Harvard Professor Reveals the Worst Thing To Do with Your Money

[Music] student debt lowers life satisfaction car debt tanks life satisfaction credit card debt is catastrophic for Life satisfaction we've been seeing this for years and years people who give more money away they get richer what happens is when you give money away you become a problem solver and your mind changes a recent study from Empower asked Americans how much their annual salary needs to be for them to feel happy less stressed Millennials locked in at 525 and the deal is that you think that with more money you're going to be a lot better off that's something that's really out of sync because we have those expectations about what money's going to buy with our happiness and it doesn't it turns out there's five things that you can do with your money four of them will bring you happiness and one won't your brain is telling you to do the one thing that won't bring happiness the worst way the worst thing you can do that brings you no satisfaction and lowers your happiness is [Music] to and and done what's up guys George camel here and today I've got a very special guest on the channel happiness expert Arthur Brooks More officially he's a social scientist and professor at the Harvard Kennedy School and the Harvard Business School where he teaches courses on leadership happiness and social entrepreneurship and because he does the most he's also a columnist at the Atlantic where he writes the popular weekly column how to build a life he's written 13 books and his latest is a number one New York Times bestseller called build a life you want the Art and Science of getting happier co-authored with Oprah Winfrey yes that Oprah Oprah can do anything going to add that to my summer reading list and today I have the distinct privilege of nerding out with this brilliant man about the intersection of money and happiness but before we get started let's get click happy with those like And subscribe buttons and share this video with your friends like Oprah because I want to write a book with Oprah 2 here's my pitch getting over the hump one camel's journey to writing a book with Oprah pretty meta right I'm thinking forward by Gail obviously we all have big dreams and sometimes it's better not to dream that dream all right let's get to my conversation with Arthur Brooks Arthur it is such an honor to have you here how you doing I'm doing great how are you we built this whole studio just for you well thank you are these all my books they're all books that you've either written or read I assume especially the textbook of medicine from 1928 yeah that's I did right what your favorites I'm aging well this is amazing we got a lot to cover you ready to get into it I'm ready we did our research here first of all I love your work in the Atlantic thanks you did a piece called why you're better off not borrowing and I was doing jumping jacks because of what we teach around here here's what you said want to buy happiness wait until you have the money can you talk about what you found about how debt affects happiness yeah so it's really clear I mean there there's there's a lot of I'm an economist by background but I but I study you know the science of happiness and so the putting those two things together one of the things that I teach my students and I talk about a lot is the ways that you can buy happiness it turns out there's five things that you can do with your money you can buy stuff you can buy experiences you can buy time you can give it away or you can save it those are the only things you can do with your money right four of them will bring you happiness and one won't your brain is telling you to do the one thing that won't bring happiness which is to go buy stuff [Music] more why is our brain that wrong because we're evolved in that way so humans were evolved we're we're we're kin based hierarchical tropical species Homo sapiens now some of that we're going to get Beyond like we invented coats so we don't have to live in tropical places I live in Boston which is the world's worst weather it's fun agreed you know I can live in a house that has heat Etc but I'm not going to get away from this hierarchical kind of kin based species and so the result is that we have this natural evolv tendency to want to rise in the hierarchy how do you do that by signaling how do you signal by actually being able to to to to to have more stuff than you need to survive the way that you display that that's the reason people have five watches why in the heck do you need five watches because you can and if you can what that suggests to potential mates for example and to people who might want to understand if you're the alpha or the beta in your tribe is they look at all your stuff and say huh George has got more watches than he needs clearly he should be able to have 75 children this is kind of what your brain is doing now of course that's anachronistic you don't know that you're doing that but it's about status and success status and success and and and then you try to connect the dots inside your brain by saying well since I want that it must be that I really enjoy that and then you say if I get that better car my car is fine but if I get that better car I'm going to really enjoy it a lot and it's going to make me happier and then it doesn't you're like I guess I needed a better car that makes sense to me so you're telling me that the louder the car the higher the truck the more primitive of a species