Does More Money REALLY Buy Happiness? | Matt Killingsworth

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20:55Matt Killingsworth:I mean, it seems intuitive. And that study, I remember that study from 2010. And you're like, that doesn't really make sense, but I guess, and you kind of trust it because it's science. But it didn't really intuitively make sense. What you're saying makes a lot more intuitive sense. Do you have the next level of depth, though, in answering why that translates to happiness? I'll first just add a really important caveat. And it's a caveat that applies to pretty much all modern research on money happiness, including the one that said there was this plateau, which is that happiness tends to vary. And this is going to be a little bit, I'll try to make this not very mathematical, but happiness varies with the logarithm of income, which is basically to say that happiness varies with percentage changes in income, not raw dollars.

21:40If you give a dollar to Jeff Bezos and you give a dollar to someone earning minimum wage, those dollars mean very different things. So it's definitely the case that an extra dollar matters less the more you have of them. But the sort of pattern that I find is that happiness seems to rise linearly with sort of the logarithm of income. And that sounds complicated. You don't really need to understand it. The main point is just that a 10 % difference in income sort of

22:09Matt Killingsworth:predicts the same difference in happiness for everybody. Whether you're high or low income, kind of if you were 10 % higher, you would at least are predicted to move up about the same amount in happiness. That's just an important piece to kind of understand about this relationship. Why are money and happiness related? There are a few different answers to that. So when I published kind of my first big paper on this topic, I attempted to answer that by saying, well, what is it that is psychologically changing for people who have more versus less money? And kind of what can sort of mediate that relationship?

22:41And the strongest factor that I could find that explained it within my data was actually people's sense of control of their lives, kind of their freedom to live the life they want to live. So one way to interpret this relationship, about 75 % of the relationship between money and happiness could be explained by the fact that when people have more money, they're essentially more in control of their lives. So you could imagine how, especially in a place like the US, there's a lot that you can do when you have money and resources. And there's a lot of way that kind of your life is more constrained and contained and maybe not fully under your control when you don't have many resources.

23:18One important thing that the money is doing is kind of giving people freedom and choices.

23:22Matt Killingsworth:One of the things that I think that this translates to, it makes sense to me, like, of course, more freedom, more choice, more opportunity to pursue happiness. And I think, you know, perhaps inversely, less misery, less unhappiness, right, are related. I think you've covered that in a lot of your work as well. When I think about one thing that seems to be absent from your work is most of your work is focused on income and not necessarily wealth. And the FIRE movement, I think, is an interesting spin on the pursuit of happiness to a large degree because more income probably translates to more happiness because it accelerates the goal of FIRE.

23:57Matt Killingsworth:But implicit in the goal of financial independence and early retirement or any of the many variations of that is I'm going to declare a number enough to achieve this happiness that I'm setting out to achieve for myself. And that's, I think, an interesting spin and implicit, maybe unique to the FIRE movement among many Americans. Do you have any hypotheses or ways you'd go about, you know, any initial research, any hypotheses or exploration of that topic of is once financial independence, you know, being met, the next marginal dollar maybe adds a little bit of incremental quality of life, but that's really a breakthrough point for people.

24:35I do see some evidence that having some resources and wealth is helpful or spending less than you earn is helpful. Having a financial cushion, even controlling for the level of income, having some financial stability there really seems to be helpful. I think one of the perhaps many ways that people pursuing FIRE might benefit is simply having that cushion puts you in a very different situation than someone who's spending every dollar as soon as it comes in. Because you're kind of one bad day away from disaster, even separate from a question of kind of when can I retire? There isn't a ton of research on wealth and happiness simply because for most people, income is a much bigger part of their sort of financial situation.

25:18As I mentioned, I am collecting some data right now from people who are very wealthy, where their wealth is by far the bigger part of what's going on. So I may have some more things to say in the future. My prediction is that wealth is probably helpful and probably at least as helpful as kind of equivalent income. Exactly how that breaks out in terms of like the shape of the curve. Is there a level where you really hit diminishing marginal returns on greater wealth? I'm not sure we really know the answer to that yet. Part of that, frankly, is because people who have lots of money don't tend to fill out happiness surveys.

25:50You really have to go find to them. And so that's what I'm doing now with some very high net worth folks. But this is an area that's been harder for science to explore. Even my first big study showing that the relationship between money and happiness keeps going up to many hundreds of thousands of dollars a year, that's the first day that I know of that even was able to really explore that range of incomes. Almost every study you've ever read about in the news about money and happiness has really been looking at kind of the low to middle end or the$100 ,000 a year, maybe$150 ,000 a year. We've really had very limited visibility beyond that.

