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Does money make us happy?

June 06, 2025

Category: News

This guest blog was written by Chris Budd who wrote the original Financial Wellbeing Book, and also the Four Cornerstones of Financial Wellbeing. He has written more than 115 episodes of the Financial Wellbeing Podcast and founded the Institute for Financial Wellbeing.

Whether money makes someone happy is a question that provokes many different opinions. Some will say yes; just look at people who have nothing and compare their happiness with people who have lots.

Others will say no; some of the poorest areas of the world show the greatest happiness, and some of the richest people are unhappy.

Research tells us that, as with most things in life, the answer is a bit of both. Understanding this interaction between increasing wealth and wellbeing is an important part of financial planning.

Maslow’s hierarchy of needs

There is a psychological theory about motivations called “Maslow’s hierarchy of needs”.

This theory states that our basic needs must be met (food, shelter) before we can think about our psychological needs (love and belonging). Those psychological needs must then be met before we can find self-esteem and be creative (Maslow describes this final stage as “self-actualisation”).

This has been a very popular model but it is, of course, flawed (as Maslow himself admitted). Life does not present itself in a series of stages, each of which is only accessible when the previous stage has been completed. For example, it is possible to be creative without feeling 100% secure.

Instead of seeing these needs as a hierarchy that we pass through, we could view the development of wellbeing as similar to building a house. We don’t build one side at a time; rather, we work on all aspects simultaneously.

Money and Maslow

So, how does money link with the hierarchy of needs? Maslow himself did not see money as a need, but a tool to be used to satisfy some of the lower needs on the hierarchy.

Although money can help feed us and make us feel secure, it doesn’t have much to do with love and a sense of belonging.

As we travel up the hierarchy, we find that money can actually work against self-esteem. If we judge ourselves by how wealthy we are, then this requires a judgment based on how wealthy other people are. As Theodore Roosevelt is reported to have said: “Comparison is the thief of joy”.

Finally, money has little to do with self-actualisation and creativity. Having more money can create more options around how we spend our time, it is true, but this is often a case of priorities.

Money and happiness

So, do we need more money to be happier? The evidence is clear: not really.

In his book The Antidote, Oliver Berkman describes the second-largest slum in Africa – Kibera in Nairobi. One would imagine it to be a place of great misery – but research shows it to actually be a place of great happiness.

We could point to a homeless person on the street in comparison with that same person with a roof, a job and some income. Of course, they will be happier.

And yet, give that same person lots of money, and they may become less happy again (there are examples of lottery winners who became miserable after their windfall).

We could also point to relative happiness. A person living in a two-bedroom semi-detached house with wonderful neighbours and a strong sense of community might be extremely happy. Until they hear that an old school friend is living in a four-bedroom detached house in an expensive area of town!

My happy challenge

The question you might wish to ask yourself is this: what are the sources of joy in your life? And how does money affect those sources – positively, negatively, or not at all? How might these change in the future?

The next step is to consider the answers to these questions in the context of your financial plan. What objectives does your financial plan aim to fulfil? Will achieving these objectives increase your wellbeing? In what ways? Are there any other objectives that you would like to include?

Perhaps you could discuss these questions with your financial adviser. The answers could help you to create a financial plan that will make you happier, not just wealthier.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Approved by The Openwork Partnership on 09/05/2025.

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