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In this episode, I sit down with Daniel Crosby, Ph.D., a renowned behavioral finance expert, psychologist, and author of several books focused on investor behavior and the psychology of financial decisions. We discuss his latest book, The Soul of Wealth, which delves into how individuals can find meaning and happiness through their wealth.
Daniel shares insights on how giving, investing in yourself, and avoiding social comparison can lead to greater fulfillment, and he provides actionable advice on developing habits and fostering relationships that contribute to a happier, wealthier life.
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The Inspiration Behind The Soul of Wealth (00:30)
When asked about the inspiration behind the book, Daniel explains that while his earlier work focused on helping people make better financial decisions, The Soul of Wealth addresses the next challenge: what happens after people have successfully built their wealth, but still feel unfulfilled.
“People are making better decisions today. They’re building wealth, they’re investing smarter, and they’re more educated than ever before about finances. But what I noticed was that many of these same people—who are doing everything right—still aren’t happy with the wealth they’ve accumulated. They’re not finding the meaning they thought would come with financial success.” — Daniel Crosby
Daniel draws on the work of Viktor Frankl, one of his personal heroes, to illustrate this point. Frankl’s observation that “evermore people have the means to live, but no meaning to live for” resonates deeply with Daniel, especially in today’s society where financial abundance often coincides with a growing sense of loneliness, disconnection, and despair. He wanted to write a book that addressed this disconnect and helped people not only build wealth but also find purpose and meaning in it.
This idea—moving from money to meaning—runs throughout the book. Daniel explains that it’s not enough to simply accumulate wealth; there’s a deeper need to align that wealth with one’s values, relationships, and sense of purpose. This is particularly relevant in today’s world, where financial success is often seen as the ultimate goal, but the fulfillment that comes with it can feel elusive. The Soul of Wealth explores how individuals can navigate this journey, offering insights into how money can be used as a tool to enhance one’s life, rather than being the sole focus of it.
Through stories, research, and practical advice, Daniel offers a guide for readers who are ready to move past the mechanics of wealth-building and focus on the “why” behind it.
Charitable Giving and the Path to Abundance (02:06)
Daniel explains that, across all cultures and philosophies, there’s universal agreement that giving money away can lead to greater wealth—not just financially, but emotionally and spiritually. Despite the counterintuitive nature of this idea, research consistently shows that people who give are more likely to feel secure and abundant, regardless of their income level.
“One of my favorite things to do is find places where the wisdom literature and scripture from all over the world agree. And the idea that giving money away leads to abundance is something that every great tradition seems to have in common. It doesn’t make sense on the surface—you’d think giving would reduce your wealth, but the research consistently shows the opposite.” — Daniel Crosby
Daniel shares that people who give money away, regardless of their income level, consistently report feeling wealthier and more secure than those who don’t. This phenomenon holds true across all income strata, from low-income individuals to high-net-worth families. What’s even more striking is that this sense of abundance is not just about having more money—it’s about feeling more connected to others, more in control of one’s financial future, and ultimately more fulfilled.
Perhaps the most interesting part of the conversation for me is how Daniel connects giving to one of the most fundamental questions people have about their financial lives: “Am I going to be okay?”
While it may seem logical that the answer to this question depends solely on how much money someone has, Daniel reveals that there’s a second, equally important factor at play—how much they give away. The act of giving shifts the focus from scarcity to abundance, allowing people to feel more secure in their financial future, regardless of the actual numbers in their bank accounts.
Daniel emphasizes that charitable giving not only fosters a sense of security but also taps into a deeper human need to feel like a good person. He touches on how many of our cognitive biases are wired to protect our self-image, and giving to others reinforces the belief that we are kind and generous. This act of generosity has profound psychological benefits, often providing more lasting satisfaction than spending money on ourselves.
In addition to the psychological boost that comes from giving, Daniel discusses how spending money on ourselves typically doesn’t bring long-lasting joy. We tend to acclimate quickly to material possessions, which lose their emotional impact over time. In contrast, the emotional reward from giving has a lasting effect, creating a sense of connection and purpose that stays with us far longer than any material purchase ever could.