they're they're trying to attract mates this is what we're doing this is what our brain is giving these particular signals but we never quite figure it out now once you know that you're going to notice it and you have a Fighting Chance of changing your behavior wow yeah so that's the whole point now the other four actually do authentically bring happiness but those aren't our tendency buying experiences with people you love that's really important now experiences they cost money depending you can walk in the park with your beloved and and it might be free except time but if you want to go to Cancun it's going to cost you some dough right but if you're going to spend the money do that and and do it with somebody you truly love because then you'll remember it forever we think that stuff is permanent and experiences are evanescent they're impermanent it's exactly the opposite you'll forget the stuff and you won't forget the experiences I learned this by the way in in a in a very real way I'm a social scientist but I'm I'm living in a laboratory environment called my life cuz I studied best experiment and you know I've been married 33 years 32 years ago my wife and I were having this knockdown drag out fight ironically about how to how to celebrate our first wedding anniversary and the reason was because we had no money we had just immigrated to the United States from Spain and and my wife didn't speak English yet and and I was working this very basic job I was in school was my late 20s but I was in college just trying to you know get my life together and and we had just enough money to borrow or beg or whatever to do one or two things we could go to the beach for 3 Days on our to celebrate our anniversary or we could use the same money to buy a couch and we didn't have a couch and so my wife who's Spanish she's all about the beach and I'm a Thrifty practical American so I'm like the couch we'll have it forever so you're thinking utility she's thinking fun the beach is over in 3 days man the couch is forever I mean it makes perfect sense so we're going back and forth Beach couch Beach finally finally we compromise and and we go to the beach and that's why I've been married 33 years but took me but but my point is that we thought about that recently and we got the couch six months later right because we had the money and got the couch I don't remember the couch I don't remember what color it was gray blue but I remember that Beach vacation everything that we did because we were in love and we still are so your experiences with the people that you love are truly permanent and I could explain the Neuroscience of how you store those and and reconstruct those memories over and over again goes into a a folder in your brain it goes into a series of folders in your brain actually you reconstruct the memories and every time you do that it frames up the current context of your life the couch nothing who cares it's a couch but the beach vacation with your beloved no joke that's number one number two is you buy time and spend it wisely for example you know if you don't like cutting your and you've got a little extra cash spread the love and hire somebody to cut your lawn you just created a job that's a really a lot of Americans are very snoody about that or they're kind of oh that's classist you know that's an elitist H someone yeah but that's nuts yeah it's it's the best thing you can do if you've got extra money to to hire somebody to clean your house and by the way pay them fairly and pay them a fair wage and do it honestly and do it legally super important but then don't waste the time don't Fritter it away on Instagram that's stupid because that's just a waste of your time spend the time in something meaningful reading a book that you want to read going for a walk in the country spending the time with the with the person that you love that's the second way you're truly buying happiness and you're cting your job third is to give it away give it to your something in your community something that really speaks to you and it'll give you Joy we get so much Flack for this I tell people hey in the budget 10% should go to giving and they go this guy's an idiot why is he telling people to give away their money F it's counterintuitive to do that but what is the science behind the happiness and joy well it's it's not even behind that I mean we can even talk more mechanically about how that works so I've been tithing my whole life I'm I'm come from a Christian background and my dad was a tither and and one time I asked him when I was you know coming of age I said dad before or after taxes right and he's like I tithe before taxes I'm like Dad after taxes what's wrong with you and he's like just in case just in case I get up there and like it's like I don't care about the system said St Peter and and the with the keys to heaven anyway it's a really important thing and one of the things that I've shown in my research going way back this goes back 25 years in my research is that the more you give to charity the Richer you get and what do you find yeah yeah you find that in subsequent years when you give a dollar to charity you on average there's about A1 60 that comes back to you in subsequent years now I was thinking when I first saw this got to be the hand of God nah it doesn't make sense I didn't believe it actually I thought there was something wrong with my data and then I was working with this psychologist I'm an economist I was working with a