26:25Mindy Jensen:Have you found any correlation between knowing what the definition of enough is for you and happiness? I'm starting to look into this a lot more because I'm noticing that there are people in my community who have enough and they're not really pushing anymore or they're pushing and now it's a game. But there's also people in my community who have never defined enough for them. And because enough never will have a definition, they always will want more. Have you done any studies on this? Or have you looked into this at all? Or has this popped up in any way? I don't have a complete answer to that.

27:02There is some very interesting research that asks people how much money it would take for them to be happy, or even how much money they would be satisfied with. And it turns out people always give a bit more than whatever they have. So you know, If I'm earning$50 ,000, well, I'd be happy if I were earning$150 ,000. That would be enough. I think I've more commonly seen this with income as opposed to wealth, but I'm guessing a similar sort of psychological trend would be observed. One possibility is people might have a target in mind, but they might find the target shifts when they reach it. And so one of the questions is, do you want that to happen or do you really want to kind of stick to your gut?

27:38If I think $3 million is enough to retire. That's it. I'm locked in. Am I going to pull the trigger there and say, that's it? Or am I going to say, well, work isn't so bad. I could do a lot more if I had$5 million and suddenly I extend my retirement timeline by however many more years in order to achieve that. I think that's something we see some evidence of that. I don't think we really know, is that a good or a bad thing? Is it better for people who have lower versus higher targets? I don't know that we know the answers to those super clearly at this point.

28:08Mindy Jensen:In the FI community, that pops up most frequently as a one more year syndrome. I've reached my financial independence goal, but I'll just do one more year. I just want to make sure that it's going to work. I'm wondering if you have any suggestions for someone who finds themselves at their FI number with the idea that they're just going to work one more year. To me, it almost comes down to the sort of fundamental premise of, you know, fire and financial independence. How enjoyable or miserable is my job and how enjoyable or miserable do I think my life would be after retirement? Some people actually really enjoy their work.

28:47And so extending that might be a perfectly fine thing to do. As a bonus, I also get some more money, but I really enjoy my work and I don't really have a clear vision of what I'm planning to do once I retire. Maybe for those people, extending is a perfectly reasonable thing to do. On the flip side, if I am incredibly miserable at work and I know exactly what I'm going to be doing once I retire, I've kind of tried out all of those things and I'm certain that that's going to be amazing. Not only is that maybe someone who should pull the trigger on retiring and living off of their resources, but also that someone who maybe should be thinking more about fire than the first person.

29:27One of the things that I see in my research is that when I look across all of the human activities, for the average person, work is the thing people are least happy doing. There's a premise that resonates in some ways with the data on happiness with the FIRE movement of like, how do I dial down this thing that for many people is kind of the worst part of their day? The other things I would kind of keep in mind as I am thinking about that is, on one hand, work is the worst thing that most people do, but about 25 % of people are actually pretty happy on the job. So maybe I could pivot to something that pays less, but that I would actually really enjoy, that I might even enjoy more than the things that if I'm just going to be sitting around the house or engaging, I don't really have any passion that I'm excited to go do.

30:09Maybe pivoting to just a lower paying, but really meaningful job would be a good thing. Another thing is work is unhappy for most people. The worst job of all is unemployed, if you look at the level of happiness. What are some of the kinds of things that tend to be associated with unemployment? Well, it's actually mostly not about the loss of income. Like the vast majority of the reduction in happiness that unemployed people experience is really attributable to other things. We don't fully understand why that is, but we can probably imagine a few. Like you lose your identity, you lose your sense of value, you lose the sense of structure that you have in day-to-day life.

30:42You lose the chance to kind of, you know, deploy some of your skills and talents and things you're best at. Well, you know, if someone is on this bubble of making a fire decision or just thinking about FIRE in general, like how do I craft a retirement where I'm kind of on the right side of all those issues, as opposed to almost just kind of looking like a wealthy unemployed person?

31:03Matt Killingsworth:We get a lot of feedback throughout the annals of the internet, not just not BiggerPocketsMoney, but the FIRE movement, the financial independence movement in a general sense that it makes him miserable. These people are frugal, miserly, they're not living life, they're given up today in pursuit of the hope for tomorrow. And there's anecdotes that then surface, right? I can't believe I spent my 20s doing this. I missed out, you know, whatever that come up. And of course, that's going to be the case in any large sample. There's going to be anecdotes. But what does the data actually say? I don't have the toolkit to actually, you know, collect a data sample on this anywhere close, not even that, you know, like so laughably far away from the work that you would do that you will giggle at this.

