Why is there such a huge disparity between generations? I believe it simply can be explained by the stages of life those at different ages are in. Millennials are right in the thick of buying their first home, which as we all know have skyrocketed in price over the last few years, and are starting to have children or already have young children. If you have children and are trying to buy your first home, you probably feel you need a significant amount of money to be happy! Gen X and Boomers likely aren’t raising young kids or buying their first home, but are thinking more about retirement. Gen Z needs significantly less to be happy because they have significantly less financial needs. If they aren’t thinking about retirement, having kids, or buying houses, it takes a lot less money to be happy.

Money buying happiness is a recent idea

Surprisingly, we have not been wondering how much money we need to be happy for very long. The question first became widespread in the 1960s, and is being asked more than ever today.

Why have we only recently become enamored with the idea of money bringing happiness? I believe it comes down to Maslow’s hierarchy of needs. Our ancestors worried about having food, water, shelter, good health, and employment. We still have some struggles today, obviously, but as a country we have improved dramatically in each of those areas. The majority of Americans today do not have to worry about food, shelter, water, or employment and will likely live longer than their parents and grandparents as life expectancies continue to rise.

Can money actually make you happy?

Having more money can make someone happier if that money is used to satisfy some of our basic needs. Someone who isn’t able to afford a house or a car will probably become measurably happier if they receive money that enables them to purchase a home and a car. However, there are diminishing returns. Going from a 4-bedroom house to a 6-bedroom house probably doesn’t feel as good as buying your first home. Trading in your 2017 model car for a 2023 model probably won’t make you as happy as your first car did.

While the majority of Americans believe there is an amount of money that will make them happy, that number appears to be a moving target. The median net worth of all Americans is $260,223. On average, the magic number that Americans said they needed to be happy was about $1.2 million. Most Americans believe they need a significantly higher net worth to actually be happy.

We ask our millionaire clients how much net worth they consider to be wealthy. 88% say that you need at least $3 million in net worth to be wealthy, and 75% say that they do not consider themselves wealthy. Almost all of our clients have more net worth than Americans say they need to be happy, yet they don’t say “I’ve made it,” or “I’m finally happy,” but “I’m not there yet.”

What does make us happy?

I do not believe that the accumulation of wealth, by itself, will make anyone happy. Much of what money can buy can increase your happiness, at least temporarily, but happiness tends to move back to where it was prior to life events or experiences (explained by the hedonic treadmill). As your wealth increases, the amount of net worth you believe you need to be happy will probably increase as well. If more money won’t make you happy, what will?

The answer isn’t easy to quantify like money, and may even be harder to achieve than a certain number on your net worth statement. Going back to Maslow’s hierarchy of needs, what actually increases life satisfaction, or happiness, after your basic needs are met include friends, family, achievement, the respect of others, purpose and meaning, creativity, and acceptance. This ties in well with our fifth level of wealth, abundance, where money doesn’t matter anymore and your focus is more on experiences and making the world a better place.

What do all of those factors have in common? Money can be used as a tool to achieve them. It’s a very important distinction: money can be the tool you use to create memories with friends and family, it can be the tool you use to gain the respect of others or accomplish certain goals, and it can be a tool that allows you to be more creative and give yourself purpose and meaning. However, one of our biggest beliefs is that money is a tool, not a goal. Instead of focusing on a dollar amount that you believe will make you happy, focus on what your net worth can be used to create in your own life and for others.

Building wealth feels amazing, but beware of the pitfalls and traps along the way! We want you to be set up for success financially and personally. Let’s explore the downfalls countless millionaires have fallen into and unpack loads of tips to keep you from going down the same path. Here’s how to stay on the path to a life of freedom and abundance!

In this episode, you’ll learn:

• Why millionaires are not happy
• How to keep money from ruining your relationships
• What Jim Carrey learned from being rich
• How to leave a successful financial legacy
• Money Guy tips to help your personal and financial life thrive

Resources and research from this episode:

• Being rich may increase your odds of divorce (CNBC)
• Marriage and divorce’s impact on wealth (Sage)
• Here’s How Money Really Can Buy You Happiness (Time)
• Key Figures Behind America’s Consumer Debt (Debt.org)
• Americans Who Can’t Afford Their Homes Up 146 Percent (NBC)
• Failure To Launch (FA)

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Money and marriage: can they coexist in harmony? Money can play a huge role in the overall happiness and success of your marriage. Taking time to consider the way you handle finances as a couple today can make all the difference in the long-run.

We’re going to walk you through signs of financial success and traps to avoid at every phase of marriage from Newlyweds to Empty Nesters.

