The reasons we might be curious about how money and happiness go together (or don’t) almost certainly vary from person to person. Perhaps folk who are short of cash want reassurance that being rich wouldn’t make them happier. Or maybe we’re looking for encouragement that saving up a few quid is indeed the key to a more joyful life.
In any case, there is no clear answer. Instead, it seems it’s the way we THINK about money that determines its impact on our happiness. Here are a few theories and findings that might surprise you (or you may even relate to).
There’s an amount that’s ‘enough’
Now, the seriously wealthy may disagree, but research carried out by Princeton University in 2010 (in which they surveyed 1,000 Americans) concluded that, yes, money can make us happier – but only up to a certain amount.
It came to light that people did report feelings of increased wellbeing when their salary rose to $75,000 (that’s £50,000 in real money), but that having a salary beyond that amount didn’t have a further impact on life satisfaction.
Why? Well, it could be that once we have enough to cover our basic needs (bills, socialising, a holiday here and there), most of us are content with that and don’t want for more. In other words, that amount makes life comfortable without fundamentally changing the types of things we enjoy doing (and the people we enjoy doing them with). Perhaps you don’t yearn for as much as you thought?
It depends what we spend our money on
OK, most of us agree some purchases are more ‘fun’ than others (paying a bill is hardly a recreational activity), but that’s not what we’re getting at here.
A 2016 study by Cambridge University analysed 77,000 UK bank transactions made by 625 people found that those of us who spend our money on things that match our personalities are generally happier than those who don’t.
In other words, looking at the ‘Big Five’ personality categories, researchers cross-referenced the types of things people were buying, then compared the results with how happy people said they actually feel. Happy extroverts spend their income on entertainment and travel, while those categorised as ‘conscientious’ got satisfaction from buying things like healthcare and home insurance.
What’s interesting about this study is there’s no right or wrong – it just suggests that the money/happiness relationship is all about matching our purchases to our personalities.
‘The Joneses’ have a lot to answer for
Does the grass always look greener on the other side of your fence? If so, you could be digging a hole of unhappiness by trying to keep up. That’s not to say you shouldn’t have aspirations, but if comparing yourself to others makes you buy things you don’t really want (using money you don’t really have), happiness is very unlikely to be the result.
As this this article from US blog ‘Making sense of cents’explores, comparing ourselves to others might not just lead to debt, but also to feeling inadequate and like we’re always on an uphill struggle. Doesn’t sound like much fun, does it? So instead of trying to create a lifestyle you can’t afford, look at people you aspire to as motivation. The smart move would be to ask them how they got there, then look at ways you can apply that in your own life.
And on the flipside, take a moment to consider the people who might aspire to what YOU have. As 2016 data from the global finance company Credit Suisse stated, Americans who have 10 dollars in their pocket and no debt are wealthier than 25% of their fellow countrymen. While there’s no statistic for a UK version of that, it’s something to think about. Which leads us neatly on to our next point…
It’s not about having what you want, it’s about wanting what you have.
This is similar to the bit about the Joneses, but includes a theory that takes it to a new level. We’re talking ‘Multiple Discrepancies Theory’ (catchy name), which was devised in 1985 by a Canada-based university researcher called Alex Michalos.
Without going into a full lecture, Michalos’s theory suggested that our overall life satisfaction level relates to what we already have versus seven comparisons. List incoming! The comparisons are: what we want, what other people have, the best we’ve experienced in the past, what we thought we’d have three years ago, what we expect to have in five years’ time, what we deserve, and – finally – what we need.
To sum it up as simply as possible, the theory showed that the greater the perceived gap between what we have and those seven comparisons, the less satisfied we feel. So you could say it comes down to expectations. If we believe that what we have now doesn’t live up to where we think we should be, it has a negative effect on our wellbeing.
Could giving money away make you even happier?
We’re not talking about just handing fivers to all and sundry (that would be terrible advice), but – as Harvard Professor Michael Norton discusses in this TED talk - there is research evidence that spending money on other people makes us happier than spending it on ourselves.
So, what’s all that about then? Well, it could be that giving gifts to others makes us feel we are kind, thoughtful people, which – in turn – makes us feel good about ourselves. There’s also the idea that gifting others helps to strengthen our friendships and relationships (think of a group of best friends who buy each other birthday gifts without fail – it’s an unspoken pact that unites the group), and people with those close social bonds tend to be happier.
Any of this sounding familiar yet, or are you still not convinced? If you’d like to see more about how we’re looking into science and happiness, check out Studio B - our new space for developing tech that could make all our lives a little easier and a place where customers can do everyday things with their money, in a more modern way.
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