31:40Matt Killingsworth:But we did poll our community and we said, you know, very simple, BiggerPocketsMoney listeners, are you happier, less happy or about the same after discovering and pursuing FIRE. And we found that 60 % said that they're happier out of a 900-boat sample, 7 % said they're less happy, and 33 % said they're about the same. And to me, that's a really interesting, very simplistic, but data point here that the discovery and pursuit of FIRE translates to a significant, at least self-reported, increase in happiness for the population of people who respond to BiggerPocketsMoney YouTube polls, which is inherently a biased population.

32:14Matt Killingsworth:There's something interesting about that. And it leads me to form a hypothesis that fire has a multiplicative impact on happiness in the sense that one, it gives you a purpose to begin moving towards that's concrete, that takes a long period of time that will require you to develop new mental models and really learn and engage and develop your brain. Two, it is as a byproduct, the journey itself produces more and more stability and security and optionality in your life along the path. And last, there is the very real, tangible, believable prospect of within a decade or two, depending on how time goes, there's a chance that you might actually achieve this thing and begin to have those options and seriously explore what I'm going to do all day long every day.

32:54Matt Killingsworth:Do you largely agree with that hypothesis before you even get to fire? You actually hit the nail on the head with all three of those points. Those were literally the three things I was thinking of as you were going through that. I don't think there are good studies really proving that those are the case, certainly not for people who are kind of in this movement in particular. But I think psychologically, those are exactly the kinds of things that I would imagine might play an important role. One day, we'll have to see if there's a way for BiggerPocketsBody to contribute some sort of data to your sampling there.

33:24Matt Killingsworth:See if we can prove that out. And of course, we'll be very biased here. We're all pursuing fire. Of course, we like it. We're the ones that actually are listening to this podcast right now. There's a selection bias that is inherent in that. But I'm so fascinated because this is why we're doing it. This is why we pursue wealth creation is for this chance at happiness, not a guarantee, but the increasing probability across a lifetime. And I think, as you said, human life is complicated. There's so many different things we have to navigate. And I think something like this gives you something really concrete to work for.

33:57Even if you end up succumbing to one more year syndrome, at any given moment, you kind of have a really clear target that you're trying to hit and kind of a notion of what your goal is. You're probably seeing some progress every year. You have some hope for the future because of what you're at least expecting to arrive to. I think that's if perhaps before people kind of embark on this journey, they didn't necessarily have any particular direction of like, what's the destination I'm actually trying to get to in life, should this be the only one they're pursuing or, you know, kind of what balance it should have with the other goals in life, you know, to be determined.

34:33But I think that makes a lot of sense. I certainly can't promise to do it off the top of, you know, in the moment, but I actually think it would be really interesting to do a truly proper study of people kind of on this journey, tracking their financial situation, tracking their level of happiness, looking at that over time, perhaps having some people who are kind of immediately before versus after triggering retirement in that kind of situation and just understanding, you know, what is the distribution of outcomes, including what is the level of happiness that someone pursuing has and how does that compare to someone that isn't?

35:05Are they kind of suffering more now because there's an expectation that things will be better later? Or are they at a similar or even enhanced level because of the kinds of factors that you just described? And also, how do things change once they do retire? Do they actually become a lot happier? They stay about the same. Maybe happiness really isn't mostly about the thing they think is changing. It's about all the other factors in their life. Does it depend on how much they love versus hated their job? There's a lot that could be understood.

35:32Mindy Jensen:I live in Longmont, Colorado, which is not the epicenter, but kind of the epicenter of financial independence because Mr. Money Mustache lives here. There's a lot of people who have moved here. It's Colorado and our weather is amazing and everything here is perfect in every way. But I also find myself kind of in this little five bubble where there's a lot of us that are unemployed or semi-employed. And I say unemployed because retired or could be retired, but choose to work because they love what they're doing. They're not doing it for the money necessarily. And I find that there is just an outside level of happiness.

36:11Mindy Jensen:Everybody here is happy. Yeah, we have problems. Oh, my car broke down. Well, it's not that big a deal. It's an annoyance. The things that make us unhappy are more like annoyances that we have to deal with, but everybody would have to deal with them. Everybody's car breaks down. So then you fix it and you move on. Or, you know, oh, I thought I made this payment, but I didn't. And now I have a late fee. Well, shucks. That's a money problem. I can fix that money problem. We still have, you know, I have teenagers. I still have teenage issues. I've got two teenage daughters. And let me tell you, those are the best years ever, said no one who had teenage daughters.