Investing in Your Well-Being and Personal Development (05:12)
While material possessions lose their emotional impact over time, investing in yourself—whether through mentorship, therapy, or self-improvement—can have a profound impact on your financial success. This concept moves beyond the usual advice of investing in the markets and focuses on the often overlooked but powerful investment in one’s own growth.
Daniel draws attention to the research that shows how personal growth can translate into higher earning potential and more fulfilling careers. But it’s not just about the money—it’s also about living a richer, more meaningful life. He stresses that those who invest in their personal development are more likely to find happiness and purpose, as they build the emotional and mental resilience needed to navigate life’s challenges. The returns on this kind of investment are far greater than those that come from simply chasing higher financial returns.
Daniel also touches on how personal development isn’t just about the individual—it has a ripple effect on their relationships, career, and overall sense of fulfillment. By investing in yourself, you become a better partner, friend, and professional. This, in turn, creates a stronger support network and opens up new opportunities that might not have been available otherwise. It’s a cycle of growth that extends far beyond the individual, creating a foundation for sustained financial and personal success.
“Investing in yourself is one of the most impactful things you can do, not just for your finances, but for your overall well-being. It’s about more than just making more money—it’s about becoming the best version of yourself.” — Daniel Crosby
In contrast, spending money on ourselves—in the form of material possessions or short-term pleasures—rarely leads to long-term happiness. Daniel shares fascinating research that shows how quickly people acclimate to new purchases, leading to a diminished sense of satisfaction over time. Whether it’s a new car, house, or luxury item, the joy derived from material goods fades quickly, leaving us in search of the next purchase.
We are wired to misjudge the sources of our happiness, assuming that more possessions will fill the void. But Daniel explains that the true key to fulfillment lies in personal growth and giving. Investing in yourself leads to lasting happiness, while material purchases only offer a brief, temporary boost. The same principle applies to charitable giving—where research shows that giving to others creates a sense of abundance and satisfaction that far outlasts the fleeting joy of spending on ourselves.
Daniel’s approach encourages readers to shift their mindset from material accumulation to personal enrichment. Whether through self-investment or charitable giving, the path to long-term happiness and financial success lies in focusing on what truly matters: personal growth, meaningful connections, and using wealth as a tool to enhance both your own life and the lives of others.
The Impact of Social Comparison on Financial Decisions (10:10)
Humans are hardwired to avoid uncertainty and ambiguity. When we are unsure about how we measure up, we instinctively turn to others as a benchmark. However, this habit of comparison, especially in the modern age, can be incredibly harmful. Social media has amplified the reach and visibility of others’ financial successes—whether real or exaggerated—making it easier than ever to feel dissatisfied with our own lives.
Daniel highlights the importance of understanding how deeply ingrained these tendencies are. For centuries, humans relied on cooperation for survival, and social comparison helped us maintain social cohesion and success within groups. But in today’s world, this evolutionary trait has been overextended. Instead of cooperating for survival, we now compare ourselves to celebrities, influencers, and our wealthier neighbors—leading to harmful financial decisions, like overspending, keeping up with others, or making risky investments to match perceived wealth.
Daniel introduces the concept of Social Comparison Theory, explaining that when we constantly benchmark ourselves against others, it can trigger feelings of inadequacy and push us to live beyond our means. He gives examples of how this might manifest in everyday life, from someone upgrading their car because their neighbor did, to feeling pressure to take lavish vacations after seeing pictures on Instagram. In each case, the individual’s financial decisions are influenced more by their desire to “keep up” than by their actual needs or long-term goals.
“When we start comparing our financial lives to those of our neighbors or people we see on social media, we end up making decisions that are more about keeping up than about what we truly need or want.” — Daniel Crosby
So, how can people combat this harmful cycle of social comparison? Daniel offers several strategies.
One of the most effective, he says, is gratitude journaling. While it may sound simplistic, research shows that practicing gratitude can significantly increase happiness and satisfaction with one’s life, reducing the need to compare oneself to others. By focusing on the things you’re thankful for—whether they’re financial or otherwise—you can shift your mindset away from envy and toward contentment.
