Is having wealth the secret of happiness? The fact that millions of Australians buy lottery tickets every week, even though they have less than one in a million chance of winning, suggests that the majority think it is. But the evidence is very much to the contrary.
Many lottery winners end up broke after less than two years, and the papers are full of stories about rich families fighting over the family fortune. One well-known book, Navigating the Dark Side of Wealth: A Life Guide for Inheritors by Thayer Cheatham Willis, tells about the challenges faced by those who have been "unlucky" enough to be left huge sums of money by billionaire relatives.
There is no doubt that nothing can take the place of money in the areas where money works. Margaret Thatcher put it succinctly, "the good Samaritan needed more than good intentions - he needed money as well". The problem is that money of itself cannot give meaning to our lives.
This leads us to the big question - how can we arrange our finances so that we enjoy our money and are not burdened by it? If we can believe Elizabeth Dunn and Michael Norton, the authors of the new book Happy Money: The New Science of Smarter Spending, it might be time for a radical rethink on the ways we spend our money.
They point out that, for most people, experiences turn out to be far better value for money than purchases. Certainly, a new car gives you quite a buzz the day you drive it home, but after a few weeks you become accustomed to it and it becomes simply another thing you own. In contrast, money spent on a holiday that has long been on your bucket list gives you wonderful memories for years to come.
But the big surprise was their recommendation to invest in others. They discuss an experiment in which participants told the researcher how happy they were, provided their phone number for follow-up, and then received a mysterious envelope.
Many envelopes contained a $5 note with the instruction to spend it before 5pm on a gift for themselves, or for expenses such as rent or food. Other envelopes carried a $5 note with a different instruction: to spend the money before 5pm on a gift for someone else, or a donation to charity.
Just to broaden the experiment, some of each type of envelope contained a $20 note instead of a $5 one.
After 5pm, all the participants were phoned and asked to report their level of happiness now that the day had passed. Overwhelmingly, individuals who had spent money on others were happier than those who spent money on themselves - even though there had been no differences between the two groups at the beginning of the day.
The twist in the tale was that the amount of money in the envelope made no difference to their feelings. How the money was spent mattered far more than the amount they were given.
I asked my wife, who was a psychologist, why giving money away has such a positive effect on our well-being. She explained that it is because the person who makes the gift feels they are contributing to society and benefiting future generations, while enjoying the feeling that they have made a contribution without any thought of benefit to themselves.
Did you know that many retirees die with more money left in their superannuation than they had when they retired? This is because they tend to live more frugally after they retire because they don't know how many years they have left. For them, making donations to worthy causes is a wonderful way to add meaning to their lives, as well as gaining the happiness of seeing what a huge difference their generosity has made to other people's lives.
Let me conclude with a quote from American poet Rod McKuen: "The gifts that one receives from giving are so immeasurable that it is almost an injustice to accept them." I reckon that sums it up.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: email@example.com