THE FT COLUMN: Money can mean happiness, if it’s spent well
I was having dinner with a very good friend recently, and we got talking about money and happiness. My friend explained that collecting and drinking fine wine made him very happy indeed; so much so that he estimated that his wine collection was worth more than his home.
Money is, for most people, emotive and complicated. We all have different beliefs, motivations, emotions and preferences, which can make our relationship with it difficult. Money also influences how we view ourselves and can affect our feelings of self-esteem, control and security.
Over 25 years as a financial adviser I interviewed hundreds of successful people. They told me their life stories and how they had achieved their success. But what I found most interesting was their relationship with money and how it influenced their approach to life.
For some people, money was merely a measurement of their personal or business success. Others saw it as a means of obtaining social status, often comparing their material wealth (house, car, clothes) to that of their peers. Their personal motivation was very much about the outward appearance of success, even if they were not completely fulfilled and satisfied as a result.
Sometimes, people feel "trapped" by money, particularly when lifestyle costs have crept up and they are forced to do a job they don’t enjoy purely for financial rewards.
A few years ago, City & Guilds did a jobs survey and found the highest level of job satisfaction was experienced by florists and gardeners (87/oz) and the lowest was experienced by technology workers (48%) and bankers (44%). It seems having a high degree of control over one’s working activity and seeing the results of those efforts have a big impact on happiness.
Another friend of mine is a business consultant. He and his wife decided to make a radical change to their lives, after several years of making excuses. They sold most of their possessions, put the rest in storage and rented out their London home.
They now travel the world, including skiing for at least two months a year, and only return to the UK to see clients and run their business courses. They are happier than they have ever been and now make more money, while working less.
I was able to "fire" my own job when, a few years ago, the opportunity arose for me to sell my stake in the advice firm I had founded. I was apprehensive about such a radical change, after 17 years at the helm, but I was determined to change my lifestyle.
I no longer have a tiring commute and I enjoy a lot of variety between speaking, writing, consulting and angel investing. I see my family more, exercise more and have lots of holidays and trips. I’m planning to project manage the building of our new family home this year.
Research suggests having a higher income affects happiness, but only to a point. Whatever that point is for you (one study put this at $75,000 a year) depends on your situation, but beyond it you won’t be significantly happier. Maximum happiness comes from continued, meaningful rises in income throughout one’s life.
Comparing your financial situation to your peers is also not a good idea. If you earn less than your peers you are likely to feel aggrieved. There will always be someone with more money than you, so try to stop worrying about it.
There is also evidence that spending money on life experiences, rather than material possessions, makes you happier. This is because we remember experiences longer than the initial excitement of acquiring something.
You are likely to be happier spending money on others to strengthen personal relationships, or give money to causes aligned with your values.
Your self worth is not determined by your net worth, but by the quality of your personal relationships, your life experiences and the meaning you derive from your existence.
I think true happiness comes from a strong sense of purpose, being clear on your ideal lifestyle, and making work and spending decisions aligned with that vision. Life is far too short to waste time doing things you don’t enjoy.
Back to my friend and his wine collection. The last time we met for dinner he produced a bottle worth about £350. I protested that I couldn’t possibly drink such a wine at his expense, but he insisted.
"None of us is getting any younger and I need to start drinking my fine wines before it’s too late. I’d rather share the experience with a good friend, than letting the bottles gather dust. What’s the point in having it if I can’t enjoy it?"
So my friend has done two of the things that research says maximises happiness. He has turned a possession into a life experience and spent some of his wealth on me, his friend, in a way which strengthens our personal relationship.
I’ve told him I am more than happy to help him enjoy his fine wine. After all, a friend in need is a friend indeed.
• Butler is a personal finance expert and a former financial adviser.
© The Financial Times 2017