Money Can Make You Happy. If You Follow This 5M Framework

Don’t make these 2 mistakes searching for happiness

There are two approaches to money and happiness. Both are wrong.

I wonder which you mistakenly follow?

1. Happiness = becoming rich & buying a lot of stuff. Money is central.

I got an Accountancy degree because that meant I could earn a lot of money. With the money, I could buy a lot of stuff and that would make me happy.

But I noticed something strange happening. I would look at job adverts and fantasise about my future salary. Each week my expectation of what is a good salary would gradually rise. 80K was now not enough, I saw an ad for 90k last week.

This is hedonic adaptation and discredits the idea that more money will make us happy. Positive psychology has repeatedly shown any boost in happiness from buying stuff is only temporary. More and more is required for the same effect.

This is why we look at a rich celebrity buying their 9th Ferrari and imagine we would happy with only one. But if we had one we would soon be looking for the next.

A quick glance in any direction will reveal this is the most common approach. Even if in polite conversation people we assure each other ‘I’m not greedy I just want enough to be happy’ (which usually means more).

I did not want to spend my life on the hedonic treadmill. So I quickly got off it and tried a different approach.

2. Happiness = inner peace/contentment. Money is Irrelevant.

I rejected the more money = more happiness approach and went on a spiritual journey. This led me to conclude that money is irrelevant to happiness.

I gave myself to prayer and meditation. Focused on my character and inner life. I even changed my career to focus on helping others who were in need and got a lower salary.

I was seeking an inner state of contentment.

Happiness is not getting what you want but wanting what you have.

There is much in this approach that I still value. However it was incomplete. I still struggled to know how to handle money. It was causing tension in my marriage. I needed more practical advice that I could use on a weekly basis.

I began to find snippets of advice and research on what worked. I experimented. Gradually I pieced them all together to develop the 5M framework. The ultimate guide to how money can make you happy.

Let’s dive in.

The 5M framework

There are 5 ingredients to the framework. The first two lay essential foundations.

1. Spend less than you earn

The place to start is not spending and buying stuff but realising the power of not overspending. When you spend more than you have the results are:

• the guilt and shame of debt
• the anxious feeling of not having enough
• the stress of making ends meet
• relationship tension with your spouse
• never feeling free to spend

All of this is constant and vastly outweighs any pleasure you get from spending. The path to happiness begins by removing all of these negative emotions from your life.

Yes I know — budgets are boring.

But when you see them as a way to remove guilt, shame, anxiety and stress they become very important (and even a little exciting).

There are many practical ways to spend less than you earn:

• increase your income
• learn self-control over the little expenses
• make the decision to spend less on the big ones (car, house, holidays)
• resist lifestyle creep
• closely monitor your spending (by itself this will reduce your spending)

The main key is to carry a positive vision of happiness. You only spend what you have so you can be happy. Don’t see it as a limiting exercise

Annual income £20 annual spending £19.50: result happiness Annual income £20 annual spending £20.50: result misery ― Charles Dickens, David Copperfield

2. The unexpected is predictable so be ready

I am always surprised when people complain and are made miserable by unexpected costs, such as something needing repaired or replaced. For days or weeks, this can cause people to feel unhappy.

Which is odd when it is not really unexpected.

If you have 10 major electrical appliances in your home. Assume each lasts about 5 years. That means 2 will break every year.

So why are you surprised when it happens?

You buy a car — guess what? You are inviting car repairs into your life. Yet it is staggering how many people are surprised and made unhappy by needing to pay big sums of money to repair their car.

All this unhappiness is totally unnecessary.

Simply build up a fund to cover these expenses and it will never cause unhappiness again. Make this a priority if you want to be happy.

When the unexpected cost comes up — it won’t faze or bother you. You pay it out of this fund. No stress. You don’t even think about it once it’s paid.

Points 1 & 2 lay the foundations by removing unhappiness. Now we can get to the exciting stuff of splashing the cash.

But what sort of spending makes us happier?

3. Seek experiences more than things

The research always says the same thing. Experiences bring more happiness than possessions. Going out for a meal, investing in a hobby or visiting the theatre. All bring more happiness than buying something we really want.

This is for a number of reasons:

• experiences deepen relationships as we rarely do them alone
• we anticipate and remember experiences more. We get the triple happiness of before, during and after.
• the pleasure of things we own quickly fades but experiences get sweeter with time as we retell the story
• experiences feed more conversations with others. You will talk with others about both your experiences and the stuff you’ve bought. But telling others what you’ve done lasts longer and creates more response

So if you want more happiness bang for your buck. Shift some of your spending towards experiencing life more.

4. Have fun giving it away

Research participants were given some money and half spent it on themselves and a half gave it away. Those who gave it away reported higher happiness.

Giving generates more joy than spending.

Interestingly, observers of the study were invited to predict the results. They got it wrong. They thought those spending money on themselves would be happier.

Giving makes us happier than spending. Your bank account will reveal you don’t believe it does either

If you want your money to cause you more joy. Here are 3 suggestions on how to give some away:

• pick one charity you care about and give regularly. Read their updates and learn how they make a difference. Realise you are part of their impact.
• be a surprise giver — once a month give money or a gift to someone. You may need to keep this anoymous to avoid awkwardness. But that can make it even more fun. Notice how it feels.
• Support a local project. It can be powerful to be giving to something local. You will more likely see the effects and be reminded of what you achieving.

5. How to maximise happiness from your stuff

So far the research has been pretty negative about buying stuff. Let’s be honest we will keep buying things no matter what the research says.

I’ve got some good news though.

There are ways to get more happiness from what you buy stuff.

Here are 2 approaches you could try:

i. delay the purchase and only buy when you have the money. Save a specific amount towards it each week. How will this help? Anticipation increases the joy when eventually own it. It also gives you pleasure before you buy! And as a bonus it will confirm you really want it — so you can avoid an impulse buy and feeling regret.

ii. there is a mountain of research that links gratitude to happiness. This tends to focus on relationships and health. Why not start a gratitude practice around what you own? Either write it down or share it with others. ‘I really like this sofa’, ‘I am so glad we have this beautiful picture’.

Now the hard bit.

Putting 5M into practice

There is an order to the 5M framework. You need to start with points 1 & 2:

1. Spend less than you earn
2. Set up an unexpected cost fund

This solid foundation will remove a lot of unhappiness. You can then explore maximising joy from your money:

3. Seek more experiences

4. Have fun giving away

5. Experience gratitude for what you have

Use this as a checklist when reviewing your finances. Use it in conversations with your partner.

And enjoy the happiness which then flows into your life.

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