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Finding Happiness and Purpose With Your Money

Published on July 31, 2023

Peter Mallouk
President & CEO
Jonathan Clements Headshot

Jonathan Clements
Director of Financial Education

In light of recent research, Peter Mallouk and Jonathan Clements revisit the age-old question of whether money can buy happiness and discuss the best way to spend one’s wealth. Plus, the case for umbrella insurance and a reminder to double-check your rental car insurance coverage.

Hosted by Creative Planning Director of Financial Education, Jonathan Clements, and President, Peter Mallouk, this podcast takes a closer look into topics that affect investors. Included are in-depth discussions on financial planning issues, the economy and the markets. Plus, you won’t want to miss each of their monthly tips!

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Jonathan Clement: This is Jonathan Clements, Director of Financial Education for Creative Planning. With me is Peter Mallouk, President of the firm, and we are Down The Middle. Today we’re going to tackle one of the most enduring questions in personal finance. Does money buy happiness? And if it does, how can we best use our dollars to get maximum enjoyment? So Peter, let’s start with the first part of that question. Do you think money buys happiness?

Peter Mallouk: Well, I think this is a fascinating question because my thinking on this has changed, and I know the research behind it has changed a lot. There used to be a time where everyone said, “Oh, money doesn’t buy happiness.” And a lot of people kind of shrugged at that, including me. I mean, I know that when I’m working with our clients, if you’ve got 500,000 or 500 million, well you’re in the top couple percent of the population. That’s one group. But when we’re doing, say, the things that Veronica, my wife and I are interested in charitable giving, it tends to be cycle of poverty. And I’ve never heard ever in my life someone that needed a scholarship or basic needs or is going to the local food bank for food and the kinds of things that we’re interested in, never heard anybody in that group say that money doesn’t make a difference and money doesn’t make life easier and therefore make you a little happier.

It’s something that only somebody with money could possibly say. So I think intuitively it felt wrong. I know I’ve written about research that I’ve read and I’ve read your books. That’s how we met. And you’ve written about it where it seemed like, well, money started to make a difference. And now the most latest research, I think is what I agree with the most, which is that it makes a difference to a point for most people. And for some people, the more the merrier. It’s really if the vehicle becomes a vessel to implementing things that you find purposeful. And that’s really where my thinking is. If you’re somebody that really likes to help people around you or you’re very charitably inclined and you have more money and you’ve got a good head on your shoulders, well of course you’re going to be happier because it lets you do more of those things.

If you’re somebody that really wants to invest in a lot of startups, a lot of my clients are like this, they have a lot of money. They like to just go invest in a lot of things. It’s really exciting. It’s a lot of fun. And of course you need money to do it. And so it brings some reward. And there are people that legit love collecting cars and collecting houses. You know what? You need money to do those things. So I think for most people, life gets easier and you’re happier up to a certain point, and then you’ll know the research better than me, whether it’s $100,000 or whatever. And after that, for most people it makes no difference. But for some, the happiness continues to accumulate and maybe the research so much better than me around here, Jonathan.

Jonathan: Yeah, let me throw this in, which is money won’t necessarily buy happiness but not having money will buy considerable unhappiness — that goes to the case of people in poverty. If you can lift people out of poverty, you can vastly improve your life. But even at higher income levels and higher wealth levels, one of the great advantages of having money is that you don’t have to think about money. Not having to think about money is a huge privilege, and to me, it may not be a source of happiness, but at least you avoid the unhappiness of worrying about how you’re going to pay the rent, how you’re going to pay for food, how you’re going to pay the utilities. So money may not necessarily buy happiness, but not having it is definitely a problem you want to avoid.

