Can money buy happiness?

The commonly accepted response to this question is a simple “no.” Most people seem to agree that because money is exchanged for material things, which can never fill a void in the human soul, spending your life obsessed with the accumulation of money is misguided.

But what if having more money could deeply impact your satisfaction with life? If you could learn to turn money into a magic ticket to happiness, maybe accumulating money ought to be a central focus in your life — something you think hard about, read about, and pour yourself into every single day. Maybe you should even be a little obsessed with it.

Understanding the Money Tradeoffs You’re Making

Life is full of choices. One of the biggest financial decisions people struggle to make is balancing “making a lot of money” with “the important things” like friends, family, and personal fulfillment. It seems like the more you chase the first, the less you’re able to enjoy the second. Fortunately, this dilemma is totally overhyped. It’s a distraction from the real financial choice we all have to make: the tradeoff between luxury (being able to buy a lot of nice things) and liberty (being able to do what you want because you don’t have to worry about money).

Imagine two people, Adam and Bob. Working full-time, Adam makes $25,000 a year (after tax, let’s say, to keep the math simple). Working the same number of hours, Bob makes $50,000. Immediately, without any other information, we imagine a stark contrast between the lifestyles of these two guys, but in this case, our intuition is wrong: Adam and Bob live what appears to be the exact same life. They drive the same type of car, live in the same apartment building, and even binge-watch the same shows on Netflix on the same size TV. So what’s the deal?

Bob has realized that regardless of how much money he makes, he is a human being just like Adam, with similar needs. If people like Adam lead decent lives on $25k a year, Bob wonders why he would ever need to spend any more than that to be happy. Bob has a different idea.

Every year, Bob takes the $25k he doesn’t spend and saves it (or more likely invests it, but we’ll leave that discussion for another article). Bob has made an important realization: He figures that since his basic living expenses are $25k each year, and he saves $25k each year, he’s effectively banking a full year of living expenses for every year he goes in to the office (plus interest!).

Photo of uniform apartment building

Two years pass. Both of these people have lived the same lives from an outsider’s perspective, but their financial positions are very different. Adam has spent every penny he’s earned, and while he’s managed to stay out of debt and lead a pretty comfortable life, he also realizes the frightening truth that:

  • He is trapped. Since he depends on his income to live each week, he can’t afford to leave his job, whether he enjoys it or not, and
  • Any sudden shock to his financial position (like a medical bill or a layoff) would put him into debt he may never get out of.

Bob looks at the $50k+ he’s saved in the past two years, compares it to the $25k per year he knows he’s comfortable living on, and suddenly sees limitless possibilities. Not only can he weather a financial storm like needing to pay his full health insurance deductible several times over, but if he wanted to, he could afford to quit his job for the next two years straight just because he felt like it.

This kind of freedom is unbelievably powerful. Aside from keeping him out of a potential debt spiral, it allows Bob to consider a lot more choices for the direction his life goes from here. He can take time off to learn new skills, travel, spend more time with loved ones, pursue art or recreation, seek better employment opportunities, use the capital to start a business, or, if he’s happy, continue on the same path until the inevitable day he gets bored and wants a change. Despite living the same lifestyle for two years, Bob comes out of the other side with a much bigger smile on his face than Adam. Money bought him freedom, and the feeling of freedom — not the money itself — ultimately led to his happiness.

At this point you might feel like I’m being too critical of this Adam guy. After all, he made all the same purchasing decisions as Bob, so why should he be criticized? Adam didn’t make a lot of money, and it would have been tough for him to get his expenses much lower than they already were.

Actually, this story was never about comparing Adam and Bob at all. The point was really to compare Bob and the rest of his middle-class peers who made different choices, like some other guy, Carl, who had the exact same job as Bob making $50k/yr and leveled up his lifestyle a bit, spending nearly all of it along the way. Who do you think Carl feels more like at the end of the two-year experience — Adam or Bob?

Let’s Drop the Hypotheticals: Here’s Our Real-World Story

We have saved (and invested) significantly more than 50% of our take-home pay at all times since graduating college in 2012. We bought our home for cash when we were 25, immediately following a six-month honeymoon in Hawaii. That may sound super fancy and expensive, but it wasn’t achieved via six-figure salaries. In fact, the highest-paying job either of us held through that point in our lives was…public school teacher.