36:44Mindy Jensen:There's things that come up that would also come up if I wasn't financially independent. But I find that having a community, a nearby community that I can bounce these ideas off of, or, you know, hey, I'm having this problem. Like we have a discord, an online chat that we can ask any question. And having people available to have these conversations, this social connection where we're all in the same boat, I think is so valuable. And you hear from people who retire early, oh, all my friends are working all the time. I'm going to go back to work because I don't have anything to do during the day.

37:25Mindy Jensen:Have you seen any sort of correlation between social networks, like in-person social networks and happiness. I think that that's so valuable, but I also don't want to have my experiences tainted by my little bubble here. One way to kind of summarize some of my work is kind of like constructing the equation for human happiness. And one of the really important variables is exactly the one you just described, which is, what percentage of the time am I interacting with other people, especially interacting in person? The higher that percentage is, the happier people tend to be. The lower it is, the less happy they tend to be.

38:01there's also value in other kinds of networks. Even having this conversation, it might be more fun if we were all sitting in the same room, but we're able to kind of commune and connect and discuss in a way that I think is also pretty meaningful. Just thinking about your example of other folks that are in a similar situation, some of the value is kind of the instrumental benefit of literally being able to get advice and insights from those people. But I think a big part of it is having the community of people who are in a similar situation and they're a support network, They're, you know, people you can talk about things with.

38:32They're kind of part of your tribe. Like having a tribe that you feel like you belong to, I think is also super important.

38:38Mindy Jensen:I'm just going to give a quick shout out to choosefi.com slash local. They have a ton of local groups. I want to say like 480. It's not just like three. It's people in the same community, people who understand your language and finding an in-person support group is so beneficial. I can't say enough good things about having people that speak your same language.

39:02Matt Killingsworth:Yeah. Shout out to Tyler Alex for the SoCal or the Southern California. We're in Colorado. I live in Colorado. Southern Colorado. Highlands Ranch and Mustachians meet up, right? Those are all over the place here. And I've attended several of them at the local library right next to my kids' daycare, actually. So those are popping up all over the place because of this item here, right? People get this. Smart people in the finance community have followed Matt Killingsworth's work and derivatives and there's a science behind it. The community optimizes for happiness beyond a certain point or a certain portion of them, and they're getting pretty good at it.

39:42Matt Killingsworth:And I think that's going to be a powerful correlate because that is the goal. It's explicitly defined. It's attempting to be scienced by people, thanks in part to your work. And that's them being achieved in larger numbers. And I think that it's a really strong, this conversation, I think, is a really strong refutation to the assertion that the pursuit of financial independence is going to make you unhappy. I would hope, and it's not proven. There's more work to be done and proven that out. But that's the takeaway I'm going to walk away with. And the second takeaway is that all those self-help gurus that have the wheel of life thing in their workbooks were right onto something all along.

40:18Matt Killingsworth:It sounds like pretty close to mapping these things out, because I imagine your equation incorporates the social, the mental, the flow state, the family, the relationship, the finances here. And there's some sort of coefficient across all of those that says, of course, they all get better as they get better, but the returns diminish. And so they were right. They were right all along with some of those basic things. There's probably better tweaks and versions of that that you have pioneered. And that brings us to my last point here, which is where can people find out more about you and go down the rabbit hole of really following the best work to date on this subject if they want to optimize for happiness in particular.

40:55One thing people can do is go to attractyourhappiness.org. I have that sort of my big happiness study, but it's also a place where you can measure a lot of these metrics for yourself. It's totally free if you want to see what percentage of my life is time well spent. What percentage of my time am I interacting with other people? How much time do I actually spend working every day? And how do I feel when I'm working? That might be relevant to how eager I should be to retire. You can measure all of those things through that tool, track your happiness a few times a day for a couple of weeks. And I think most people will find some really interesting insights.

