We find ourselves at a crossroads. We all know that true wealth is about far more than money. Wealth is friends, family, health, a vocation, command of your time, leisure and whatever else is important to you.
And yet, we are all guilty of acting as if money alone is wealth and an end in itself.
How do we navigate this crossroads to find the right balance between monetary wealth and true, soulful wealth?
Our guide is Daniel Crosby―author of the behavioral finance smash hits The Laws of Wealth and The Behavioral Investor.
In The Soul of Wealth, Daniel presents 50 short essays which explore what wealth really is and provides practical suggestions for how to change your thinking and your actions in small, powerful ways, for a wealthier life.
We learn:
• How you spend your money reveals your values.
• That money can buy happiness if spent well.
• What makes a good financial plan.
• Why willpower is overrated.
• How to master delayed gratification for the ultimate wealth hack.
• Why anything worth doing carries some risk.
The Soul of Wealth is the ultimate compendium of the world’s best behavioral finance and personal finance knowledge, presented in a groundbreaking accessible format. It will challenge your thinking, rekindle forgotten truths and empower you to embrace a new relationship with your money. Please enjoy a sample chapter below:
Chapter: Giving Is The Path To Abundance
“Money is like love; it kills slowly and painfully the one who withholds it and enlivens the other who turns it on his fellow man.” —Kahlil Gibran
At first glance, the world may appear to be a fragmented place from a philosophical perspective. After all, there are hundreds of varieties of belief and non-belief, and not one of them sums anywhere close to claiming a majority of the global population as adherents. In a very real sense, whatever you believe or don’t believe, most other societies disagree with you!
When delving beyond this superficial and cynical perspective of our shared worldviews, we uncover a surprising amount of common ground rather than disagreement. Embracing this more unifying framework, one of my favorite life pursuits is to seek out values that resonate across cultures, wisdoms, and traditions.
Ideas like compassion, kindness, justice, integrity, and nonviolence, are shared by most cultures and creeds, although their expressions of these tenets come from different philosophical and scriptural texts. And one such cross-cultural truism is the paradox that giving is the path to greater abundance:
The Bible tells us in Proverbs 11:24-25 that, “One person gives freely, yet gains even more; another withholds unduly, but comes to poverty. A generous person will prosper; whoever refreshes others will be refreshed.”
The Tao Te Ching, an ancient Chinese text, advises, “The wise man does not lay up his own treasures. The more he gives to others, the more he has for his own.”
The Hindu scripture, the Bhagavad Gita, teaches us that, “A gift is pure when it is given from the heart to the right person at the right time and at the right place, and when we expect nothing in return.”
Rumi, the Sufi poet, believed that “Givers are like the ocean; they never empty, because they are always being filled from within.”
Voices from every spiritual heritage across millennia and miles have all espoused the same idea: Generosity is a paradoxical path to greater abundance.
But what does the research say?
Numerous studies have shed light on the significant impact of giving on the well-being of the giver, often surpassing the benefits experienced by the recipient. In a notable research paper titled "Spending Money on Others Promotes Happiness" (2008) by Elizabeth W. Dunn, Lara B. Aknin, and Michael I. Norton, published in the National Library of Medicine, it was revealed that the way individuals choose to spend their money is as crucial as the amount they earn in determining their level of contentment.
The findings go on to suggest that prosocial spending is indeed associated with increased happiness levels, irrespective of the participants' income. Furthermore, when the 632 subjects unexpectedly received a cash windfall, their happiness levels increased significantly not when splurging on themselves, but when they spent the money for the benefit of other people, even controlling for their pre-windfall happiness levels. So, next time you receive a tidy bonus at work, maybe try doling some of it out to friends, family, or even strangers.
Arguably the most widely known part of this research involves an experiment where participants were given either $5 or $20 with the instruction to spend it by the end of the day. Those directed to use the modest amount on others or make charitable donations reported higher post-windfall happiness than individuals told to indulge for themselves. Being generous and helping our fellow man is the more abundant path, so the evidence suggests.
So, why doesn't spending money on ourselves bring long-lasting joy? Well, it turns out that our happiness levels tend to adjust to our circumstances over time. Those shiny new things we buy might give us a temporary thrill, but the excitement quickly wears off. When we improve the lives of others, though, a deeper enrichment endures.
The authors went on to identify a key gap. Despite the clear advantages of generosity, the research revealed that people tend to allocate a significantly larger chunk of their income towards their personal spending priorities rather than on prosocial endeavors—we're talking like a 10:1 ratio. But there’s hope for us all. The findings show that even a minor change, like handing a $5 bill to someone in need, holds the power to produce nontrivial gains in happiness on a given day. This discovery highlights the transformative ability of small acts of kindness and demonstrates that anyone can make a positive impact, regardless of their circumstances.