psychologist he says no we've been seeing this for years and years people who give more money away they get richer and they make way more money back than that which they give away and I'm like is this you know the the wheels of you know this isn't like a Karma thing like you get you give what you get it's not one of those what happens is when you give money away you become a problem solver and your mind changes you become a more effective person people who solve problems and give their money away are people who feel more effective and they earn more money and I talked about the Practical side I could tell you about you know how it makes people think you're better looking I've got data on that wow yeah yeah it's unbelievable women find men more attractive when they're seen to be giving in volunt give a big tip at the end of that dinner they go man that guy's good looking I like now of course evolutionarily it says I should this he's got enough money you know he's he's got he's got extra money so there's a piece that's Financial if he has the money to be a generous Giver that's attractive on its own but what you find also is that that people who are already in couples women find men more attractive even if they're already in a couple if they been married 25 years your wife likes you more when she sees you being charitable toward others that's there's a lot of laboratory evidence that suggest that using human participants in these experiments so that's giving money away but you got to find something you got to do the work to find out what animates your soul to figure out what you want to give to and last but not least that's one two and three that'll buy happiness here's the biggie put your money away and save it every dollar you save will buy happiness for you and the reason is because we're evolved to make progress human beings don't get that much satisfaction from arriving at a goal but making progress toward a goal you know I've done a lot of research over the years on you know why people are so happy when they're on a diet and the reason is because the scale goes down and it's well worth not eating what they like because the scale going down is a daily reward we're making progress is that own drug in a sense it is it is incredibly rewarding and it actually satisfies the dopaminergic pathways I mean the the dopamine Pathways give you an anticipation of reward and that anticipation is really the it's the sweetness of life well we've been helping people get out of debt for decades now and there's something about that sacrifice when you're knocking out you're doing the debt snowball method smallest to largest balance you free up a payment and it it seems to change their physiology and give them more agency over their life other areas they start to lose weight their marriage is better they're communicating more so that's amazing that's the progress principle that's how it works when you're making progress in one part of your life you start making progress in all parts of your life now the better way to do it is to not be in debt in the first place and just start making progress toward a bolus of savings because what that says is life is going to be more secure later I'm going to leave more for my kids I'm going to be able to buy a house without a mortgage at some point or maybe I mean how wonderful is that kind of thing but but even if you are in debt getting out of debt will give you the same progress principle the problem the the worst thing that you can do with your money the worst way the worst thing you can do that brings you no satisfaction and lowers your happiness is to spend it when you don't have it for consumption in other words buy something you don't have the money for that's just fun for you right now so for example running up your credit card bills is the stupidest thing you can possibly do now I get it sometimes there's like a moment of desperation you got to put groceries on your credit card okay that's not what I'm talking about I'm talking about like I don't know man I can't afford this vacation to Cancun right now but you know what I'll pay it off over the next 6 months okay if you do it with your beloved that's good enough I guess even worse than that would be I want to buy a big screen TV and put it on my credit card and pay that off over the next 5 months worse worse worse is I'm going to buy an $85,000 truck oh boy and I'm going to put it almost all on credit and I'm going to pay it off over the next 5 years $600 a month that is insanity because the truck enjoyment will wear off very very quickly and 5 years from now is still eating away at you and you're not making progress you're going backwards and if progress brings happiness regress brings unhappiness that's the reason that debt that debt is a form of Happiness death M I love that happiness death it's the best way to Snuff out your happiness I got to tell you this conversation is making me very happy and the other thing that makes me happy is saving money it feels really good and one of the ways I've that recently is by switching our phone plan to T the sponsor of today's episode T is a phone service provider designed to be super affordable and super flexible there's no contracts no fees no strings attached and it's super easy to get set up you don't have to go anywhere no joke in less than 60 seconds I signed up for T from the comfort of my home and my bed without needing some guy in a red Polo shirt to push a $65 phone case on me and the best part is you