Does Money Make You Happy?

The Jared Dillian Letter | November 13, 2019

This question hits at the crux of what we’re doing here at Jared Dillian Money.

The short answer is: Yes, money makes you happy. No doubt about it.

Money can buy you a place to live. It can buy you a car, physical comforts, and a lot of fun stuff. Perhaps most important, money can buy you security and peace of mind.

I’ve never understood people who say money is the root of all evil. Money is the root of all good. And it’s healthy to want more of it.

But You Should Aim to Get Rich Slowly

Advocating to get rich slowly isn’t what people want to hear, but when the desire for money gets out of control, it’s usually because people want too much too soon.

Look at Jordan Belfort, the Wolf of Wall Street. Belfort was a smart guy. If he had started a brokerage firm the right way, he could have been a billionaire.

But he was in a hurry. He took huge, illegal shortcuts. If he’d gone about it the right way—the slow way—everything could have been fine.

Happiness isn’t just about the actual money, though. Working for money makes people happier than if it just lands in their laps. Personally, I like working for money and all the stuff it affords me. I also like giving money away. It’s nice to be able to tip $20 when I buy a coffee at Dunkin' Donuts.

Happiness Is Moving the Goalposts

I didn’t make a ton of money when I first worked on Wall Street. Starting out, I did something called index arbitrage. I made around $135,000 my first year—good money, but nothing huge for Wall Street, where seven-figure salaries are not uncommon. But I saved absolutely everything.

My goal was to build up $2 million. When I got there, I was going to retire and live off the interest.

At the time interest rates were about 6%. So I figured $2 million could give me $120,000 a year to live off of, and I would just sit around not doing much. This was a ludicrous idea. Insane.

Here’s why:

• $120,000 would not have funded the lifestyle I wanted.
• 6% interest rates have disappeared.
• Sitting around doing nothing is not a good goal. Especially for a 28- or 29-year-old. Sure, I imagined I would write novels or something like that, but that was nonsense.

So, when I got to $2 million, I moved the goalposts. And today I’m thinking about moving them again. Is this greed? Not at all. Working towards a goal is the whole point. That’s the part that makes people happy.

W.A.S.H.

The moral of the story here is that you should have an ever-moving money goal.

Let’s say there’s a $600,000 house you want to live in, so you need to come up with around $150,000–$200,000 for a down payment. When you reach your goal and buy the house, you should… set another goal!

Because happiness doesn’t come when you’re “done.” It comes from chasing your goal. So you have to set another one.

By the way, psychology backs me up on this. There’s this thing called the satisfaction treadmill, coined by Daniel Kahneman, which basically runs like this:

• You achieve your goal and feel happy.
• This soon becomes “the new normal.”
• Your aspiration level shifts upward and you need to metaphorically start running again in order to feel happy again.

Kind of like my cats! The cats (all 5 of them) play with toys, but they’re most happy when they’re chasing the toys. Because the pursuit of money is part of what makes people happy.

I have a t-shirt that says work, achievement, self-esteem, and happiness on it. It doesn’t fit as well as it used to, but I still wear it.

W – Work
A – Achievement
S – Self Esteem
H – Happiness

There’s no ‘M’ in WASH, but if you do WASH, you’re going to get money.

Jared Dillian