Daniel also emphasizes the importance of controlling your media diet. In today’s world, people are constantly bombarded with messages about what success looks like—often tied to material possessions, luxury lifestyles, or extreme wealth. By being more selective about the media you consume, you can reduce the negative influence of these external pressures and focus on your own values and financial goals.
Lastly, Daniel discusses redefining your reference class—in other words, being more mindful of who you compare yourself to. He explains that we tend to benchmark ourselves against those closest to us, whether that’s our neighbors, colleagues, or social media peers. However, this can lead to unrealistic expectations and unnecessary financial stress. Instead, Daniel suggests focusing on your own values and goals, and surrounding yourself with people who share similar priorities.
He also points out that while it’s harder today to control who you compare yourself to—thanks to the internet and social media—it’s still possible to choose healthier reference classes. By limiting exposure to unrealistic portrayals of wealth and focusing on communities that encourage responsible financial behavior, you can build a more grounded and satisfying financial life.
Developing Better Habits for Financial Success (17:00)
One of the key themes in The Soul of Wealth is the importance of developing good habits for achieving long-term financial success. Daniel points out that while most of us know what we should be doing, there’s often a significant gap between knowing and doing. This “knowing-doing gap” is one of the central challenges people face when trying to manage their finances effectively.
“It’s incredible, but nurses smoke at nearly double the rate of the general population. They know better than anyone how bad it is for their health, but knowledge isn’t enough—it’s behavior, driven by stress and habits, that really matters.” — Daniel Crosby
The same principle applies to financial habits. Knowing that we should save more, invest regularly, or avoid debt doesn’t automatically lead to those behaviors. Instead, people are often swayed by emotional factors, convenience, and short-term rewards, which can undermine their long-term financial health. The key to bridging this gap lies in building better habits—making it easier to do the right thing without relying on willpower alone.
Daniel introduces a framework developed by the UK’s Nudge Unit, called EAST, for developing better habits that stick and lead to better financial outcomes over time:
1. Easy: The first step to building better financial habits is to make them as easy as possible. We often fail to adopt good habits because they’re too difficult or inconvenient. For example, if your goal is to save more money, automating your savings by setting up direct deposits to your investment account removes the need for constant decision-making. You don’t have to make the right choice over and over again—it’s done automatically for you. Similarly, if your goal is to exercise more, laying out your gym clothes the night before or choosing a gym close to home can increase the likelihood that you’ll follow through.
2. Attractive: To stick with a habit, it helps to make it attractive or rewarding. We’re more likely to follow through on habits when there’s an immediate payoff or when they’re tied to something enjoyable. For financial habits, this could mean setting up small rewards for yourself when you hit a savings goal or framing your financial success in terms of the future experiences it will unlock, like a dream vacation or financial freedom.
3. Social: Habits are more likely to stick when they’re tied to social interactions or accountability. Whether it’s working out with a friend or joining a financial group where people share their goals and progress, having others involved in your journey can keep you motivated and accountable. He shares how having workout buddies helped him stay on track with his own health goals, noting that a bit of friendly peer pressure can go a long way in reinforcing positive behaviors.
4. Timely: The final element of the EAST framework is timeliness—getting into a regular routine that makes the habit automatic. For financial habits, this could mean setting a consistent time each month to review your budget or rebalance your investment portfolio. By scheduling these tasks, you reduce the chances of procrastination or forgetting, making it easier to stay on top of your finances.
Daniel also explains how habits often have a delayed reward, which makes them harder to maintain. For example, saving money or exercising regularly doesn’t always provide immediate gratification—it’s experienced as a short-term sacrifice for a long-term gain. Conversely, bad habits like overspending or indulging in junk food often provide a quick reward, but come with negative consequences later. Understanding this dynamic is key to sticking with positive financial habits.