Peter: 100%. I grew up in a great household, and when my parents came to the United States in the beginning, they didn’t have a lot. We were going out to eat. We were going before five o’clock and you better get your order in before the prices on the menu change and you could not order anything but water. And we were perfectly happy. But there’s something about not worrying about those things and let alone air conditioning, heat, and things like that. One thing I’ve noticed with my clients that I haven’t seen research around, but I’m convinced it is true, is obviously there’s a big shortfall, it creates stress. And if you look at married couples, the number one cause of fighting, we won’t talk about here, but the number two cause is money, right?

It’s a very, very big deal, and it’s the number one thing people under 35 lose sleep over is money. So you don’t have enough. There’s a lot of anxiety, a lot of stress that comes from that. Then there’s this sweet spot and this sweet spot I found is when families have enough to do everything they want without worrying about it, but not so much that there are new things to worry about. And I’ve seen a lot of our clients, and there’s a lot of these at Creative Planning that have a huge amount of money and their estate plan becomes more complex and they start to worry about, well, if I’m gone, can my spouse handle this? Am I going to ruin my kids and my grandkids? And how do I give this money away? I don’t have time to research these charities, and if I give this to my kids while I’m living, do I rob them from the satisfaction of achieving things? There’s this really sweet spot of having enough before it becomes too much that you start to worry about a lot of other things.

Jonathan: So Peter, let’s dig into the particulars somewhat here. So after we pay for life’s basic expenses, shelter, food, electricity, transportation, insurance, taxes and so on, most of us have money left over and there are endless possible choices. We could buy stuff, we could buy experiences we could save for the future, we could give to charity, we could give to family members. Do any of those particular categories of use of our discretionary dollars appeal to you?

Peter: I would say that the research around this is fascinating and I align with the research. The research basically says most people derive more pleasure from experiences than things, but it’s definitely not true for all. There are definitely people that if you said, “Hey, you can have this really cool new car, or you can go on this incredible epic vacation with eight people you love the most.” The car is going to make them much happier and for a much longer period of time. So it’s definitely a know thyself situation. I am definitely an experience person. I want to enjoy things with my family and friends and experiences with them. Not that I don’t like things, but I think knowing yourself is a big difference. There’s also a very big contingent of people that derive enormous pleasure from helping other people one way or another, whether it’s family or charities or anything like that.

And I’ve seen people go all in on any one of these three categories. In reality, we’re all dynamic. We all have things that we want to have. Most of us want to make a difference, to some extent, to other people, and most of us prioritize our experiences. But it’s definitely a know yourself and if you align the spending with that, you’re going to be happier. I think what’s interesting about the research that I think is definitely true is if you start caring about what other people think, so you start to use your money in a way to appeal to those people, you’re going to be miserable. And that’s the people that buy things to look cool to other people, and that’s the path to total misery. It’s one of the biggest creators of anxiety and dissatisfaction and not being happy, and that’s unfortunately probably where the largest percentage of the population fall, is the keeping up with the Joneses group.

Jonathan: Coming back to your example of the car, because I’ve seen considerable debate about buying the fancy car. For people who really are drawn to buying cars, I think there is an element of experiences to it. They think about getting in the car and going somewhere, so it’s not simply an object sitting in the garage. It is in a sense, an experience for them, and it may be an experience that they share with other people, other car enthusiasts. And I think many times the possessions that appeal to people, the experiences that appeal to people is that there is a giving aspect that they somehow think that they could share this with other people, so they share the experience, the vacation with family members, or they share the car by going and seeing fellow car enthusiasts. So I think the element of experience and giving tends to mix in together with the purchases, and that’s what makes the purchases special.

Peter: What a great example. And until this moment, I had not thought of it that way, and what it instantly made me think of is a client that I know very well, huge art collector. I mean, one of the largest in the United States. Had the opportunity to tour his property, and I mean he has hundreds of millions of dollars of art throughout his house and in his yard, and without a doubt that would be how I would describe him. He’s got the pleasure of having these things, but every time he looks at it is an experience and every time he gets to share it with somebody, he’s having an experience and they’re having an experience, and it’s an interesting way of looking at that hybrid approach to things and experiences.