get to keep your phone and phone number and the coverage is great because it runs on T-Mobile's Towers T pricing starts as low as 5 bucks and goes up to 25 bucks a month for the unlimited everything plan and you're free to upgrade or downgrade as you please and to save you even more and give you a little more happiness go to t.com Jorge to get five bucks off their unlimited data plan for your first month of service it's been great for my family and I know you'll love it too that's t.com George Tove five bucks I'll also drop the link in the description below all right back to the conversation well we we found you know as people make these decisions the car depreciates in value financially they're underwater on the car so there's this long-term stress that ends up happening they end up calling the Ramsey Show saying how do I get out of this at the time it seemed like a good idea so a lot of this points to the the concept of delayed gratification um and instead of the get rich quick get happy quick I just want it now which is our entire culture how do people sort of shift away from that into that delayed gratification building the habits over knowledge is power knowledge is power about your own emotions and about your own happiness this is the reason I teach happiness because I want people to have the knowledge and I've found that when people understand some of the science like I talk about the blah blah blah you know the science in the brain and the neurom modulators and all this stuff but when people have a little bit of that they're like huh I understand me so don't make the two biggest errors when it comes to money which is thinking that consumption of stuff will bring you happiness and that borrowing is somehow okay those are the two big errors and when you combine those two errors you're you're in big trouble and you wind up calling the ramsy show how do you argue against the math cuz here's what we get on the show and on this channel people say well George it makes sense to pay off the highest interest first and why would I pay off my low interest mortgage when I can make more by investing the money and so they want to argue about staying in debt because of the math no I understand how the math works and as an economist I can if you're rich enough you actually might want to keep your 2.85 mortgage even though you can afford to pay it off and then put more money into the market I get that if you're rich enough the problem is if you're not what happens is that the debt that you have especially Consumer Debt is a is a is a burden it's a psychological burden and when you have a psychological burden it's like you're carrying an enormously heavy backpack and trying to run a foot race you need to actually be free you need to be psychologically free and the best feeling you can possibly get and I say this on the basis of somebody who studies behavior and this is about happiness not about sheer economic calculations is not having the burden of having somebody have a piece of you you need to be free it's the most amazing feeling when you have can you imagine having zero debt in your life you owe nobody anything I I remember telling my my my father taught me this he said debt is a form of slavery now there's certain cases where it's it is logical you're just not going to have enough money to buy a house and you want to be a good member of your community and you want to raise and there's a a very fluid market for mortgages and okay fine but there aren't that many other cases where you're and by the way if you're paying rent you're not making progress and if you're paying a mortgage at least a little tiny piece of the house is becoming yours and so that's one of the reasons that the research shows that Mortgage Debt is the only kind of debt that doesn't lower happiness ah it actually doesn't lower happiness unless it's too big unless it's become to you can't the payment well you can AF even if you can't afford the payment if it's such a big thing that you're worrying about it every month then it's going to lower your life satisfaction quite a lot student debt lowers life satisfaction car debt tanks life satisfaction credit card debt is catastrophic for Life satisfaction so that's the important thing to keep where have you been all my life this exactly what I needed you smart you very smart well we're we've both lived in Boston for a long time yeah you you grew up in Boston 20 years and so I moved out of there I got to the South a happier place I've lost it uh my parents are Middle Eastern and so I didn't really accumulate the Boston accent as quickly as my Irish Italian Catholic friends yeah yeah are they are your parents from from Lebanon uh Syria okay mom and dad from Egypt there you go I got the Syrian side clearly I'm like an albino Middle Eastern well the the Syrian and you're raising a Christian home yes Arabic Baptist nonetheless okay so there you are so like all good things all entrepreneurial things all smart things in America you dig a little tiny bit you're going to find a Middle Eastern Christian in there hey I like this guy well being that we both spent a lot of time in Boston why does everyone from Boston seem unhappy that's a shtick part of is a stick I mean cuz they love it they'd never leave so I'm like well they're not unhappy enough to leave yeah no similar with any big city you know New York it's a very just like you just got to muscle your way through the day you have to you have to B part of the shtick is that