“Bad habits give you a short-term reward but lead to long-term pain. Good habits are the opposite—they often feel like a sacrifice now, but they pay off big in the future. It’s all about keeping the long-term benefits in mind.” — Daniel Crosby
Daniel’s insights into habit formation are practical and actionable, offering a clear roadmap for anyone looking to improve their financial behavior. By making good habits easy, attractive, social, and timely, you can close the knowing-doing gap and start making smarter financial choices that lead to lasting
The Power of Relationships in Wealth and Happiness (23:00)
While financial success is often the goal for many, it’s strong relationships that truly drive long-term fulfillment and well-being. In fact, research shows that relationships are the single most important factor in determining a life well-lived, surpassing even financial achievement.
“If you could bet the house on one thing being the key to a fulfilling life, it would be relationships. It’s the most predictive factor of happiness and well-being, more than anything else.” — Daniel Crosby
Drawing on positive psychology, particularly the work of Martin Seligman, Daniel explains that there are several elements that contribute to a good life—leisure, deep work, meaning, advancement—but relationships stand above the rest. Building strong, supportive connections with family, friends, and colleagues is one of the most reliable paths to happiness. In contrast, loneliness and isolation can have devastating effects, not only on emotional well-being but on physical health as well.
Daniel emphasizes that relationships are not just a “nice-to-have” feature of life, but an essential component of thriving. When people are disconnected from meaningful relationships, the negative impact on their emotional and physical health can be profound. This is reflected in the growing “loneliness epidemic” in the United States, where many people—despite financial success—are reporting increased feelings of isolation. Daniel stresses that, no matter how much money you have, a lack of connection can strip away happiness and diminish the quality of life.
Daniel references research from the famed Harvard Study of Adult Development, one of the longest-running longitudinal studies in the world, which followed hundreds of people over decades to determine what factors most contributed to a life well-lived. The study’s conclusion was clear: the quality of a person’s relationships is the single biggest predictor of happiness and long-term health. Wealth, career success, and even fame don’t hold a candle to the impact of close, meaningful relationships.
One of the more surprising insights Daniel shares is the role that relationships play even in unexpected places like the Blue Zones, regions of the world where people consistently live to be 90 or 100 years old. While these regions are often celebrated for their healthy diets or active lifestyles, Daniel points out that strong, interconnected communities are one of the biggest factors contributing to the residents’ longevity. In some cases, the power of relationships even overrides poor health habits—such as in parts of Italy where people eat rich, unhealthy foods but still live long, healthy lives due to their close-knit social bonds.
Daniel emphasizes that wealth should be seen as a tool to enhance relationships. Spending money on experiences that foster connection—like shared vacations, family gatherings, or activities with friends—provides a far greater return on happiness than spending on material goods. Strong relationships not only contribute to a richer, more fulfilling life, but they also offer a support system that can help you navigate financial challenges, personal hardships, and career transitions.
Whether it’s through investing time in close family members, developing friendships, or engaging in community activities, the value of these connections can’t be overstated. They offer far more than emotional satisfaction—they also have a profound impact on physical health, longevity, and financial well-being. While money can provide security and opportunity, it is the people you surround yourself with that bring true meaning to life.
The Link Between Money and Happiness (27:30)
The connection between money and happiness is one of the most discussed and debated topics in both psychology and personal finance. While it’s true that money can improve your quality of life and ease financial stress, Daniel explains that beyond a certain point, its impact on happiness diminishes.
Drawing from both his research and widely cited studies, Daniel discusses how happiness and money are measured in two distinct ways. First, there’s subjective well-being, which refers to how people evaluate their overall life satisfaction. Then there’s moment-to-moment happiness, which measures how people feel emotionally at any given point in time. These two measurements are critical in understanding the true link between money and happiness.
Daniel references the famous Princeton study by Daniel Kahneman and Angus Deaton, which found that happiness plateaus at an income level of around $75,000 per year. This study showed that while people with lower incomes experienced increased happiness as their earnings rose, those making above $75,000 saw little to no additional benefit in their day-to-day happiness. However, when it came to overall life satisfaction—how they rated their life on a broader scale—higher incomes did lead to more positive assessments.
