Does Money Make Us Happier? Science Has Spoken

Having a good relationship with your own finances is one of the pillars of well-being. It is not about having a lot of money or that money alone is enough to be happy. But maintaining the balance between income and needs provides us with a stable foundation so that the other aspects of our life can flourish.

We have all heard or ever said that “money does not buy happiness. ” We like to believe that it is so. In fact, if we did not agree with this statement, we could be accused of being materialistic or superficial.

However, recent scientific research in the field of positive psychology indicates that the relationship between money and well-being is not so simple: our income does not define our happiness, but it does contribute significantly to it. (And maybe now many of you are saying: “Obviously!”).

The psychology of money

Research on life satisfaction and psychological well-being shows that people in the most economically developed countries tend to be more satisfied with their lives and experience higher subjective well-being, while the most unhappy people tend to live in the poorest countries.

Still, the relationship between economic development and personal well-being is not direct ; For example, Latin American countries, in general, present higher satisfaction and happiness indices than would be expected in relation to their gross domestic product. Obviously, everywhere we can find cases of happy and unhappy people.

There are many factors that contribute to individual well-being, such as the quality of social networks, interpersonal relationships, personal interests, the attitudes with which each person faces life or the activities that one performs … And yes, money is also another of the ingredients that bring happiness.

Happiness and financial stability: are they related?

Ed Diener, known as “the father of the study of happiness”, has devoted himself to research, along with a group of leading psychologists and economists, how money influences psychological well-being. And concludes:

Income is very important when you have little money

In other words, there is a big difference between having almost nothing and having the essentials to live. For example, a person with no income who finds a job in which he receives the minimum wage experiences a large increase in his level of life satisfaction.

But the satisfaction of a millionaire will probably only increase slightly when it goes from having five million euros to six. This is called “diminishing marginal utility.”

Another important finding of Dr. Diener is that, although it is important to have enough money to cover our needs, having a materialistic attitude works against our satisfaction and psychological well-being. That is why he recommends not sacrificing other components of happiness, such as relationships, for the sake of money.

What do we spend money on?

Other research indicates that in addition to how much money we have, how we spend it is important to our well-being. Michael Norton, Lara Aknin and Elizabeth Dunn, researchers at Harvard University (USA), have carried out a study that shows that, generally, spending money on ourselves does not increase our happiness.

However, research, published in the journal Science, reveals that spending it on other people or donating it to charities does elevate our mood and satisfaction.

Sometimes when we feel sad or anxious, we think that we will feel better if we buy something for ourselves. There are those who consider that shopping is a kind of therapy when we feel “half depressed”.

But shopping can backfire: there is evidence that if a person is sad, they are likely to spend more than they normally would. It is therefore not convenient to make financial decisions when one is in a bad mood.

Buy objects or experiences

Researcher Tom Rath, an expert in development practices based on personal strengths, points out that research shows interesting differences between buying things and buying experiences like a good dinner, a concert or a vacation …

Our satisfaction with material objects is disappearing with time; Ask yourself, for example, if you have the same illusion when you get into your car as the day you bought it.

On the other hand, memories of good experiences can last for years and allow us to “relive” them: do you still remember that trip with your friends from school or your honeymoon?

Researchers at the Gallup polling company have also found that the perception of our income is not “objective ” but depends on different factors.

Thus, in a group of workers with the same salary and the same responsibilities at work, while some felt that their remuneration was adequate, others did not. The difference was in how involved they were in their work.

Those who concentrated on their tasks and found them satisfactory also tended to be satisfied with their pay. The same thing happened with people with good interpersonal relationships: they used to be more satisfied with their salary.

Irrationality and unintelligent decisions

Tom Rath and his partner Jim Harter also describe another phenomenon related to subjectivity in our perceptions of money: behavioral economists have observed that we are often irrational when we make economic decisions.

For example, we prefer not to lose rather than win ; that is to say, we will avoid the pain of losing ten euros that we already had before experiencing the joy of gaining ten euros that are not yet ours.

The use of credit cards is also, in a certain way, irrational : we “know” that we have to pay what we sign, but since the moment of purchase is separated from the moment of payment, we spend more easily.

These researchers also say that, since we do not always behave rationally, it is important to establish automatic systems to manage our money well.

A good idea may be to directly deposit part of our salary each month in a long-term bank account from which it is difficult to get the money. For personal finances, it also applies that “eyes that do not see, heart that does not feel”, and it is better not to see the money that we are going to save each month so as not to feel that we can count on it.

One of the five elements of well-being

Financial wellness is one of the five elements of wellness that Tom Rath and Jim Harter describe in their book Wellbeing. The Five Essential Elements (“The Five Essential Elements of Wellness,” edited by Gallup Press).

According to the authors, it is not only about the net income or the debt that a person has: it is being able to feel financially secure, without too many worries, because you have enough to do what you want to do.

Almost all people with high levels of financial well-being live on less than they earn and save. They make decisions that allow them not to be worried about money, and this has a great positive impact on well-being.

People with financial well- being feel satisfied with their standard of living and have confidence in their financial future.

If a large purchase like a car or a house will put us into uncomfortable and stressful debt, it probably isn’t worth it. So Tom Rath and Jim Harter give us some tips for enjoying financial wellness:

• Buy experiences instead of things.
• Spend on others and make donations according to our possibilities.
• Have automated savings systems that allow us to live without worrying too much about money.

By following these recommendations, we may be able to build a stable financial base that gives us enough peace of mind to fully enjoy the other things that make us happy.