Why Money Can’t Solve Our Problems

“I don’t know who I am or what I want. I just know I want to make more money and then I’ll figure it out and be happy.”  Ever felt this way?  At one time in my life, I sure did.

If you are reading this, most likely, you have a full tummy most of the time, shoes to protect your feet, a closet full of clothes, and an apartment or a house to keep you dry and comfy.   You were taught to read.  You have several years, maybe close to two decades, of education.  You may have participated in sports or music or arts or outdoor activities.  You may have experienced love in one or several different forms – from your parents, friends, siblings, a pet,  a spouse, or from a child.  To most of us, these are just the basics.   Take away any of these “basics,” though – our physical needs, our literacy, our leisure, and our love –  and we become seriously unhappy.

In contrast, how much did your happiness increase when you got your last new car? How about your last new outfit?  Your last new set of towels?  Your last bag of groceries?  How long did the happiness last? Think about each of these things as if you had never had one before.  How would the change in your happiness level compare then to just replacing an old one?

Once we reach a certain level of wealth, each additional dollar brings us a diminishing unit of additional happiness.  Economists call this a “diminishing marginal return.”

Even though we have scientific studies confirming money’s diminishing marginal return to happiness, we still seem to think, “If I had more money, I could do or have that,” or “I can’t do or have that, I can’t afford it,” or simply, “I would be happier if I had more money.”   Is this really true?

Money does give us choices.   We like having a choice between Lexus and Toyota.  We like latte and cappuccino.  We like menus.  We like variety.  We like Sam’s Club.

Before thinking more money was the answer to a problem, though, I think about whether there was anything else I could give up to get what I want?  If it didn’t involve giving up the “basics,” then I could afford it.  I just didn’t choose to.

If we want our money to work for us, it has to be efficient.  It can’t be wasted on unimportant things.    If we cannot be clear about what’s unimportant, though, we are likely to find ourselves perpetually wanting “more,” which is a prescription for perpetual unhappiness.

In The Seven Habits of Highly Effective People,  Stephen Covey wrote about the “Abundance Mentality.”  Having an Abundance Mentality means living as if there are plenty of resources and money to go around for everybody.   Ironically, once we precisely define what we want in our life, the world does appear far more abundant.  Life is no longer  a game of scarcity and competition.

By doing the hard work of figuring out everything we don’t need, voila’, the important stuff becomes much more “affordable.”  Money isn’t the answer to our problems.   We are.

Holly Donaldson

Holly Donaldson, CFP® runs an hourly and fee-for-service financial planning practice virtually from her Tampa Bay, Florida office. She also works with clients throughout the U.S. (except Texas) interested in retirement and tax planning advice without product sales or investment management. Holly is the author of The Mindful Money Mentality: How to Find Balance in Your Financial Future (Porchview Publishing, 2013) and publisher of the award-winning monthly e-letter, "The View From the Porch."

This Post Has One Comment

  1. Joe Merkt

    I know the saying “Money can’t buy happiness” but this article provides a more focused assessment of why money can’t buy happiness. At this time, I’m in a position which is forcing me to take a hard look at the “basics.” I’m finding that, for me, some things that I thought were basic are really not.

    Good article. Thanks.

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