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FOR DECADES, RESEARCHERS have been looking at the link between money and happiness. The findings? In short, it’s a mixed bag.
To be sure, there are ways that money can boost happiness, and below are some ideas to consider. But there are also obstacles to contend with. We’ll look first at the obstacles before turning to the recommendations.
The most significant challenge is the fact that—to a great extent—our happiness level is hard-wired into us. Everyone has a happiness “set point,” with the result that some people simply end up being happier than others, regardless of their finances or circumstances. People debate about how much that set point matters. To one degree or another, though, researchers agree that happiness isn’t entirely in our control.
Another reality to be aware of: Happiness for most people follows a predictable pattern throughout life. Specifically, that pattern tends to be U-shaped, with happiness often dipping in early adulthood, as responsibilities begin to pile on. Buying a home, climbing the career ladder and raising children—these things all take work and can take a toll. The good news is that happiness tends to start rising again by the time folks hit their 40s. But it’s hard to sidestep those earlier, more challenging years.
The third obstacle is what’s known as the Easterlin paradox. Richard Easterlin was a leading researcher on the psychology of money. One of his key findings was that when societies experience economic growth, the resulting rise in prosperity, counterintuitively, doesn’t seem to affect people’s happiness levels. Roughly the same percentage of Americans today report being very happy as did a hundred years ago, despite the vast improvement in our standard of living.
Someone with just an average income today enjoys luxuries that John D. Rockefeller might have only dreamed of. Why doesn’t happiness improve along with standard of living? Easterlin’s conclusion was that it’s not just our absolute standard of living that matters; it’s our relative standing. That’s why Scandinavian countries tend to rank highly in global happiness surveys. If there are fewer people with outsized—and ostentatious—wealth, that tends to make everyone feel better.
To be sure, these three factors are obstacles to contend with, and they’re generally hard to avoid. The good news, though, is that there are plenty of things that are well within our control, regardless of age or stage or financial standing. Below are five strategies you might consider as the new year approaches.
Plan
Suppose you’re thinking of taking a vacation next summer. Even if it’s several months away, happiness researchers suggest you start planning that vacation today. That’s because a finding in the research is that we derive enjoyment from looking forward to things. So if you increase the lead time before a vacation or other event you’re looking forward to, you’ll increase the enjoyment you derive from that experience.
Give
In a finding that’s been replicated more than once, giving has been found to boost happiness. Whether it’s to family, a friend in need or to an organized charity, giving almost universally brings us joy. According to the research, we get a lift from each gift we make. So writing five or 10 modest-sized checks may have more of a positive effect than one large donation.
Organize
Psychologists talk about the damaging effect of “open loops” in our minds. This refers to tasks that are unfinished. According to the research, they’re particularly unpleasant because they occupy disproportionate mental space. Suppose you have five items on your to-do list, but one of them is overdue. That one overdue task will tend to loom large, sapping energy, even while you’re working on the other items. That’s why I suggest keeping your financial life as simple as possible. The result, generally, will be fewer open loops to worry about.
What does this mean in practice? First, I suggest structuring your household finances so that as many things as possible run on autopilot. If you have a credit card or cards, turn on the auto-pay feature so you don’t have to keep track of deadlines. Do the same with your rent or mortgage, with your insurance and with other critical services.
If you’re in your working years, I suggest the pay-yourself-first approach to budgeting. Instead of trying to track every dollar—a task that few people have the time or discipline to undertake—instead simply divert a portion of your paycheck into savings before it even reaches your checking account.
Other steps you can take to streamline your finances in 2026: If you have more than one bank, credit card or brokerage account, see if you can consolidate any of them. If you have old 401(k) accounts, roll the balances into your current employer’s plan or into an IRA. And within each account, see if you can streamline the number of holdings.
You could use a free tool like Portfolio Visualizer to examine the correlation between two funds and see whether your portfolio would be materially affected by consolidating into just one.
Buffer
In organizing your finances, another step I recommend is to build in a buffer. While cash isn’t a great long-term investment, it can serve an important purpose in reducing open loops. Even if your bank doesn’t pay much in the way of interest, I’d still maintain an amount large enough that you don’t have to ever worry about running low. If that means selling some stocks now to build up a cash reserve, that strikes me as worthwhile.
Delegate
My neighbor tells me that he has an assistant who works remotely—from Romania. She takes care of standard things like managing his calendar but also helps with a variety of other tasks that he finds tedious, like booking travel and paying bills. All of this can be done from afar. A service like this might not make sense for everyone, but there’s a useful takeaway: If there are tasks you really dread, don’t resign yourself to living with them. Instead, see if there’s a way to delegate them. Indeed, one of the best possible uses for money is to buy time. On this point, all happiness researchers agree.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam’s Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
Thanks Adam! Where do you get your topics? We certainly benefit from your -what? -curiosity?, breadth of experience?, perspective? your parents? Whatever it is, I appreciate it
Yes, ‘open loop’ is my rumbler, at about 4am. Sadly most items are not fixable in a day or two, or three. Tried using a bedside note pad, measured breathing, counting 99 to 1, etc, etc. Have to go to a comfy chair (so wifey can sleep) and open a good book to re-direct my focus. After about 20 min (if it’s a good book), the lids get heavy and I can settle under the quilt, pull the stocking cap down over my eyes and sleep until the alarm.
fyi: Put one small IRA into Schwab Intelligent Portfolio and let them make the investment choices. It’s been there just over 2 yrs and returned ~ 34% during that time. [I’m retired, well into ‘RMD-land’ and never worked for Schwab]. Picked the ‘aggressive investor’ option, so I’m really watching it closely to see what happens when ‘the bear’ visits. It’s been very interesting to see the changes they’ve made to the portfolio as the market has wobbled through the last 6 months. Curiously there’s been no precious metals or related purchases in their ‘SIP’ This is certainly not a 4am ‘rumbler’.