Jonathan: So that brings me to the $64,000 question, Peter. Thinking back over the ways you’ve used money over the past 12 months, what’s brought you the greatest happiness? And you can give more than one example.

Peter: I would say I’m a live events person, and so a big moment for me was when I was able to buy lower-level tickets to sporting events or concerts, which literally did not happen regularly until I was in my late 30s. It was really one of those things that all growing up, you’re in the upper level of the baseball stadium, or not even going to the football game and then be able to get in the stadium and then be able to go, “You know what? I want to be in a really good spot.” To me, that’s a great example of money getting me an experience I wouldn’t have otherwise. And I think after that I’d put travel, the ability to go see the world and be able to share that experience with your family and your best friends is really special, and you can do all these things on the cheap, right, but money makes them easier. How about you?

Jonathan: A couple of things I wrote down when I was thinking about this question — number one was a couple of months ago we went to see Billy Joel and Stevie Nicks perform.

Peter: Hey, I’m going to see them next month. I’m very excited about that.

Jonathan: Lincoln Financial Field here in Philadelphia, and we were in row 18 down on the field. These were the best tickets I’ve ever had for a large arena concert, and it was the only concert I can think of where I didn’t look at the jumbotron at all. I actually looked at the individuals. Half the time when you go to a concert, it’s like, I might as well be back home watching this on YouTube, but when you can actually see the expression on the faces, that was really special and that was worth the money. The other thing that I think about over the past year is one of my promises to my daughter was that I would fund a 529 plan for my grandson, my first grandchild, and I said, “I’d get it up to $50,000 and the rest of the responsibility is up to you.” So I funded that over the past couple of years and sending off those checks to the 529 gave me more pleasure than any money I’ve spent on myself over the past couple of years. Just knowing that you’re paying it forward somewhat.

Peter: I would say the happiest I’ve seen my dad in a long time was when my son graduated from college a couple of months ago, he gave him a check for the first time. My son’s getting ready to buy a house and just watching how happy he was giving him the check really, really speaks to what you were just talking about.

Jonathan: All right, Peter, so it’s that time of the podcast. What’s your tip of the month?

Peter: So my tip of the month is total tangent here. If you want to protect your things and yourself, you should have umbrella insurance. And this is top of mind for me because I had a client have an experience here, but we all know that you have life insurance on your life and you have insurance on your car in case there’s a wreck, you have insurance on your home, but there are things that don’t fall neatly between the home and auto. I had a client whp had an event; someone fell down the stairs and became injured and the homeowner’s insurance said, “Hey, nothing happened to the house. This isn’t on us.” Umbrella insurance steps in and says for those things that are not neatly covered by those policies, they cover it all. Now it’s very improbable, but the good news is umbrella insurance is extremely inexpensive. Somewhere for most people, $100 to $300 a year get a million dollar policy. And if those strange things happen, the slip on the sidewalk, the fall down the stairs, that may not be covered by your policy, it protects your wealth. How about you?

Jonathan: Like a lot of people, whenever I rent a car, I decline the insurance and I rely on the coverage provided by one of my credit cards. But I just discovered that one of my credit cards, a Discover card that I have, doesn’t offer car rental insurance and hasn’t for the past five years. And yet during those five years, I’m pretty sure I used that credit card to rent cars thinking that I was covered. So my tip of the month is if you’re going to be renting a car, check the credit card that you’re going to use and make sure it does indeed provide car rental insurance, and even if it provides car rental insurance, see if there are any exceptions, for instance, if you’re abroad or if you’re renting a particularly exotic car, because you may discover that you are not covered. So anyway, that’s it for me, Peter, and that’s it for us. This is Jonathan Clements, director of Financial Education for Creative Planning. I’ve been talking to Peter Mallouk, President of Creative, and we are Down The Middle.

Disclosure: This show is designed to be informational in nature and does not constitute investment advice. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on this show, will be profitable or equal any historical performance levels.

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