Can Money Bring Happiness?May 4, 2021
Just how true is the old saying “money can’t buy happiness”? Research says that it isn’t, and that the opportunities financial security provides can deliver happiness and improve your wellbeing.
A recent study refutes often cited research, claiming money could buy happiness, but only up to a certain point. A paper written by psychologist Dan Kahneman and economist Angus Deaton 10 years ago found happiness and income were only linked upto £75,000 each year. Up to this point, life satisfaction increased in line with income, but levelled out once earnings exceeded this amount. The paper summarised that money can improve general satisfaction, but it cannot improve your emotional wellbeing.
Now, however, a newly published paper is rubbishing this claim.
New Research Suggest That Money Can Buy Happiness
While the 2010 paper was mostly based on surveys, the latest one utilises data collected from a mobile app called “Track Your Happiness”. At random times, the app will ask users about their feelings and circumstances. The developer, Matt Killingsworth, has based a body of research on these findings, which have now been published in the Proceedings of the ‘National Academy of Sciences’.
It is titled “Experienced wellbeing rises with income, even above £75,000 per year” and sums up the findings.
The paper says: “Higher incomes can still have the potential to increase people’s everyday wellbeing, rather than having already reached a flat-line for many people in wealthy countries. There is no evidence to suggest an income threshold to support at which experienced and evaluative wellbeing diverged, which suggests that higher incomes are indeed associated with both feeling better day-to-day and being more happy with life overall.”
In fact, while there is a slight drop in both experienced wellbeing and life satisfaction at around £100,000, there is a general increasing trend, even as annual income reaches £500,000 per year, the 1st figure shows. The 2nd figure highlights that as positive feelings increase, negative feelings decrease in line with income.
Therefore, if money actually does buy happiness, should you focus your efforts on increasing your income and the cash in the bank?
Value Of Assets Versus Value To Your Life
One of the things both research papers have overlooked is ‘why’ wellbeing increases as income rises.
You may get a small amount of satisfaction from watching the balance of your bank account rise, but it is often not the actual number itself that improves wellbeing. Rather, it’s the stability and safety it provides. Knowing that you have security to fall back on, for example, can provide a huge boost to how confident you are about the future and enable you to enjoy the present.
An increase in income can allow you to use more of your disposable income on the things you enjoy and help you to take steps towards long-term goals. However, if you need to spend more time travelling to work and sitting in traffic every day, meaning you don’t have the freedom of enjoying the additional income, would it still improve your everyday happiness? Some may find they feel even less satisfied with life in spite of having more money.
While the research presents an interesting insight, focusing on what’s truly important to you and how your income can help you reach this is equally as important, on a personal level, as your salary.
A raise in wellbeing doesn’t have to be linked directly with your income. A 5 figure sum in the bank and good investments can help you to be prepared for life’s unexpected events, but that doesn’t mean you cannot achieve the same level of security without this. A financial protection product, such as income protection or life insurance, that maches up with your priorities may deliver the same sense of wellbeing.
The process of financial planning helps you to understand what your financial goals and concerns are, and then allows you to create a long-term financial plan that addresses them. It’s more about getting your assets and income to work in a way that matches your priorities, whether that’s spending more time with your family, travelling the world, or retiring early.
Rather than only looking at the value of your assets, looking at how they can bring more value to your life can help you get the most out of them.