? Being an Average Joe doesn't cut it for someone who has lived the life of a king.
What About Those who are Born Rich or Become Rich?
For those who have always been rich, more money doesn't mean anything to them anyways. They can already buy everything that they need or want. These people have different priorities. Also, the things that they can't buy with money will frustrate them more than the average person. If they get sick, it takes them just as long to heal. Sure they can afford better treatments, but to what extent? When reality hits though, they take it just as hard as anyone else.
They also have different goals to look forward to. An heir to a chain of hotels might not have to worry so much about college, since he's going to take over the family business anyway. But he has to maintain it's name and reputation. He has to run the business just as good as, if not better, than his parents. Even if someone is just living off royalties and doesn't really have to do work, they still need to find something meaningful to do with their lives. Without goals, they'll just be bored and may even get depressed. Rich people have higher tendencies for depression and substance abuse.
Those who become rich are probably the best off of anyone. They've lived the poor or average life, and so when they are met with wealth they know how to handle it wisely. Assuming they have a secure source of income for the future, they won't have to ever worry about going back to the average lifestyle. Like the person who wins the lottery, at first everything they buy will bring them utter joy. They can buy designer clothes, a brand new fully loaded Mercedes. They don't have a care in the world when it comes to money, but money comes with its own baggage. Will their friends treat them differently? Will their family depend on them more for aid? After a few years, will buying a brand new car still have the same excitement? The joy you get when you save up for a year and buy your first Corolla is probably ten times greater than the joy the rich persons spoiled child gets when he gets his 10th BMW.
Ultimately, happiness comes down to balance. Happiness is relative to you, your lifestyle, and your situation. No matter how much money you have, you won't ever be truly happy unless all the other factors in your life play out right. Unfortunately, the more money you have, the more chances there are that these other factors are out of your reach.