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Can Money Buy Happiness? with Melissa Leong

Presented by Borrowell

Welcome to The MapleMoney Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of MapleMoney, where I’ve been writing about all things related to personal finance since 2009.

You’ve heard the saying, “money can’t buy happiness”. Is it really true? This week, my guest Melissa Leong breaks down the relationship between money and happiness. Melissa is the finance expert on The Social, on CTV, and author of the new book, Happy Go Money.

She explains why we love buying things, and whether it’s possible to flip that thrill away from shopping, towards saving and debt repayment. We discuss how dealing with pain and stress in life can impact our ability to make long term financial decisions.

Are the wealthiest people you know, the happiest? Maybe not. Melissa shares how research points towards there being an optimal income as it relates to our level of happiness. As our incomes move higher, our happiness can actually decrease.

Did you know that having a good credit score can help you get better rates on your mortgage, insurance and personal loans? Our sponsor, Borrowell, will supply you with a free credit score, report and more, so you can see where you stand. Head over to Borrowell to get your free credit score today.

Episode Summary

  • Looking at the relationship between money and happiness.
  • How your income level impacts your overall happiness.
  • How can you use money to buy happiness?
  • What is hedonic adaptation, and how does it make us feel?
  • The effects of shopping on your brain.
  • For some, shopping is simply an attempt to mitigate emotional pain.
  • Melissa weighs in on the time vs. money argument.
  • Excessive levels of debt will steal your happiness.
Read transcript

You’ve heard the saying before… money can’t buy happiness. But, is that true? Melissa Leong, the financial expert on The Social, and the author of the new book, Happy-Go-Money, breaks down the relationship between money and happiness including why we like buying things and how we can flip that thrill towards debt repayment. Plus, we cover the balance between time and money.

Welcome to The Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Did you know that having a good credit score will help you get better rates on your mortgage, insurance or personal loan, saving you a lot of money in the long run? Our sponsor, Borrowell, will supply you with a free credit score, report and a whole lot more. Visit Borrowell today at, maplemoney.com/borrowell. Now, let’s get to Melissa…

Tom: Hi Melissa, welcome to The Maple Money Show.

Melissa: Thank you so much for having me, Tom. Happy New Year.

Tom: Thank you. I wanted you on because your book just launched and it really reminded me of a topic I hear come up often; can money buy happiness? What’s the short answer on that one?

Melissa: You know what? The short answer is, yes. Yes, it can. The long answer is to a limit. You could probably maximize your happiness if you know how to spend it and how to manage the money properly. That’s the short and the slightly longer answer.

Tom: Ultimately, in this episode we’ll get into it but one of the things you mention in the book is the relationship between money and happiness. Can you explain how that works?

Melissa: Absolutely. Over the years scientists have trotted out tons and tons of research about happiness and money and the connection between the two. All of the research shows there is a connection between happiness and money. It’s just not as strong as you think it would be. The research shows that the more money you have, the more satisfied you are with life, and the happier you are on a day-to-day basis. Basically, how you’re feeling right now is your day-to-day basis of happiness and what we use to think of happiness. But more money equals more happiness—to a limit. Those limits, according to one study from Perdue University in 2018 say life satisfaction is $95,000 US. That’s pre-tax per single family household. And in the other study, day-to-day happiness is usually between $60,000 and $70,000 US. That’s according to various studies. Does that sound about right to you? What are your thoughts?

Tom: Yeah, I’d say so. Is that household-based or personal?

Melissa: That is a single family household. So, basically, you.

Tom: Exactly. That totally makes sense. When you have too little money you’re dealing with all sorts of unnecessary headaches like worrying about how to pay the bills, the mortgage. That’s got to be more stress than just not having to worry about that stuff. It’s not about being able to buy a huge house and pool and everything. At least that seems like an amount where things can be covered without stressing about it.

Melissa: That’s right. You have to be able to pay your bills and you don’t want to have to be worrying about how to feed your family and keep a roof over your head. The interesting thing about some of these studies was it showed once you reach those thresholds (and went over the threshold) your happiness actually started to decrease.

Tom: Do the studies try to guess why that is? Why is having too much money a problem?

Melissa: There isn’t empirical evidence that would really link why it would be a problem. But, obviously, people who are social scientists, behavioral physiologists and such just have theories. And some of those theories suggest once you take care of your basic needs and start focusing on material goods, comparing yourself to others and keeping up with the Jones’ doesn’t make people happier over the long-run. The other thing too is that more money is often associated with higher demands. Maybe more time at work or less time for leisure and family, so your relationships start to suffer. That’s definitely going to make you less happy.