everything sucks and you're stupid anyway that's my view but it's also one of the things that we find in the science of happiness that one of the greatest barriers to happiness and that actually brings unhappiness which is not the same happiness and unhappiness are processed largely in different hemispheres of the brain so they're not opposites and we have both kinds of both negative and positive emotions in response to threats and opportunities in the environment one of the greatest stimuli for negative emotion negative affect in our lives is is is aggravation and so people will say to me sometimes like will I be happier if I cut my commute and move closer to my job the answer is no but you will be less unhappy if you do that because commuting is the number one activity not involving other people that people do that brings that that brings unhappiness to their life you want to know what the number one interaction with another person that brings unhappiness to people's lives every day is what's that spending time with your boss that's the number one unhappiness provoking interaction in the average person's day spending time with your boss that is why I don't know if I can agree with that Dave Ramsey I would love hanging out wuss seriously but work is a is a source just like finances can be a source of unhappiness yeah well a lot of people in the you they're miserable at their jobs and they're wondering why they're not making good money and why they can't make Financial progress It's all kind of tied together a lot of it is tied together and a lot of it has to do with the way that they're designing their lives um and so life design is a lot of what I do emotional self-management is a lot of what I do and again the secret is in the science you know once you understand what's going on between your ears then you can manage yourself a lot better you can you can change your habits and once you change your habits you can actually start passing on these ideas to other people and that's the real gift is when you become a happiness teacher that's powerful um let's get into salary and happiness cuz we've done a lot of content around here about salery and happiness celery is part of it our writer wanted us to have celery and I said Arthur he's a he's a he's a professor at Harvard we can't have celery salary jokes and now that I know you enjoy this I regret not having C hey man I'm turning 60 next week and uh I'm all about plays on words that are incredibly annoying that's perfect I am looking forward to 60 now because this is I am this is kind of what I'm going to do for the rest of my life it's like Dad jokes and grandpa jok that reminded me of a thing and so I'm just going to talk about it for like an hour that's amazing and they're like Grandpa's going crazy guys he's finally lost it now for an openmouth nap he's on the celery salary train again it's amazing I love this guy uh recent study from Empower asked Americans how much their annual salary needs to be for them to feel happy less stressed gen Z said 128k Gen X 130k Boomers 124k Millennials clocked in at 525k what is going on here what what why is it with Millennials are so much higher and is there actual correlation between salary and happiness so yeah when people are asked to speculate on the amount of money that would be enough cuz that's really what it is it's not about happiness it's about having enough be comfortable comfortable what that means is to not be B that's really what it comes down to all of those how much would you need to be happy are really questions about how much would you need to not be unhappy and the sources of the unhappiness of the aggravations that come because you're worried about money or you're feeling pressure for money that's really what it comes down to and so people are speculating on man how much would I need so I'm not feeling kind of out of sorts I'm not thinking about money all the time it's not living in your head rentree exactly right and what you find is we do know what that number is but the speculative number isn't very meaningful because according to the data it's almost 40% more than you have and so that's a moving Horizon and the reason is because they're not watching the ramsy show and trying to live within their means if you live within your means your Horizon's not going to change but if you don't live within your means in other words you're going to go to the hilt and what you can spend to be comfortable is always going to be 40% out means you'll never achieve it because it's always what's the magic salary more and that's no way to live but if you're living within your means then then then it's sweet and that's really why this is so critically important get out of debt don't spend beyond your means you will live a happier and less unhappy life bottom line is what it comes down to now how much do people actually need if they live within their means and the answer is less than you think the answer is less than you think even with inflation and all the rent going up yeah I mean with the okay I mean index it for inflation if you want but there was a very famous study in 2005 that was that was um was actually put together by two economists at uh at Princeton that looked at how much people needed to max out in their life satisfaction and what they found is $75,000 a year now of course if you're in New York San Francisco versus Nashville versus Tupelo Mississippi I mean different you know it relative so really it really is relative but the