However, there is another critical gap that requires attention. In a different part of the study, participants were presented with a choice between personal and prosocial spending to maximize their own gratification, and a majority (69 out of 109) thought that personal spending would make them happier than being generous. Apparently, the notion that giving is the path to abundance has yet to go mainstream.
Another set of research in 2017 aimed to investigate the actual neural mechanisms underlying the link between generosity and happiness. Subjects in an experimental group committed to spending a weekly endowment on others while a control group agreed to spend on themselves. Using FMRI data, it was observed that the group of individuals who engaged in giving reported heightened levels of happiness. Moreover, brain scan data indicated a surge of activity in reward-related regions associated with happiness. The findings suggest that such changes in the brain promote a positive feedback loop, thereby encouraging individuals to take part in further acts of generosity.
Thus, there is something in our brain that craves giving and rewards actions that stimulate it. During the worst of the Covid-19 pandemic, that played out in front of us. Giving rose 6% as the crisis unfolded, a trend that surprised some researchers. It begs the question: Was our innate desire to give just an emotional response to the collective need for upliftment during those trying times? At the very least, it’s a conjecture that might help restore your faith in humanity.
Further reinforcing this idea is a 2013 study that analyzed data from 136 countries. The conclusion was that people worldwide experienced emotional benefits when they used financial resources to support others. The tendency persisted across economic conditions, even in the absence of social ties. The findings strongly indicate that the emotional rewards derived from helping other individuals are deeply ingrained in human nature, transcending cultural and economic boundaries.
What’s more, the thesis that giving leads to abundance holds true regardless of age. A research paper from 2012 titled "Giving Leads to Happiness in Young Children" elucidated the concept of a "warm glow" individuals felt after acts of kindness. Surprisingly, this feeling was most pronounced among children. Even toddlers, as young as two years old, derived greater happiness from giving treats to playmates rather than receiving treats themselves. Additionally, children experience increased happiness when engaging in costly giving, willingly sacrificing their own resources, compared to giving without personal cost. I have not observed this behavior often among my own kids, but I suppose the research is right.
Ok, so being charitable makes us happy, from a young age and across cultures, but does it actually make us richer, as some researchers contend? In some ways, that doesn’t make much sense—after all, shouldn't giving away a portion of your resources diminish your own wealth? That may be the case in the most literal sense, but there still seems to be some magic around generosity. According to Dunn and Norton, authors of the influential 2014 book Happy Money: The Science of Happier Spending, those who give to charity often feel wealthier than those who do not, regardless of their income level.
Surely you want to get on the path to abundance, right? Here’s how you can feel that warm glow that results from happier spending:
Start Small: One impediment to giving is that we think it has to be a grand thing. But just take a baby step, and note the impact on aspects of your life, such as your budget and personal happiness. Just one small move towards giving is often enough to make a difference and reshape how you view your financial resources.
Give of Yourself: Remember, giving doesn't solely revolve around money. You can also contribute your time and talents, allowing you to see impacts firsthand. Giving of yourself is personally gratifying and can be accomplished within any budget.
Make it Meaningful: Reflect on what holds significance to you. For instance, my biggest charitable contribution of each of the past five years has been a gift to the psychology department of my alma mater to help young psychologists further their training. Although I trained as a clinician, I’ve spent my professional life studying the intersection of money, mind, and meaning. I have had an incredible career and have hopefully helped some people along the way, but I also mourn the lives I could have touched had I chosen to remain a practicing psychologist. Helping other psychologists do the work I didn’t do is a way to give back that is personally meaningful to me and my life. What would your meaningful giving look like?
Diversify: This may be a money nerd thing, but I have lately gotten in the habit of diversifying my giving portfolio in the same way I would think about diversifying a basket of investments. Here’s what I mean: A portion of our family giving goes to what philanthropy experts refer to as “effective altruism,” charitable gifts with an extreme bang for the buck in terms of saving lives. Think mosquito nets in developing countries—inexpensive but with enormous life-saving power. Another of our giving buckets is for things that make life worth living and are personally meaningful to us: mental health efforts for me and gifts to the arts for my wife, a talented visual artist and pianist. Consider how you can optimize a diversified portfolio of giving that encompasses personal effort, effective altruism, and causes that hold deep meaning to you.
Both scriptural and empirical evidence converge on a common truth about money and happiness: giving is the best path to having true abundance. We truly enrich the world and our own lives when are generous with others.
Daniel Crosby, Ph.D., is chief behavioral officer at Orion.