Alert
Close

Earn Double Rewards Points: Take the AARP Social Security True/False Quiz

How Much Money Does It Take to Buy Happiness?

Being disciplined about financial security trumps having more money

Happy adult woman holding piggy bank, Chatzky: Happiness and Finances

A recent study shows that if you are disciplined when it comes to setting financial goals, you'll feel more financially secure. — Istock

En español | Does money buy happiness?

Thanks to the work of Daniel Kahnemann, a Nobel Prize winner, and his Princeton University colleague Angus Deaton, we learn that you need about $75,000 in annual household income in order to live a happy, comfortable life.

More than that (acknowledging, of course, that the amount it costs to live comfortably varies by location) doesn't buy you more happiness. Earning less than that means your happiness will likely be taken down a notch by financial stress.

But what are the other issues that loom large? Newly released findings from a 2014 study by Northwestern Mutual Life Inusrance Co. suggest discipline plays a big part. Researchers asked: When it comes to planning your finances, are you a highly disciplined planner (meaning that you have exact goals and have developed a specific road map to meet them), a disciplined planner (you have goals and plans but sometimes deviate along the way), an informal planner (you have goals but no plans to achieve them) or a nonplanner (you have no goals and no plans). They then correlated the results with happiness.

Just over half of respondents indicated that they're planning in a disciplined or highly disciplined way; 46 percent are largely flying by the seat of their pants. But the more specific your approach is, the more satisfaction you seem to get from it. Nearly three-quarters of the highly disciplined folks say they feel "very financially secure." Just 17 percent of nonplanners say the same. As for happiness in retirement? Ninety-one percent of highly disciplined folks report they are happy in retirement; nonplanners, just 63 percent.

I was particularly interested in this survey because it dovetails with what I found when I worked with Money magazine (where I was then editor-at-large) to commission a survey on money and happiness. The results were chronicled in a book called The Ten Commandments of Financial Happiness. We, too, found it's not how much you have — it's how you handle it, and having a plan is one of the factors that boosts financial morale. But there are others. Among them:

Save habitually

Although financial planners often advocate saving at least 10 percent of whatever you're bringing in (and 15 percent if you're getting a late start), crossing the 5 percent line is enough to boost your mood — as long as you do it habitually.

Pay your bills as they come in

People who do are significantly happier. The question is why, and I have two answers. First, seeing a huge sum of your money move out of your hands and into the hands of your creditors — as happens when you pay your bills monthly — is demoralizing. It's just not fun. Paying them piecemeal is a lot less painful. Second, when you pay in real time you have even more control. If you get an electric bill that's larger than you thought it would be, you can adjust and spend less on other things so that you don't dig yourself into a hole.

Give back

Being charitable provides a boost to your psyche that is tough to replicate in any other way. But note that although any charity will happily take your money, you can give in other ways and still reap the same happiness reward. Volunteering and donating your old or unused belongings have the same result.

Communicate

Finally, none of these things work if you've got a spouse or partner aiming in the opposite direction. So, when you sit down to make your plan — make an effort to do it together.

Jean Chatzky, best-selling author, journalist and money editor at NBC's Today, is AARP's financial ambassador.

AARP Fraud Watch Network logo

Also of Interest

Join AARP Today — Receive access to exclusive information, benefits and discounts

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.

The Cheap Life

Jeff Yeager Cheap Life Ultimate Cheapskate AARP YouTube web series save money

Catch the latest episode of The Cheap Life starring Jeff Yeager, AARP's Ultimate Cheapskate. Watch

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Life insurance: you are covered rain or shine

Exclusive annuities for members from AARP Lifetime Income Program from New York Life.

AARP Credit card from Chase

Members can get cash back rewards on purchases with the AARP® Credit Card from Chase.

Homeowners Insurance
Member Benefits

Join or renew today! AARP members receive exclusive member benefits & affect social change.