Money allows us to meet our basic needs—to buy food and shelter and pay for healthcare. Meeting these needs is essential, and if we don’t have enough money to do so, our personal wellbeing and the wellbeing of the community as a whole suffers greatly. We all have a responsibility to work towards a society where everyone has access to adequate food, shelter, and healthcare. Where we are all safe.
Can Money Buy Happiness?
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Money provides security and control
Having enough money also provides a sense of security, one that is often missing when people worry about unforeseen medical expenses or losing their job. A 2017 study found that almost 50% of Americans worry about their financial situation, and it impacts their mental health, relationships, diet, even their work performance. There is no denying that having enough money to cover expenses and put some aside is important for our wellbeing.
Moreover, as Tom Rath suggests in his book, Wellbeing, “money can increase our short-term happiness by giving us more control over how we spend our time.” For example, it can give us the option to live closer to work, work fewer hours, and spend more time on leisure activities with family and friends. Money can be used to make our lives easier.
Poverty inhibits wellbeing
According to the American Academy of Family Physicians (AAFP), research shows a connection between low income and poor health outcomes and shorter life expectancy. There are many reasons for this, beyond the fact that people living in poverty have a harder time affording nourishing food and adequate shelter. For example, low-income neighborhoods often have poorer hospitals, and they are less likely to have public resources that have a positive impact on health, such as safe streets and clean water.
Poverty also often creates a domino effect of more hardship. For example, being poor may force a person into work at a young age, preventing them from getting an education and thus access to higher-paying jobs.
But there are surprises
While having enough money to meet basic needs and provide a safety net is essential to wellbeing, there are indications that additional income may not significantly increase our wellbeing and may even have a negative effect in some cases. The data to support this is interesting. For example,
- Per capita income in the U.S. rose 150% from 1946 to 1990 (which is a huge difference in purchasing power), but the percent of people considering themselves very happy fell.
- In addition, depression rates in the U.S. rose 10 times in that 50-year period.
- In Japan between 1958 and 1991, the per capita income rose six-fold, but subjective wellbeing stayed the same.
- People who won large amounts of money in lotteries in the U.S. or football pools in England were not significantly happier a year later and were more dissatisfied with daily events.
And there is research that suggests additional ways money can have a negative impact on our wellbeing.
Money isolates us
When people are thinking about money, they isolate themselves from others. A researcher at the University of Minnesota did a series of nine experiments that demonstrated that money makes people want to be free of dependents and dependency. Reminded of money, participants preferred to:
- Play and work alone
- Put more physical distance between themselves and a new acquaintance
- Were in general less helpful to others
Comparing makes us unhappy
We are forever comparing ourselves to others and it causes us distress. A person who earns $30,000 a year will be dissatisfied if his friend makes $50,000 a year. A raise to $50,000 should make him happy, but it won't if his friend gets a raise too. He will be equally unhappy making $50,000 if his friend is now earning $70,000!
Many times our dissatisfaction with our financial situation comes from the perception that we’re not stacking up to the people around us.
More income may mean more stress and less fun
Other studies have associated higher incomes with higher levels of stress, increased likelihood of divorce, and less enjoyment of small activities.
Ed Diener, a researcher who has spent over 30 years studying wellbeing, postulates that a higher income may mean more work, less leisure time, and fewer strong social connections. In other words, the benefits of having more money might be offset by the sacrifices people are making in other aspects of wellbeing. So while money can give us more control over our time, the fact is that most of us don’t use money to buy more free time or fun activities with friends and family.
Materialism makes people unhappy
We humans don’t always know what makes us happy! Because our society values it so, we believe that money will bring us happiness and so we don’t pay attention to what is actually going on. Consider these facts:
- The happiness of acquiring goods is always transitory—it wears off. For example, we might be really excited to buy a bigger car, but over time, we take the car for granted. Moreover, we are still committed to monthly car payments, which can restrict our options for fun activities--vacations and dinners out, for example.
- We adjust our expectations upward. As our income goes up, we feel we need more expensive things, and those higher aspirations use up almost all of our gained income. In other words, we use almost all of our raises to buy a more expensive version of things we already have.
- Our wants can be insatiable—the more we get, the more we want. This can lead to large debt and all the stress it brings.
- Greater materialism is associated with a host of negative effects: lower self-esteem, greater narcissism, less empathy, and more conflicted relationships.
Worrying about money clearly impacts our wellbeing in major ways, and in that struggle it is difficult to see beyond the needs of the day. But if we can take a moment, we can recognize that we still have ways to enhance our wellbeing: we have some choices about how we spend both money and time. And we can see the truth of what might initially seem trite: that most of the important pleasures in life cannot be bought. What really brings us satisfaction in life are relationships, purpose, meaning, and connection to nature. If we can remember that, we can find ways to enhance our wellbeing.
Learn more with Wellbeing U
In Wellbeing U, our free online learning experience, you'll find a useful course on managing money by Chris Farrell, financial advisor and radio host of American Public Media's Marketplace.
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