Tom: That’s a good point. I’ve seen real estate agents where they’re working non-stop, basically. And yes, they may earn more money—granted you can be fulfilled by you work…

Melissa: Well, yes. But we’re not talking about that. We’re talking about the pursuit of happiness through wealth. If we’re talking about trying to get fulfillment through your career (through what you do) that’s a totally different thing. People who work themselves to the bone because they’re lost in the process can make you happier because there are a lot of studies that show when you’re in the zone— that, “I can’t remember if I’ve peed or eaten because I’m just so lost in my work…” That Zen moment is ideal because you want to be in the moment. It’s kind of like when your mind is wandering or you’re bored, you’re less happy when you’re doing that. But when you’re in the ‘groove’ and everything’s good—if you define work as feeling then it will bring you satisfaction. But we’re not talking about that. We are talking about dollars—trying to get dollars and thinking, “I’d be happier if I got a raise. I’d be happier if I got this dream home with the perfect island in my kitchen for entertaining…” The reason why I wrote the book was partly to explore that. Exploring how you, as a human being, use money to buy happiness.

Tom: I find myself doing that too. It doesn’t matter how much money I make or if I just got a raise or did something in my business, I do think of what comes next. What do I do next? I do see that being a little negative. It’s a motivator, but it’s negative.

Melissa: What you’ve just described is totally natural. I call it hedonic adaptation. Basically, the idea that whatever you have, you’ve just get used to it. You reach the next level of achievement where you say, “Okay, I make this much money now. Yay! But, I could be making more.” It’s as though you’ve totally forgotten all the chasing you’ve done before. When we talk about how much more money you need to be happier, there was a great study done by a Harvard researcher where he asked middle-income earns and high net-worth people in the UK to rate their happiness from one to ten. Take you for example, Tom. Rate your happiness from one to ten.

Tom: I’ll give myself a seven.

Melissa: Okay. Now think about how much money you have with your paycheck and how much money you have in the bank. How much more money do you need to be a perfect ten?

Tom: I have no idea. I don’t think I would ever rate myself a ten. It’s the idea of these constant goals. There is always more money you can make and save. It’s tough. I think I’d always be pushing for more. I don’t know if there is a point where I would stop.

Melissa: But this is the point. Just wait, we’re going to get there. When this researcher asked participants in the study everyone said two to three times the amount of money. So, if you had a million dollars in the bank, you wanted three million. If you had three million you wanted nine million, and so on. It’s to that point, like you just said, we’re always chasing more. Whatever we have isn’t really going to be enough because you get there and discover you could have more. That’s actually an impediment to our having a joyful life. You have to spend more time thinking about how and what you have now is freaking great but we don’t. We’re just obsessed with the next, the next, the next… That’s why all these people play the lottery because they think they’re going to win the jackpot and all their dreams will come true. Life will be perfect and they’ll never feel pain again. But what is the point of money? It’s just cool. If the point of the money is to make you happy, then is it actually going to do that? I have a lot of friends who are in the health industry and life-coaching. I’ll run into people who, when asked to identify their goal for their fitness plan say, “I want to build self-esteem.” So you have to think, if the ultimate goal is to build self-esteem, is diet and exercise going to deal with that? There are so many other things you can try to do to actually build self-esteem. It’s the same thing with happiness. If the end goal is to be happy, then is all of this working and trying to accumulate money really going to get to that end goal?

Tom: That’s a good point. My other confession to make is, I’m naturally a shopper. I fight it a lot just because I know better being in personal finance that I need to save money.

Melissa: It’s the balance—save money, spend money. You can’t just save it all. I don’t believe that’s going to be enough either.

Tom: I still do my fair share of shopping. What I’m wondering is, why do we love buying things so much? Is it an adrenaline rush? What’s really happening there that’s making people so excited to spend all of their money?

Melissa: I’m going to answer this from a scientific point of view. Based on my research, when you buy something you get a burst of endorphins, dopamine and all these wonderful hormones in your brain. You’re lighting up part of the brain that is associated with them. It feels good to actually buy it but the feeling is temporary because it dissipates. Then you need to fill the void some other way. Talking to a lot of physiologists, I’ve heard where people become shopping addicts because they’re compulsive. They’re doing it to mitigate pain because that “dumping” of endorphins is what they’re using to medicate stress, anxiety, and boredom in their life. That’s natural for people to do. Think about your last three, unplanned purchases, what triggered those purchases and how you felt about them. It’s just sort of, reflection. I’m a big promoter of planning in personal finance. It’s all about strategy and planning. But, if somebody has a lot of credit card debt because they are spending to fill a void and you’re going to hand them a budget and talk to them about setting limits, retirement goals, that person is shopping and spending often in times of pain. Psychologists and behavioural economists talk about the part of your brain that regulates long-term thinking, the part that figures out the repercussions of your actions long-term. For example, they think, “Should I buy this or will this mess up my child’s RESP plans?” That part actually shuts off. You can tell that person until you’re blue in the face, “No, retirement! Look at your budget!” That part of your brain is off. It’s just shut off. We don’t ever talk about that as financial coaches or advisors. There is a physiology component where you actually have to deal with pain and stress. If you reduce pain and stress in your life maybe you won’t… Maybe at this macro-level, look at your life in terms of finances fit into it.

