How the Difference Between Needs and Happiness Should Influence Your Money Decisions

Reward Sign - Amalgamated Press Building Northfleet Kent

Monkey Brain likes rewards.

“Man is the only animal that blushes – or needs to.”
–Mark Twain

When I was a kid, my parents used to reward me for good grades. They would give me a dollar for every A I got on a report card. A dollar would buy four games of Pac-Man, so that was a good tradeoff, particularly if I got straight As. Pretty soon, others got into the act. Showbiz Pizza gave a bunch of tokens for each A that you had on your report card. Then, the Atlanta Braves gave you four free tickets to a home game if you had straight As. Granted, the Braves were terrible – this was in the mid-80s, mind you – and the tickets were up in some nosebleed section of Atlanta Fulton County Stadium (OK, they were actually two counties away, but if you had binoculars and a vivid imagination, you could pretend), but, hey as a kid, going to a baseball game was pretty darn cool.

As others upped the ante in the report card rewards game, my parents soon realized that they could not compete. More likely, they decided that they didn’t want to compete. I’d be asking to play goalkeeper for the Atlanta Chiefs soon (yes, this admission dates me).

Instead of offering rewards, they started changing the tone of the discussion about my grades. There would be no bribes for me to get good grades. Instead, they expected me to get good grades. It was non-negotiable. I needed to get good grades because that’s what I was supposed to do, and it would be crucial for me to get into a good college.

My parents were working to get me to change my motivation from expecting rewards to having internal and intrinsic motivation to get good grades. I wouldn’t get good grades because I expected something in return, but, rather, because I wanted to get good grades.

My parents were a lot smarter than I ever game them credit for when I was a teenager who knew it all.

They were, probably unknowingly (although my mother often claimed omniscience due to her dual professions as a “teacher and a mother”), overriding my Monkey Brain when it came to getting good grades.

Why Did Monkey Brain Want Me to Get Good Grades?

Did I type that correctly? Monkey Brain wanted me to get good grades? Isn’t Monkey Brain master of the realm of laziness? Surely good grades and laziness don’t go together.

If you thought that there had to be more to this story than met the eye, you were correct. Read on.


Continues Below




Rewards are the realm of Monkey Brain. When Monkey Brain gets a reward, then Monkey Brain tells you to be happy. That’s all well and good, but, according to Dr. Richard Ryan, happiness is not enough for you to be a fulfilled, vital, and healthy person. It’s not that happiness is bad – it’s not – but happiness driven by rewards is not enough for you to have a rewarding (no pun intended) life.

Ryan explains in the Self-Determination Theory (SDT) that we all have a universal need for other types of fulfillment beyond the happiness that we get when we get a reward. There are three main human needs which we have to also address in order to have a full and rich life:

  • Autonomy. We need to be able to be independent and capable of functioning on our own in society. This doesn’t mean that we won’t interact with others, but we also don’t want to leech off of others for our own success. This isn’t always the case (419 scammers come to mind), but, for most of us, we want to know that we can make it on our own.
  • Competence. We also want to know that we can do something good and make a contribution to the world due to our own skills and abilities. When we’re good at something, then we get an intrinsic satisfaction from our work and being able to look back at a job well done.
  • Connectivity with others. Dr. Ryan calls this “relatedness;” it’s our ability to interact with others and feel connected as part of a community. It doesn’t have to be a community in the sense of a town or a city, but, rather, a community of those with whom we interact – our friends, our family, our co-workers. We’re inherently social creatures, and while we sometimes might need some alone time, we generally like the presence of others in our lives.

When you satisfy all three of these needs, then you have achieved what is known as eudaimonia, or full functioning and the state of being healthy, happy, and harmonious. Notice, you’re happy when you’ve achieved eudaimonia, and you get a whole lot of other goodness thrown in for free!

Why do we treat fulfilling our needs differently from happiness?

This is where the battle between Monkey Brain and your rational self comes most fully into play. As UCLA’s Dr. Kou Murayama and others show, the sectors of your brain which function when you are performing a task which has its own intrinsic value – addressing needs and helping reach eudaimonia – are completely different than the section which lights up when you receive a reward, and, furthermore, it lowers the activity in the other parts of the brain.