Stages covered in today’s episode:

• Newlyweds (1-5 years)
  • How much you should spend without talking to your spouse
  • How to reframe your financial goals to include each other
  • Financial tools every newlywed should know about
• 7 Year Itch (6-10 years)
  • How kids play into your overall success in marriage
  • How to protect the financial success you’ve achieved so far
  • Why valuing your financial roles can make or break your marriage
• Catching Your Stride (10-20 years)
  • Why this is the stage where a lot of couples can “come up for air”
  • Why this is NOT the time to “keep up with the Joneses”
  • How to tell if you and your spouse are on track to financial success
• Empty Nesters (21-40 years)
  • Why this stage should be something to celebrate
  • How to adjust your mindset to protect your marriage and your net worth
  • Why this is not the time for financial risk

Resources and research from today’s show:

• Love and Marriage… and Finances (BEFORE Bo got married)
• Marriage… an Education (AFTER Bo got married)
• Money Guy Financial Order of Operations
• Why Communicating About Money is Key to a Healthy Relationship and Financial Future (Forbes)
• Divorce risk highest within the first two years of marriage (The Telegraph)

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If you have any questions (or just want to say hi!), feel free to reach out to us: brian@moneyguy.com and bo@moneyguy.com. You can also join the conversation on The Money Guy Show Facebook page or connect on Twitter @MoneyGuyPodcast.

Can you buy happiness? How much does it cost to buy happiness? What is the relationship between money, wealth, and how happy you are about life? While we don’t have all the answers, we do think we offer a unique perspective on this topic because of our day jobs as fee only financial advisors. We have many conversations with our clients in regards to their money, goals, dreams and what makes them happy, and we share our high-level observations in this week’s episode of The Money Guy Show. 

Over the years, we have made it our business to learn and understand the ways in which money correlates with happiness (and in which ways it does not!). Tune into this week’s show to learn how you can derive the greatest happiness from your army of dollar bills. 

Here’s What You’ll Find Out in this Episode:

• The difference between happiness and fulfillment
• How your emotional well-being factors into happiness
• What the monetary threshold for happiness really is
• If there are “side-effects” of financial success and what they are
• When a perceived positive item in your life, such as a premium vehicle, can produce negative feelings and outcomes
• How giving big ticket items to teenagers can be detrimental to their long-term happiness
• The three common mistakes that prevent people from reaching happiness
• The four ways to spend money that can yield the most happiness and fulfillment
• Why you should use your money as a resource
• How you can expand the excitement of your purchases with ‘over research’
• The biggest influencers when it comes to your happiness
• A secret for parents that encourage children to be successful

Resources Mentioned in this Episode & Related Episodes

• David and Goliath: Underdogs, Misfits, and the Art of Battling Giants
• How to Think About Money
• How Money Actually Buys Happiness
• Module E: Economics, Work, And Happiness
• Top 10 Personal Finance Podcasts By Financial Advisors

Enjoy the Show?

• Make sure you subscribe so you get updates, announcements, and exclusive post-show deliverables!
• Leave us a review on iTunes
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• You can also use #AskTheMoneyGuy on social media!
• Get your FREE copy of The 30-Minute(ish) Financial Plan

Tune In and Go Beyond Common Sense with the Money Guys

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If you have any questions/suggestions/comments/concerns (or just want to say hi!), feel free to reach out to us: brian@moneyguy.com and bo@moneyguy.com. You can also join the conversation on The Money Guy Show Facebook page or connect on Twitter @MoneyGuyPodcast.

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This week on The Money-Guy Show, Brian and Bo review a piece from The Wall Street Journal’s Jonathan Clements. Clements shares the 5 keys to living a happier financial life in his recent article from a Sunday edition of WSJ.

Who doesn’t want to learn how to live a happier financial life? Money can be the cause of so much stress, but financial success isn’t as complicated as some think it is. Read on or listen in to find out what you can do to be happier.

Commuting Is a Huge Waste of Time

The first point Clements writes on: commuting destroys our happiness. Many of you can probably relate! Who enjoys being stuck in traffic for hours on end?

Clements cites a Swedish study that concluded longer commutes increase the risk of couples separating by 40%. He concludes the trade-off of dealing with a stressful drive into the city for a larger house in suburbia isn’t worth it.

Have Humility When Investing

Clements highlights that, as investors, we need to have humility. So many get caught up in trying to beat the market — but remember that “before costs, we collectively earn the market’s return.”

There’s also the issue of encountering high internal expenses when actively trading, although Bo and Brian note that fees have been decreasing over the past few years. They’re no longer the end-all-be-all when it comes to choosing what you invest in. Be smart about it.

Focus on Lowering Fixed Expenses

Clements says a third of the money typically spent in a household goes toward housing. By keeping housing and transportation costs down, we’ll have more money to spend on discretionary expenses, and we’ll be able to save more for retirement. Ideally, housing shouldn’t be more than 25% of your gross income.

Spend Money on Experiences

The guys are huge fans of spending on experiences rather than things, and couldn’t agree more with Clements on this point.

Brian touches upon the fact that when loved ones pass, we’re only left with memories. Similarly, when we pass, we can only take our memories with us. Make them count!

Don’t Work Just for a Paycheck

We all need to get paid, but working solely for a paycheck can be draining when you hate your job. Plus, what we enjoy doing early on in life might not make us happy later on.

Going back to the previous point, if we keep fixed expenses low, we can save enough to retire early, or at least take a paycut to transition to a better job in the future. Brian and Bo recommend doing what you love so it never feels like you’re working.

What Are You Doing to Live a Happier Financial Life?

These 5 keys to living a happier financial life aren’t extreme  or hard to live by– they’re common sense. If any of these issues resonate with you, then maybe it’s time to make a change so you can increase your happiness.