Photo of Lauren and Steven in Hawaii

None of this was paid for with an inheritance or family money — just the money we scraped together at our “lower-middle-class” jobs by living a no-frills lifestyle and participating in simple investing and the occasional side hustle. After that, we managed to increase our incomes modestly without expanding our spending too much. As a result, I am now (May 2019) writing this article from the road while on a self-funded, seven-month expedition to every United States National Park.

I’m not gonna tell you this required zero effort; we had to give a little thought to our spending and even face a little social pushback for the lifestyle choices we made.

I’ve ridden a bicycle to work (and around town) daily for the past seven years because we only own one used car between the two of us. We avoid the fancy grocery stores in town and buy our food at Walmart instead. We’ve never paid for cable or streaming TV service. And that house we paid cash for? It’s just a modest little condo that didn’t even crack a 6-figure price tag.

Our life isn’t glamorous like a reality TV show, but none of these choices have made us unhappy at all. Actually, the exact opposite is true: We feel an incredible sense of freedom every day because we own less stuff and have more choices about what to do with our time. If that’s what you value most in life, the ideas we have to share might be for you.

Anyway, that’s a little about us, but the point of this article (and this website) isn’t to brag about how cool and special we are. Actually, we’re here to convince you that with a shift in your mindset and a few financial hacks, you can do a lot of the things we’ve done yourself. We’re really not all that special after all.

So, What is a Luxury?

At this point, hopefully you’re at least a little excited about the notion of having multiple years of living expenses in the bank and a world of opportunities ahead of you, but the idea of chopping your living expenses in half from where they are right now is easier said than done. It’s gonna take more than a quick read through one article on a website to get that right (sorry haha), but a good first step is to recognize what unnecessary luxury exists in your life today, since you can’t really just copy some random guy named Adam’s budget verbatim.

There are some obvious and big luxuries many of us indulge in. Two of the first things most people indulge in once they hit that middle-class salary level are bigger housing and a nicer car. But now that you have a different perspective on what money can do for you, ask yourself: In the context of trading freedom for it, is the third bedroom in your house (or, if you rent, is moving into your own space without roommates) really worth it? Could you downsize (or live with a friend for another few years) and be happy knowing you were working toward something more important in your life?

At least when it comes to housing, specifically with regard to home ownership, you’re spending your money on an asset with some value and some potential for appreciation over time. I’m not saying it’s sin-free to buy a big house, but it’s not the worst luxury you could buy.

When you spend money on a car, though, you’re purchasing something that becomes worth less and less each day. Cars are depreciating assets, and they depreciate more quickly the closer they are to new (not to mention that a new car can be over six times as expensive as its more sensible, used counterpart). If I could encourage you to make cuts in one area of your life, transportation would be first on my list. Even calling the expense “transportation” is a bit charitable, since beyond the four-figure sum you need for a decent used vehicle, every extra dollar (or ten thousand dollars) is mostly being poured into the luxury of a nicer look, higher social status, and some bells and whistles. Again, when compared with your freedom in life, is it that important?

Small luxuries can add up just as much. Everyone talks about the daily latte, or eating out at fancy restaurants, but even something as simple as a McDonald’s hamburger is luxurious. Realize the amazing privilege you have when you make the decision to pay another human being to prepare food of any kind for you. It’s almost laughable.

I’m not saying you should never eat fast food again (well, at least not for financial reasons). My point is to get you to think differently and be thankful for the level of luxury that likely exists in your life today.

The bottom line here is that if you are a member of the American middle or upper class, you probably have way more income than you actually need to subside. Take a look at someone who makes half your salary. Do they at least have a place to live and food on their table each day? It’s easy to complain about one’s own situation no matter how fortunate it is; we all do it. But if you’re middle class in the US, you are rich compared to a lot of people.

Appreciate this incredible privilege, and think hard about what you want to spend it on — luxury or liberty? Take joy in the fact that you have a choice!

— Steven


Update, December 2023: This was our very first blog post 4.5 years ago. Today, we’re millionaires!

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