whole point is it's less than you think why because you get above that threshold of avoidable unhappiness problems where your kids are getting fed you're able to make the rent um you're able to go to the doctor you're able to do all the stuff and that stuff's not bothering you anymore and anything above that is not really going to wipe out that much more unhappiness if you're living within your means now maybe it's 250 maybe it's 400 and there's new research out there from a guy at Penn um named Matt Killingsworth who's a great researcher who says that it's actually a higher number here's the really interesting thing about it it does get flat at a relatively low Pace people evaluate their lives as much better with more money but don't feel it so this is a funny thing this is a fun on paper they go I'm happier they they say I should be happier but I'm not so this is a weird thing where I valuate my life and I'm like that's a lot of money yeah yeah my life is really really good but I feel crummy what's the deal and the deal is that you think that with more money you're going to be a lot better off and so when you find that you're actually pretty prosperous you judge your life as being really good but your mood balanc and your level of anxiety don't match that that's something that's really out of sync because we have those expectations about what money's going to buy with our happiness and it doesn't unless so we think my life will be perfect and then it's still my life should be perfect my life should be perfect but it isn't perfect and that's a cognitive dissonance that people are struggling with an awful lot when you can make when you can understand the science that we're talking about here you can marry these things up and be at peace and that's one of the great secrets well I'm going to end with this idea that you wrote about called this this happiness 401K you've said half the population tends to get happier after age 65 or 70 the other half starts to become unhappy and I love this quote as well from you your well-being is like a retirement account the sooner you invest the greater your returns will be are those two things coinciding the people who invested earlier they're on the upper trory and the ones who don't thr back down it's that simple it's how you it's what you invested in your life and again you can it's a metaphor for what we actually do with our budget you know if you inv invest intelligently and you know early on more growth stocks and later on more bonds and having more in cash and such that such that when you're older you're stable and secure and and not worried that's great but the same thing is true with the Investments that you make in your life and there's four Investments you need to be thinking about over the course of your life your faith your family your friendship and your work that serves other people that's what it comes down to and what that really really comes down to the bottom line on that maybe the best last word is that when I talk about those things I'm talking about love of the Divine and love of your family and love of your friends and the love that you express to the whole world whether you enjoy it every single second or not to the way you earn your daily bread it's love love love and more love your Investments are love Investments and if you do that you're going to be on the upper trajectory for the rest of your life all you need is love I can't think of a better ending hey man this is so fun I I could talk to you all day I want to be you when I grow up but unfortunately I don't think I'll ever be a Harvard Professor you'll always have that hair too hopefully by the way you're GNA when you grow up and you're my age you're going to still you know will I still have this if I had it I'd be president of the United States you know what that means guys 2028 it's my year baby if you were the president what's the first thing you would do I I I'd buy a mini fridge Arthur is such a pleasure make sure to check out all of his work his books they're all incredible you're a genius and thank you for supporting the work that we're doing here with the than for doing this you're helping a lot of people to be happier and I think we need a happiness revolution in this country and all you're doing here at Ramsey Solutions is at the center of that Revolution I appreciate that so much and I will aim in and retweet that all or reexit all day long right on thank you so much Arthur pleasure man I am happy to have had that conversation and I am sad that it is over what a delightful human being so grateful for Arthur and his time with us today be sure to check out his books from strength to strength and the newest one build the life you want among many others I'll also drop a link below to his piece in the Atlantic on why you're better off not borrowing be sure to read that and if you like videos of me having a conversation with other smart humans check out this next video with two of the biggest personal finance YouTubers out there just spr from Minority mindset and Humphrey Yang definitely worth a click I'll drop a link in the description as well thanks for watching we'll see you next time on to the next read Robert dairo

Channel: George Kamel

Views: 372,817

Keywords: money, budget, how to save money, personal finance, financial advice, finances, money trends, investing, crypto, retirement, smart money, george camel, george kamel

Id: BVjT3dzVvbA

Length: 29min 32sec (1772 seconds)

Published: Fri Jun 21 2024