41:26If they want to learn more about the kind of science side of things, they can go to mattkillingsworth.com. You can see my latest papers, including some papers on money and happiness. And linked from there is also the place that I've started posting my newest research, which is happinessscience.org. You can sign up for kind of, I don't want to call it a newsletter, but you can get notified when new research comes out on happiness science. So people that kind of want to stay up with the latest there can, can do that. I imagine that your recognition and leading

41:55Matt Killingsworth:and pioneering research in this field is in the study of happiness is in of itself, a driver of happiness for you personally. And I hope that it can inspire other people to pursue similar or, you know, tangents off of, off of that. I think it's a really, one of the most worthy pursuits you could have in life as the work you're doing. So thank you very much for all your contributions. and I hope it brings you a lot of happiness and joy as you continue to unlock more nuance to this subject. Thank you very much. Yes, it absolutely does.

42:22Mindy Jensen:All right, Matt, thank you so much for your time today and we'll talk to you soon. Sounds good. Talk to you later. Thanks a lot. All right, Scott, that was Matt Killingsworth and that was a very interesting discussion on happiness and the factors that lead to happiness. Not completely surprising that a social network will help you with your happiness, but a little surprising that happiness tends to plateau in some instances, and in other instances, it doesn't plateau at all. What did you think of his commentary?

42:52Matt Killingsworth:I mean, maybe I'm too close to the FIRE community and the study of personal finance and wealth at this point, but I mean, it just all made perfect sense. His data set mapped to the realities that have become clear over the course of hundreds or thousands of hours studying the subject. I wasn't surprised by any of those items. I've also read a lot of his research about probably is a feedback loop, but it makes perfect sense to me why these things tie together. And I think what's really interesting is the research that has not been done at the edges. There almost certainly, I believe, is going to be a relationship between this concept of enough, a high enough level, and then doing what you want when you want with who you want is got to, right, correlate with an increased level of happiness by both removing unhappiness and giving you better and better probabilities to pursue the things that actually make you happy for his happiness equation.

43:41Matt Killingsworth:So I think there's a really interesting study there. That's the bet we fundamentally make in pursuing financial independence from the get-go. So of course, I have to believe that. And many of the people listening to this will have to believe it. But I think what will be really interesting is, can we prove it over time by piggybacking on the work that Matt Killingsworth has done and other happiness researchers have? I think that'll be a fun journey. And that's implicitly one of the underlying reasons why you and I do what we do, Mindy.

44:07Mindy Jensen:Absolutely. When you spend your time doing something that causes you stress and gives you ulcers, obviously you're not going to be nearly as happy as when you spend your time doing the things that you love, which is the whole point of pursuing financial independence, at least for me. And I would like that to be the whole point for everybody listening. I think a lot of it starts off with people who hate their job. Oh, how can I retire early? I mean, that's how Carl started. He banged into the computer. You know, how do I quit my job earlier? Stop working so long or whatever. And, you know, up pops Mr.

44:38Mindy Jensen:Money Mustache and he starts reading and he's like, oh, there is a different way. All I have to do is, you know, keep doing what I've already been doing. I've been investing for the future, but the future is now.

44:49Matt Killingsworth:By the way, I will call out that Mr. Money Mustache, a lot of people think of him as a personal finance blog. But I think that if you actually study the work that he's produced over the years, he is a diligent student of happiness, the pursuit of happiness. And much of his work is really tying in how do I optimize for happiness and remove money as a constraint in that pursuit. That's really the underlying thesis, I think, of Mr. Money Mustache's collective works there. And I think he's actually very, very advanced in this topic, not as advanced as Matt Killingsworth, but very close. I think the difference is very small between them because that's really what Mr.

45:23Matt Killingsworth:Money Mustache has studied over time and why his work is so influential.

45:28Mindy Jensen:Yep, I absolutely agree. And he's starting to talk more and more specifically about happiness, not just money. And I think that's great. If you would like free resources or to sign up for our newsletter, go visit us at our website, biggerpocketsmoney.com. Or you can find us on YouTube, Facebook, and Instagram at Bigger Pockets Money. All right, Scott, should we get out of here?

45:50Matt Killingsworth:Happy to.

45:54Mindy Jensen:Okay, that wraps up this episode of the BiggerPocketsMoney podcast. That was good. I like that. He is Scott Trench. I am Minnie Denzen saying bye-bye, lemon meringue pie.

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47:12Matt Killingsworth:Dan and his son Adam noticed something unique about Long Angle. The people here all seem to be curious and interested in others. That's hard to find in people who are successful. I started for the financial angle, but the non-financial pieces, whether it's relationships, trips, family, wellness, that's brought me a lot of value. Long Angle is a vetted community of 8 ,000 or more entrepreneurs, executives, and investors who came for the financial conversations and stayed for everything else. Membership is free for those who qualify. Apply at longangle.com slash money. That's longangle.com slash money.