How to be rich with less money
A 6 minute read • Alan A
Part of our financial management and life hacks series. I’m not going to claim that money doesn’t matter. Or even that money can’t make you happy. The evidence is that it can – up to a point1. But what you do with your hard-earned cash makes all the difference to your life satisfaction, and it may not be in the ways that you expect. It’s also quite possible you can enrich your life by spending – and earning – less money. Let me tell you how.
Money makes you happy – up to a point
It is now well understood that having more money only makes you happier up to a point. We all need sufficient to feed and clothe ourselves, put a roof over our heads – and ideally have some left over for leisure. Research by Daniel Kahneman and Angus Deaton in 2010 found that happiness increases with earnings, with the rate of increase falling off sharply as incomes rise further. Much of the benefit is seen at relatively modest household incomes – and there was no further increase in emotional well-being beyond $75,000/~£55,000 per annum2.
Might you be materialistic?
Our economic system is geared up for producing, selling and consuming goods (and services). We are encouraged to buy and consume by social pressure and slick adverts – and perhaps sometimes by our own desire to ‘keep up with the Joneses’. Don’t get me wrong, our economic system has delivered measurable benefits over many decades, but there can also be human and environmental consequences.
Materialism, or the desire to accumulate wealth and possessions, has become less common in recent times. Ronald Inglehart has studied the phenomenon since the early 1970s, when about 80% of people held materialistic views, to recent times – when only around one in two are materialistic3.
Too much stuff makes you stress
The move away from materialism is maybe a sign that having lots of stuff has not made us any happier. Perhaps people have concluded that acquiring more and more things is like chasing that elusive pot of gold at the end of the rainbow.
In fact, there is evidence that having too much stuff can actually be bad for us4. Think about it. Each material possession you own takes up physical space (meaning you need a bigger place!), it probably needs cleaning or maintaining, it perhaps even takes up mental bandwidth too, as you worry about looking after it, or in some cases (worse still), you feel bad because you hardly ever use it. (How many pieces of clothing do you have in your wardrobe that you haven’t worn in the last year?) You can easily imagine how having too much stuff can start to have a negative impact on your wellbeing.
In his groundbreaking book on the subject, James Wallman coined the term Stuffocation – also the book’s title – to describe the phenomenon.
Those of us who collect (books, model cars, ornaments, whatever!), are perhaps even more prone to the problems of Stuffocation, as we chase that evasive goal of “owning the full set”.
The good news is that, if you can be happier with a little less stuff, it’s quite possible you can also get away with earning a little less money.
What to do about it
Wallman examined several reactions to the condition of Stuffocation that have, at least for some people, led to happier existences.
Put very simply, minimalism is living with the minimum amount of stuff that you actually need. Taken to extremes, it could mean owning just one day’s worth of clothes, one set of cutlery, a single chair and a futon bed … you get the idea. Perhaps not the most comfortable of lifestyles for most of us.
However, the principle is sound, in the sense that it asks us to question what we really need. For an article in our Financial Management section, you can see why this is relevant.
Personally, I have adopted the principle in moderation – I don’t have a wardrobe full of clothes that I don’t wear for example, and my flat is not cluttered compared with many homes. Getting to this state involved a bit of truth searching (which of my possessions was I really using?), some donations to local charity shops, and a promise to myself not to fall into the trap again of buying what I don’t need. The result is that day to day living is more relaxed and I have less stuff to get in the way and fret about. I’m also spending a lot less. But, I do have enough stuff to live a very comfortable existence.
In his book, Wallman describes techniques for working out just what you really need to keep.
2. Simpler living
A second approach explored in Stuffocation is the idea of voluntary simplicity. One US family moved away from their suburban home to a remote mountain cabin; in the process rejecting most of the modern conveniences that we take for granted. Although they felt happier spending time together as a family, and healthier, they struggled with the practical challenges of their subsistence existence.
Taking a remote-working IT job allowed them to earn some money, and buy in more of the things they needed, while still living more simply than they had back in the suburbs.
Again, this is perhaps not for everybody, but for some it could be the perfect escape.
3. The medium chill
Another remedy examined by Wallman is the ‘medium chill’. This involves rejection of the conventional career treadmill; for example, you would simply turn down that big promotion – and the extra money – if it would have meant spending less time with your family and friends.
Ultimately though, Wallman prefers the final approach for combating Stuffocation:
The rise of experiences
Spending your money on experiences, rather than things, can be far more rewarding.
As a friend of mine likes to say:
“The best things in life aren’t things.”
And I would add to that:
“Some of the best experiences in life are free.”
A walk in the countryside with friends or a chat over a good cup of coffee can be just as enjoyable as a meal in an expensive restaurant; and all three are more rewarding than buying another pair of shoes that you’ll probably never wear again.
There is good evidence that experiences can have highly positive benefits for our wellbeing and happiness. Wallman describes the research of Gilovich and van Boven, and others, in Stuffocation.
So why are experiences better?
Here’s the psychology:
- Experiences are more likely to result in ‘positive reinterpretation’. In other words, you tend to remember the good things more than the bad – and create great memories. In contrast, that loud shirt or blouse you bought in a moment of madness (and now you hate) is still hanging there in the wardrobe to remind you daily of your poor judgement
- Material possessions don’t perform as well as experiences because they are subject to ‘hedonic adaptation’. Although initially you got a buzz from that new gadget, you adapt to having it, and get less pleasure from it over time
- Because experiences are harder to compare than material goods, they are less susceptible to ‘keeping up with the Joneses’
- Experiences are more likely to bring us together with, and closer to, other people. Since we are social animals, this makes us happier
Although I personally reject the more extreme approaches highlighted in Stuffocation, over the last few years, I’ve consciously adjusted the balance of my life away from things and towards experiences, and tried to spend smarter. And I have never been happier. I’ve also ‘de-stuffocated’, and avoided ‘re-stuffocation’. My wallet has never been happier too!
So in summary, if you want to feel richer yet not have to earn as much money, then why not consider ditching stuff and embracing experiences? You don’t have to go all out. Just try a few adjustments to start with and see what happens.
Further reading – Stuffocation
If you enjoyed this topic and want to know more, why not check out Stuffocation?
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2Kahneman & Deaton
3Stuffocation Introduction & World Values Survey
4Stuffocation Part I
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