While money can alleviate stress related to basic needs—like housing, food, and healthcare—it doesn’t necessarily buy long-term emotional satisfaction. This is because happiness derived from material wealth tends to fade over time. People quickly acclimate to higher incomes, larger houses, and luxury items, leading to the hedonic treadmill—the constant pursuit of more without ever feeling fully satisfied.
However, Daniel’s exploration of money and happiness is more nuanced than simply debunking the notion that wealth always leads to fulfillment. He points out that while money can’t buy happiness in the traditional sense, there are certain ways of using money that can lead to more enduring joy. He introduces the idea that how you spend your money matters just as much—if not more—than how much you have.
“Money doesn’t inherently buy happiness, but how you spend it can make a huge difference. Spending on things that enrich your relationships, provide meaningful experiences, or help others tends to bring a lot more happiness than just buying things for yourself.” — Daniel Crosby
Another key point Daniel raises is that money can prevent misery, but beyond a certain threshold, it doesn’t necessarily create happiness. For people living in poverty or those struggling to meet their basic needs, money can dramatically improve their quality of life and mental health. But for those who are already comfortable, additional wealth tends to have diminishing returns. The absence of money can cause great distress, but once financial security is achieved, other factors—like relationships, health, and purpose—become more important for sustaining happiness.
Interestingly, Daniel also points out that there are some individuals for whom no amount of money seems to buy happiness. These individuals tend to have deeper emotional or psychological issues that wealth alone cannot solve. For them, true happiness lies in addressing those underlying issues—whether through therapy, personal growth, or finding a sense of purpose—rather than accumulating more wealth.
Continual Learning and the Power of Novelty (33:20)
As we wrap up the episode, Daniel emphasizes the importance of continual learning and experiencing new things. He explains how novelty—whether through travel, new experiences, or learning new skills—can significantly boost happiness and personal growth.
As the world changes rapidly, those who prioritize learning and seek out new knowledge are better equipped to adapt, innovate, and thrive. Daniel explains that while many people focus on financial investments to grow their wealth, investing in your own knowledge and skills can often provide even greater returns. Personal development and lifelong learning allow individuals to stay relevant in their careers, become more resilient, and make smarter decisions over time.
It’s equally important to expose yourself to new ideas and experiences outside of your comfort zone. By seeking out novelty—whether it’s through travel, meeting new people, or even engaging with viewpoints different from your own—you can break free from the monotony of daily life and gain a deeper understanding of yourself and the world around you.
The rosy retrospection effect is one of the reasons why novelty is so powerful in generating lasting happiness. When we try new things, we often remember them more fondly in hindsight than we might have experienced them in the moment. For example, a family vacation might feel stressful at times—waiting in lines, dealing with travel logistics—but after the trip, we tend to reflect on the highlights and memories with more joy than we felt in the moment. This is why spending money on experiences, especially novel ones, tends to bring more happiness than spending money on material possessions, which quickly fade into the background of daily life.
Novelty plays a critical role in personal development. The more you expose yourself to different people, cultures, and ideas, the more open-minded and empathetic you become. Engaging with people who are different from you, or experiencing new perspectives, helps challenge your assumptions and biases, allowing for growth and a more nuanced understanding of the world. This continual learning and exposure to novelty not only makes you a more well-rounded individual but also enhances your emotional intelligence and decision-making.
Daniel also touches on how novelty can serve as a powerful antidote to boredom and stagnation. Many people, especially those who have reached a certain level of financial success or stability, find themselves stuck in routines that no longer challenge or inspire them. By embracing new experiences, you can reignite your passion for life and maintain a sense of excitement and purpose. This, in turn, can lead to greater happiness and satisfaction.
In closing, Daniel encourages listeners to adopt a mindset of **lifelong learning** and seek out new experiences that will enrich their lives, both financially and personally. Whether it’s through travel, learning a new skill, or simply having a conversation with someone from a different background, the act of stepping outside your comfort zone has a transformative power that far exceeds the fleeting joy of material purchases.
Resources:
- The Soul of Wealth by Daniel Crosby
- Follow Daniel Crosby on Twitter
The Long Term Investor audio is edited by the team at The Podcast Consultant
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