Tom: If you’re shopping like that on credit it’s a terrible downward spiral because it’s just going to add more pain.

Melissa: Absolutely! You feel crappy about it and you go shopping more. I think sometimes people temporarily can get themselves out of it because it’s habit. You can fix a habit and get onto a new path but life happens. You get this “dump” of stress or someone gets sick in your life and you fall back on old patterns of how you dealt with trouble. That was a really heavy conversation.

Tom: No, it was great.

Melissa: We are supposed to be talking about happiness and money.

Tom: Even if you’re someone that is spending a lot and not doing it on credit… I found I had a problem like that back in my college days. I was not only going out like anyone else in college, I was also doing what I call, collecting. Now, I look at it as hoarding though. I had so many CDs, video games and comics. And, it was all under this idea of being a “collection.” Now I’m still stuck with a lot of it that I’d love to get rid of. But I think over-shopping like that is bringing me unhappiness because I’m burdened with all of this stuff. Half of it is sitting in boxes still.

Melissa: Right, I totally agree. Storage facilities in Canada are a huge business. I think they’re building the biggest facility in the world right now in Toronto. All of us are just jamming our stuff into these big, giant closets that we don’t even look at. Why are we doing that? There is a book—I can’t remember what it’s called, but it’s about garbage. There’s this stat that says when we die we’re going to need one grave but we’re going to need so many other plots for the hundreds of tons of garbage we have. As people, we collect all this crap but wonder what to do with it. There are studies that show higher materialism is associated with more happiness and lower quality of relationships, actually. I get it, we collect. It’s easier to quantify our success and worth by the square inch size of our TV and how much stuff we own. It’s harder to quantify saying, “You know what? Tom, is a great friend,” How do you quantify the worth of being a good dad? You can quantify the worth of being a good worker with a paycheck because it’s a number.

Tom: Exactly, it helps you keep score with everybody. Another thing I’d like to talk to you about right now is the idea that time is money. We had Miranda Marquit on a few episodes ago. She was talking about how she outsources cleaning and taxes and all these other things and I actually thought I was going to get some negative feedback on that show. I thought everyone was going to come out saying, “How can you come out telling us to spend money?” But actually, in her case, she’s running a business so time truly is money. If she can hire something out for $20 an hour and she makes $100 an hour it seems like obvious math there. In general though, what are your thoughts on the idea of hiring out things that free up your time, either to gain something or even to just lifestyle-wise?

Melissa: There is a part in my book where I talk about the things you can spend your money on to be happier, according to science. This is not just me thinking, “Oh, I think I’d be happier if I had a cleaning lady.” No. Science shows that people who have valued time over money in their lives just, generally, are happier people. It actually makes you happier. So, if you purposefully value time over money, it will give you a boost in happiness. We have to put a value on our time so I really appreciate you bringing that up. How that takes a form in my life is—my husband has made fun of me on many occasions that I’m super-cheap. I will wait in line at a festival for an hour. Well, maybe not an hour but at least 20 minutes, just to get a free Popsicle. And my husband says, “We will walk to the store and I will buy you a whole box of popsicles! That should put a value on your time.” It’s the same thing with work. I’m not going to kill myself to make a few bucks at work and wonder if that’s the best use of my time. For example, if I’m going to take this job where I’m going to make $300 this weekend, that’s excellent. But another way to flip that (if you think about it) would be by asking yourself if you would you spend $300 to buy a full day of time with your family? It’s kind of like flipping it around which is basically what I did. I quit my job at the National Post a few years ago when my son was born. I gave up my $65,000 a year salary. I had to pay back an $8,000 maternity leave top-up but I bought 2,600 more hours with my kid which I’ve never regretted. I feel like that was a good use of spending or giving up that money.

Tom: I agree. Between having a day job and my online business with this blog and podcast, I would work 60 and possibly up to 80 hours a week between those two things. I certainly made time for my family between work and doing the business in the evening. But I find now that I’m trying to cut that back as much as possible, looking at things I can possibly outsource. Business-wise there are all sorts of things I can have people do for me. I’m even looking at switching to a robo-advisor because I used to be excited by rebalancing my portfolio and everything but for half a percent I can get somebody to do that for me. I’m looking at everything like that.

