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Raj Raghunathan
Raj Raghunathan
Photo illustration by Money

Raj Raghunathan asks a provocative question right in the title of his new book: If You’re So Smart, Why Aren’t You Happy? Many of his answers are even more provocative. But as a professor who teaches on the subject of happiness at the University of Texas McCombs School of Business (and via Coursera) Raghunathan is quite adept at turning those provocations into useful and rigorously researched advice — not least on the knotty relationship between money and living a happy life.

We’ve all heard that money doesn’t buy happiness. But the way you frame it, our fixation on money sounds almost like an impediment.

For people who don’t have their basic needs met – food, shelter, clothing – money does enhance happiness levels. It starts becoming an impediment when you have enough to meet your basic necessities and you start thinking: “Okay, up to this point the more money I earned, the happier I was; this must go on to infinity. The more I earn, the more I’ll be happy.”

Research has found that once you start tethering your self-esteem to your bank balance, it starts backfiring. Money is no longer about the freedom it gives you to do the things you want to do, but an end itself.

The book includes a lot of interesting exercises — which you’re making available at — that seem designed to help the reader quantify happiness. Why is that important?

Happiness seems like a loosey-goosey, difficult-to-define concept. People intuitively feel it’s subjective. But if you go into in the literature, happiness as an experiential state means similar things to most people. And the important point is you need to have some conceptual clarity on all this. Happiness can be abstract compared to money, which is much more quantifiable. Because of that, it can assume a lower priority.

You admit in the book that you have been thrown off by over-focusing on a dollar amount yourself.

Yes, even after researching this subject for three or four years. I was buying glasses, and I found a great pair for $120. I noticed I could get another pair of equal or lesser value, for half off. I found one I liked almost as much — but it was $70.

I should have been happy. Instead I felt I was not maximizing value for money. I spent at least 10 minutes searching for another pair that was as close to $120 as possible — because that was the “best deal” — before I caught myself. What really matters is how good the glasses are for me, not how much they cost. I’d almost sacrificed my own happiness in this process.

Were you raised with a particular set of values around money?

I was brought up in a middle-class family in India, which is not a rich country, as you know. It was a somewhat conservative environment, and my own family was maybe even more conservative. I always got decent clothes, and great food, and so on, but there was this instilling of the idea that money is very valuable.

I think I had a slightly rebellious reaction to that. To me, what was important was that I have an enjoyable time, experiences that help me grow — and that I should treat money as a means to that. I have a grandfather who is kind of like that: Money is what money does.

Of course I’m still responsible enough not to live beyond my means! But let’s say I’m going to buy a gift, for $20. That’s not much. But I’m going to use that budget to buy something top of the line within that budget — a $20 coffee mug, not a $20 cell phone. I apply that to my own spending as well.

Last thing, a question I ask everyone: If you see a penny on the sidewalk, do you pick it up?

I know people talk about the opportunity cost [basically: picking up a penny is not worth the time it takes], but that’s only one way of looking at things. Another is: Do you derive some pleasure or enjoyment from it? And I actually have a little project — I want to make a bowl out of pennies.

So again, money is a means. What really matters to me is the experience and fun I am having. If mowing the lawn or hanging out with the kids on the weekend is fun, even though that time could be spent earning more money – so what? I’m going to do what, in the end, gives me happiness. So yes, I would pick it up.