Show Me The Money

Money is fairly important, so much so that we normally have to dedicate eight hours a day of our life to get hold of it. It is a major shaping force in our lives. More is generally perceived as better and whilst a lot can buy nice holidays, cars and gifts, a lack of it can also cause jealousy and annoyance. It isn’t uncommon to overhear all sorts of people suggesting that, ‘if I just had a bit more money, life would be a lot better’. But is money and wealth all that good? In a lot of situations the answer is obviously yes. You couldn’t function without food, water, the internet or designer clothes. And money buys all these things. But the question of whether money can buy happiness is more interesting (or at least I think it is). Depending on your view point you may believe it does or you may buy into the age old cliché that money can’t buy you happiness and because of it the world is full of Ebenezer Scrooge characters. However, both are somewhat off the mark. This blog discusses what research tends to shows concerning money and happiness and how we might be able to make the most of our earnings.

There has been a fair amount of research examining the relationship between wealth and life-satisfaction. It has generally come to rather unimpressive conclusions. In developed countries, income only tends to explain 2-5% of variance in individuals ratings of wellbeing (measures of well being tend to ask individuals how satisfied they are with life or what their ‘general happiness’ is). This really isn’t very much and what this suggests is that income may play only a very small role in shaping happiness. Furthermore, there is some suggestion that these small effects are largely the result of the very poor being very unhappy because of bad living conditions. So, when you have enough money to live comfortably (i.e. being able to afford to read blogs on the internet) the effect money has on happiness gets tiny; A 40k a year job being no better than a 55k job in terms of promoting greater life satisfaction and happiness.

If massive increases in happiness are unlikely to follow an increase in bank account size, then why do people work themselves into the ground? A 2003 survey commissioned by Boys and Girls Clubs of America found that the majority of parents surveyed had little or no time, or wished they had more time to spend with their children. The major reason given for this was their work schedules. In addition, a study by Kahneman and colleagues (2006) showed that individuals with higher incomes do not spend more of their day partaking in enjoyable activities anymore so than individuals with lower incomes. The two did however differ in the amount of stress they tended to experience during the day, with the higher earners feeling significantly more stressed out.

Esteemed research psychologist Martin Seligman also cites research that shows, although lawyers (who work notoriously long and hard hours) are one of the best paid professions in the US, they are also one of the unhappiest. With one of the highest depression rates of all professions and significantly more alcohol and family problems than non lawyers. Thus, as well as doing little for us in terms of happiness, in some instances our drive for money may even encourage unhappiness.

Now we know that money is unlikely to provide us with everlasting happiness, two potentially even more interesting questions that follow on from this are:-

a) why do we continue to chase it regardless?
b) is there anything we can do with it to make us happier or more content with life?

One obvious reason as to why we may continue to chase money is that we are simply mistaken and believe that more money = more happiness. But it is probable that there are also other things going on. Another explanation is that we are trying to satisfy other needs with money. Our need for social approval and status may be particularly relevant. Advertisements are everywhere and generally teach us that money is normally associated with respect from peers and a symbol of success. Our heroes and role models in society don’t tend to be working in Somerfield and tend to wear quite expensive clothes. It is therefore likely that an implicit association between money, power, success and respect can’t help but be formed. These desires are strong; everybody likes to be seen as someone important and valued, and earning high wages is a way to achieve this. The way this may work is akin to the fashionable status of obesity during the reigns of the likes of Henry VIII. A bulging waist line was a sign of wealth and thus revered. Today, earning lots of money is associated with success and importance and therefore likely to be similarly revered.

But can we make any use of the money we have or should we just throw it all away then? The fact that money has been shown to have a small influence on life satisfaction would suggest that if used wisely, maybe it can enrich our lives. Luckily there is evidence of this; Gardner & Oswald (2007) followed UK citizens that were lucky enough to win between £1000 and £120,000 in lottery draws. Compared to control groups these winners showed a greater improvement in mental wellbeing 2 years later at follow up. So how did they do it? Regrettably the study can’t answer this question because they only tracked mental well being and not what they actually did with the money. But work by University of Columbia’s Elizabeth Dunn may provide some clues as to how money could be used to promote well being.

What would make you happier? Spending money on yourself or others? In a 2008 study Dunn gave participants $5 or $20 in the morning and asked to either spend the money on themselves or someone else/a worthy cause. Their happiness was then measured later on in the day. The findings were encouraging for those that are kind hearted. Spending the money on others resulted in individuals feeling much happier at the end of the day and even more interestingly the amount spent had little effect on mood. Spending $20 dollars on your self is seemingly no more rewarding than spending $5. Dunn also reports data that suggests individuals that have a habit of spending money on others tend to be happier than their miserly counterparts. Using ones money for good seems even more appealing now.

Application

Quit your grad schemes with Price Waterhouse Coopers and do something worthwhile with your life.

Feel sorry for lawyers; they may be rolling in money, but they are miserable alcoholics with failing families.

Find a job you feel enriched by and you value as important. This is far more likely to be satisfying than whatever career happens to currently be bringing in big bucks.

Feel there is now good reason to help starving children in Africa or to buy family members birthday presents.