Melissa: It’s your life. You make your own decisions and it’s not always about math. Somebody listening to you might say, “No, Tom! Keep your half a percent. That’s meaningful and with compounding interest over years and years that half percent is going to mean more to you than you realize…” Yes, sometimes the math says to pay off this balance because it has the highest interest rate. But personal finance is personal. Sometimes you’ve got to do, YOU. If it makes you way more motivated to pay down one debt before another debt because it will set you on fire to follow your goals, then do that. Do something that works for you. And if you find it’s a tedious task that makes you annoyed, then that’s the price you pay to buy yourself time. I know a lot of frugal people and they’re not necessarily willing to do that. But it’s your well-being.

Tom: You mentioned paying down debt. How does that work when it comes to happiness? I had a bit of debt after college and a wedding. I always like to see it paid down as fast as possible. It’s almost that same rush as shopping. Almost…

Melissa: That’s great.

Tom: Is that common? Can people find that same motivation if they can pay something off first— like the snowball effect? That can be very motivating compared to just going for the highest percentage, right?

Melissa: When I talk about reducing debt in terms of happiness people get really sceptical because they think I’m talking about them cutting back or not giving up something in order to pay down debt. But, when you take a step back, the debt actually sucks your happiness. Who do you know (that’s not really mindful) that has a lot of debt that doesn’t worry about it? People are just so burdened by it. There was a study that ranked 56 of life’s most stressful events like your spouse cheating on you or a period of homelessness, for example. And, getting into debt beyond means of repayment ranked higher than those. It was ranked at number five out of this huge list. Yes, it is freaking stressful. So, if you can tackle your debt and think about it in the sense that you’re going to get rid of this big “happiness assassin” that will give you good feelings, motivations, pride and confidence—all of which will help you along your happiness journey. Saving is a habit. Paying down debt should be a similar habit. It’s willpower. You have to build it with muscle. I get it when we talk about how to pay down debt and where to get this magical money from. It’s going to take a little sacrifice which is, unfortunately, something not joyful. But it can be joyful if it has meaning to you. For example, when we talked about things like time, where you were saying you value your time now, but before when you were working and trying to get your podcast going—it’s the same thing for trying to get to any kind of goal like paying down debt. Why don’t you sacrifice and put a time-limit on it just like your smart goals? What does “smart” stand for? It’s time-sensitive, achievable, measurable… Just think, “I’m going to pay down my debt and it’s going to take me a year and a half to get this $6,000 or whatever off my credit card. And what I’m going to do is take these steps…” Say my car lease is up. Can I give up a car and take public transit for just a short period of time to try to help out? Some people say, “Give up my car?” And I say, “Dudes, I have friends who went from two cars down to one to pay for fertility treatments because that was important to them. I have friends who had a goal to get their mortgage down and decided to rent out one of the rooms in their home to International students.” One of my really good friends just leaves her condo altogether and goes to her parents house when she rents it out on airbnb. There are things you can do. You don’t want to do them. But, if you can identify a specific reason for them; give a time period for them and very, very specific tasks that will get you motivated, I think that could give you a happier feeling.

Tom: I’d say so.

Melissa: It’s kind of like running a marathon. I don’t like it but you think, “Yeah, I’m training for the marathon.” Sometimes it sucks but you’re chasing that euphoria for when you’ve finished the marathon.

Tom: Yeah. Thanks for being on the show. Can you tell people where they can find and also tell us about your new book?

Melissa: Absolutely. My book is called, Happy-Go-Money. It is out now, published by ECW Press. It’s basically just about the pursuit of happiness through wealth but I do talk a little bit about savings, managing your money in a way to maximize the joy in your life. I’m most active on Instagram and I’m sometimes on Twitter. Find me @lisleong. And, if you need any further resources or want to find out anything else I’m at melissaleong.com. You can always send me an email.

Tom: Thanks for being on the show.

Melissa: Thank you so much.

Thanks to Melissa for showing how money and happiness can go hand-in-hand. Melissa’s new book, Happy-Go-Money, is available now. You’ll find show notes for this episode at maplemoney.com/melissaleong. If you’re enjoying the Maple Money Show on iTunes or Apple Podcast or whatever they’re calling it now, please leave a rating and review. Not only can it help the show grow, but I read all reviews and I want to know what you think. Remember, we have new episodes every Wednesday so I look forward to seeing you next week.

'You have to ask yourself….if the end goal is to be happy, then is all of this working, and trying to accumulate money, and trying to buy all this bull, is that really going to get you to the end goal?' - Melissa LeongClick to Tweet

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