Fine and thought-provoking piece!
For my part, I suspect strongly that the reasons for the reported happiness / contentment differential between, say, U.S. and Scandinavian peoples are considerably more complex than just “keeping up with the Jones” wealth disparity comparisons. That sort of thinking would certainly be a factor, but there are lots of other social, cultural, and political elements at work, too. (Ezra Klein and Fareed Zakaria briefly discussed this general topic in the latest “Ezra Klein Show” podcast, IIRC.)
Also, the increasingly sophisticated use of emotional inflammation for profit through media / social media makes people unhappy and dissatisfied all over the world, but especially in the U.S., where there are endless scapegoating opportunities and an exceptionally diverse, not to mention often credulous, population.
Another well written article. Happy and appreciate you gifts to us.
Interesting to read about the concept of the “open loop.” We have pretty much everything financial on autopilot except deciding what to sell toward the end of the year. In particular, I have one actively managed mutual fund that I keep thinking about ditching, but which has significant embedded capital gains. I can see how I might benefit from biting the bullet and closing that loop.
The Easterlin paradox and the observation that each of us appears to have a unique, inborn happiness “set-point” help explain much of what I have read in the so called “happiness literature”.
When interest rates were at historic lows until recently, many financial writers favored holding very little cash. As though our cash allocation should be based on the interest it will earn. If one remembers the purpose cash, bonds and stocks in his or her portfolio serve, a sensible allocation decision can be determined.
Great post, Adam!
Nice advise, Adam. Thank you!
Wonderful post, Adam.
We love planning our vacations. While still amongst the working folk, we did two trips per year, and both felt that the planning was as rewarding as the actual vacation.
We have had donations on monthly autopilot. We are beginning to make our donations annually via QCDs, which, I have to admit, makes me feel good.
I often leave a to-do list on my Google calendar. I love it when, at the end of the day, all items are finished. We also have consolidated accounts and turned on auto-pay.
Getting to the point where we had built a healthy emergency fund helped to wash our fears away for sure.
Finally, while we sure can’t afford a personal assistant, living in a 55 community, where the grass is mowed, snow shoveled, and pool maintained is wonderful. We also have the house deep cleaned once a month, which keeps us (Chris) off the floor with a bucket and sponge.
Excellent. I’d never heard the term “open loop” but I sure understand it.
After ten years with a company, my father left for a position that doubled his salary. Within a year he returned (at his old salary) because he realized he’d lost something by going for the money. Later he became president of that company. I found out Warren Buffett invested in it at one time. We lived across the street from a maintenance person at the company and that family was top quality in every way. I went to public schools and the local community college, and I wouldn’t have it any other way. Mom and Dad taught me well.
It does not take a lot of money to enjoy your life.
Oh, Dad’s salary was about nine times the minimum wage at the time. There were over 1,000 employees and the company did about $500 million in business (in today’s dollars).
These five pieces of advice are very solid. I especially liked the last two. I never thought about our cash holdings as a “buffer,” but that’s exactly what it is. After we sold our house and bought a new condo in 2019, we used a chunk of our profit for a down payment—interest rates were so low that it made sense to us to get a new mortgage, and we refinanced again the next year—saved out some money to furnish and decorate the new place, and parked the rest in cash, where it still is. I was grateful for the buffer when COVID hit months after we moved. I knew my tenured position was safe, but pay cuts and furloughs were on the table for a few months, and my husband is an at-will employee in the private sector. I slept a lot better knowing we had readily accessible funds. I still like having the buffer even though the Empower dashboard shames me for having too much cash every time I log in.
As for “delegate,” my main example of this right now is our housecleaner. I could see adding more assistants as we age, though. For example, even though I like to cook and I enjoy travel planning, sometimes I don’t mind having a meal kit subscription or booking a trip with a tour or cruise line. Schwab would very much like to help us manage our retirement accounts with them, but we’re not there yet.
Maybe we need to look at anger and outrage. There is a surplus of both. How is this related to wealth?
That’s a good question, Michael.
“Someone with just an average income today enjoys luxuries that John D. Rockefeller might have only dreamed of.”
There have been shifts of civic responsibility, environment, shared costs along with the luxuries. What makes one person happy may inflict agitation on a neighbor. For instance, noise. Rockefeller did not have to contend with the roar of airplanes overhead. If he had taken one of Vanderbilt’s trains, he would not have had to deal with loud cell phone speakers and electronic toys (makes me unhappy). And other tradeoffs. I love cooking with non-stick pans and utensils, but at what cost is this to the environment and are we slowly poisoning ourselves? Plastic, an offshoot of Rockefeller’s core petroleum business, makes our lives so convenient, but at what cost to our health (microplastics, plasticizers, and other pollution)?
Cars of 20 years ago were so much better than at any time previous, but my grandparents, who bought their first car in 1926 and owned cars for the following 70 years, also taught me that cars (metaphorically) cut off people’s legs and came to destroy ubiquitous public transportation. (We’re the problem; cars make us happy so everyone in my family has one.)
Health care seems miraculous compared to Rockefeller’s time, but it makes people unhappy with its ridiculous costs (in the US) and many unhappy people seem very intent on reversing the gains in health care (such as attacks on cheap and highly effective vaccines).
The happiest feelings for me came from using money to buy independence, letting me call the shots in my life with no worries.