4 ways that money can make you happy

This guest blog was written by Chris Budd who wrote the original Financial Wellbeing Book, and also the Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.

Money holds an important role in all our lives. Whether it is enabling transactions, or providing security and peace of mind, we simply can’t avoid the fact that money and our wellbeing are inextricably linked.

This relationship, however, can be both positive and negative. Seeing money as a tool for joy can increase our long-term wellbeing. Go too far and see money as an objective, however, and this can actually make us less happy.

Here are four financial wellbeing tips for how to have a relationship with money that will help you to be happier, not just wealthier.

Tip 1: Understand what makes us all happy

There are things about wellbeing that are true of all of us. A hug with a loved one will make any of us feel happy.

Research tells us that there are two main sources of long-term wellbeing.

The first is the quality of our social relationships. Not the quantity – the quality. How are you using your money to foster those relationships that are important to you? This goes for how you spend your time as much as how you spend your money.

The second source of long-term wellbeing is having something purposeful in your life. This could take many forms. Perhaps it comes from doing something creative. Community is also a huge part of wellbeing, so perhaps it could be getting involved with supporting your children’s sporting activities. It might be being a parent – but this can be problematic as your children grow up, so having something in addition to this is a good idea.

Starting a business is another source of long-term wellbeing – but only if this is because you want to make a difference in the world. If your business objective is just to make money, then this is unlikely to have the same level of impact on your long-term wellbeing.

Tip 2: Look past the goal

Many people set themselves goals. This could be retiring at a certain age, achieving a promotion, selling a business, or a specific target.

Ask yourself this question: What happens once I achieve that goal?

Olympic swimmer Michael Phelps achieved his goal when he won eight medals at the 2004 Athens Olympics. Not long after, he faced mental health challenges, including anxiety and depression.

The problem with achieving a goal is that when you have achieved it, you need to find a new one. What will you do after you sell your business, receive that promotion, or retire?

Look back at the answers you gave to where purpose comes from in your life. What gives you long-term wellbeing in life, and how can you get more of it?

This might be something to discuss with your financial adviser. What is your financial plan going to allow you to do after you achieve your current goal?

Tip 3: Spend for joy

There is a lot of pressure, through advertising and social comparisons, to spend money. It’s worth taking time to think about your spending habits, and whether they are making you happy.

One tip is to slow down the buying process. When you put something in your Amazon basket, don’t click on the checkout button, but leave the item in the basket for a few days. Perhaps remove your credit and debit cards from your phone, which means you must get up and find the cards before you make the purchase.

Consider spending on experiences, rather than buying stuff. When you buy a present for a loved one, perhaps buy a ticket to a future concert or event which you can attend together. This ticks lots of wellbeing boxes, such as the joy from anticipation, and nurturing the quality of your social relationships.

Tip 4: Don’t look at your money

Money should be our servant. All too often, we realise that it has become our master.

The only prediction about investment markets that we absolutely know to be true is that they will go up and down. When our investments or pensions go up, we get a false sense of security. When they go down, we get a false sense of panic.

Having a better relationship with money, and having improved financial wellbeing, involves reducing the amount you think about money.

The best financial wellbeing involves having a financial plan. This means setting future objectives that will increase your wellbeing, not just your wealth – and then get on with enjoying your life!

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.