Specifically, what happens is this:

  • When you are performing an intrinsically motivating task: the right lateral prefrontal cortex (LPFC) engages. It is primarily responsible for cognitive control to achieve goals. When you prepare to do something which is meaningful to you, this area warms up to prepare you to perform the task. The caudate head in your brain also activates, preparing you to receive feedback. These areas of the brain are part of the rational, thinking self and not in the realm of Monkey Brain. However…
  • When you are performing a task where you expect a reward, the corticobasal ganglia activate. This is an area deep within Monkey Brain which is responsible, among other things, for the release of dopamine. When you get a reward, the brain releases dopamine, and you’re happy.

Sounds good so far, right? Do something intrinsically motivating and you get all sorts of prefrontal cortex activity and you feel good. Get a reward, and get a flood of dopamine and get a natural high. What could go wrong?

The problem with the dopamine feedback system is that it takes increasing amounts of dopamine to get that same positive feeling which you got off of the first shot of it. Dopamine is the key player in helping you hop on the hedonic treadmill, and it’s also one of the key drivers of drug addiction. So, in order for you to be motivated to do the same task the next time, when there’s a reward involved, you have to get more reward than you did the last time.

Furthermore, when the dopamine response system is triggered in relation to you completing a task, it suppresses the prefrontal cortex’s reactions to the same task. In other words, the reward overwhelms the intrinsic motivation you’d have otherwise had to do something. This is called the undermining effect of monetary reward on intrinsic motivation, and it’s crucial to understand when you’re making decisions about what you want to do with your life.

Cliff’s Notes version: You can’t live your life as a money-grubbing gold digger.

I’m not saying that the pursuit of happiness is a bad thing. The Founding Fathers thought that it was good enough to be included in the three inalienable rights from the Creator in the Declaration of Independence, and who am I to question their wisdom? What I am saying is that solely pursuing happiness as your goal in life will be insufficient to make you fulfilled. It’s a quick boost, but won’t sustain you for long.

Think about it in a different context. Have you ever worked in a job that you really didn’t like but received a bonus at the end of the year? The bonus made you happy, and might have made you a little bit more excited about coming in to work for a little while, but did it change how you truly perceived the job? No. After a while, the same disappointment about the job crept back in, and, furthermore, the bonus number in your mind necessary for you to get that same level of satisfaction went up, didn’t it? If a $1,000 bonus was what you got last year in a crummy job, then you’d probably need a $2,000 bonus this year. Monkey Brain needs more dopamine to keep going.

This understanding of how the brain interprets monetary rewards compared to intrinsic rewards confirms what Princeton’s Daniel Kahneman and Angus Eaton evaluated about the salary necessary for emotional well-being: $75,000 a year.

What lessons can we learn about making money decisions?

There are several lessons we can learn about the difference between happiness and needs as they affect our money and finances:

  • Swinging for the fences won’t make us fulfilled. It’s tempting to try to buy the next Google or Apple at the IPO, but we won’t get a lot of actual fulfillment out of the reward if we’re successful. Furthermore, we’re much more likely to be unsuccessful and much unhappier when we fail.
  • Materially rewarding ourselves for achieving a goal means we may be less likely to permanently adopt the behavior. Let’s say that you have a goal to get out of debt. You set interim milestones along the way and agree to reward yourself with a small purchase. After the first $1,000 paid off, you get a new game. To give yourself to pay off the next $1,000, you’ll probably need something a little bigger, nicer, and shinier. Pretty soon the rewards aren’t enough, and you just give in to Monkey Brain who demands that you whip out the credit card, since rewards now are much more fun than rewards later.
  • Your financial goals should match your priorities in life. Money is, at its core, a tool to enable you to do other things. Sometimes it’s pretty mundane, like paying the electricity or water bill, and sometimes it’s exciting, like paying for your dream trip. If you’re setting your monetary goals to get yourself material rewards, then you’re going to find yourself later wondering why you did all of that hard work just for a 183” flat screen TV. Instead, align your monetary goals with the things which matter most to you, and you’ll find a harmony between your life and the money which enables it.

Money can’t buy love. Neither can it buy happiness. As you plan for your money and what you want it to do for you, remember that your well-being and fulfillment are caused by a lot of other things that just happiness. Keeping that in mind won’t make Monkey Brain happy, but it probably will make you a lot happier.

Have you ever found that you weren’t as satisfied with a reward as you thought that you might be? Tell us about it in the comments below!

About Jason Hull, CFP®

Jason Hull, CFP®, is the Chief Technology officer of myFinancialAnswers, an online comprehensive financial planning service.

Close