Can money buy happiness? Exploring the link between your finances and your mental health
For years, humans have pondered the age-old question: “can money buy happiness?”
Even 2,500 years ago, philosopher Democritus wrote: “Happiness resides not in possessions, and not in gold, happiness dwells in the soul."
But is he right? Can money actually make us happier?
There have been many studies that link your financial wellbeing to your mental and general wellbeing. So, read on as we explore the link between your finances and your mental health.
Financial wellbeing has an impact on your overall wellbeing – but it doesn’t matter how wealthy you are
A 2019 Salary Finance study about how financial wellbeing affects individuals found that two in five people (40%) were worried about money. These people were:
- 880% more likely to have sleepless nights
- 600% more likely to have a lower quality of work
- 220% more likely to be looking for a new job.
The research found that financial wellbeing has a major influence on overall wellbeing, as well as a significant impact on mental health. The findings of the survey revealed that those with financial worries are:
- 380% more likely to suffer from anxiety and panic attacks
- 470% more likely to be depressed.
There’s an important point to note here. Research has found is that financial worries have very little to do with the amount of money or wealth that you have.
The Salary Finance survey found that it was the lowest and highest earners that had the most financial stress. It also revealed that financial wellbeing is directly linked to your borrowing, saving, and spending habits, not your earnings.
The conclusion to draw from this is that if you’re less worried about money, your general wellbeing and mental health is likely to be better.
3 reasons having more money might not make you happier
Over the last few decades, there has been a huge rise in living standards in the UK. Despite this, levels of happiness among Brits hasn’t increased significantly. There are three main reasons for this.
1. We’re never satisfied
Humans tend to overestimate how much pleasure they will get from having more. While earning more might make you happy in the short term, you quickly adjust to your new wealth—and everything it buys you.
This concept, called ‘hedonic adaptation’ means that you soon get used to your little additional luxuries such as a new car or a bigger TV. Even though buying things seldom brings you the satisfaction you expect, you keep returning to the shops in search of more.
2. More money can bring more stress
While you think you would be happier with more money, it can actually make you more stressed.
For example, when you’re promoted, you might decide to move to a bigger house in the suburbs. However, the commute may then be longer and more stressful, meaning that even if you love your job you can be worn down by the daily commute.
A morning drive through traffic or standing up for 45 minutes on a train will make you unhappy whether it’s your first day on the job or your last.
3. It leads to comparisons with others
Happiness experts have found that how you stand relative to others makes a much bigger difference in your sense of wellbeing than how much you earn in an absolute sense.
Matching census data on earnings with data on self-reported happiness from a national survey, Dartmouth economist Erzo Luttmer found that your happiness can depend a great deal on your neighbour’s salary.
“If you compare two people with the same income, with one living in a richer area than the other,” Luttmer says, “the person in the richer area reports being less happy.”
Using your money to do things rather than buy things could improve your wellbeing
Researchers often present wildly different findings when asked the question ‘does money buy happiness?’
What is generally true is that it’s not the amount of wealth you have, or the level of income you earn that matters. Instead, it’s the way in which you direct your money to the things that are likely to bring you joy and satisfaction.
Sometimes these ‘things’ are actual ‘things’. A new car might make you very happy – but often using your resources to buy experiences can bring greater satisfaction.
A poll by Harris Group found that 72% of millennials prefer spending on experiences over material objects, while a series of studies from Cornell have also found that subjects were happier spending their money this way.
‘Experiential’ purchases might include:
- Holidays, trips, or days out
- Payment for services that free up more time so you can do more of what you like (cleaning, ironing, car washing, garden care etc.)
- Philanthropy and charitable giving
A study published by the Journal of Consumer Psychology concluded that, as money can buy things that make us feel happy, money can therefore buy happiness.
Here are five reasons that support this thinking:
1. Think about what makes you happy
Happiness often comes from doing something. Consider buying a new car. It’s not the colour of the car, the built-in GPS or the size of the boot that typically makes you happy – it’s the drive in the countryside with your family.
The same is true when you buy a house. It’s the birthday party you host for your children in your garden that you’ll remember, not the colour of your kitchen cupboards.
2. Buy experiences not things
Individuals are often happier when they spend their money on experiences rather than material goods. It is possible to both anticipate and remember a great experience, unlike buying an item in which the happiness can often be fleeting.
3. Help others
Humans are social beings and we’re dependent on interpersonal relationships for happiness. If you spend your money on improving your social connections, you are, in turn, creating a happier social circle.
According to the Public Health Agency, giving to others stimulates the reward areas in the brain, creating positive feelings. Studies have shown that giving is beneficial for combating stress, depression and anxiety. It also helps to keep you mentally stimulated, improves your self-confidence and provides you with a sense of purpose.
And, charitable giving helps you to teach your children about the impact of giving back to the community. Children watch everything you do, so, by following your example, it will give them first-hand experience of the benefits of being philanthropic.
4. Buy lots of little things
If you like shopping, and buying things makes you happy, research has shown that spreading your money over lots of smaller items provides more happiness than buying one more expensive item.
So, consider buying lots of little things. Spread the happy feeling over many purchases!
5. Don’t over-compare
If you spend hours online, checking comparison sites in order to try and get the very best deal on a product, you lose sight of what it is about the item that makes you feel happy. The issue becomes about the price, not the joy you’ll receive from the item.
The peace of mind of insurance
What would help you to sleep better at night? A new car? A £2,000 a year raise? Or the peace of mind that your family are protected if the worst should happen?
Insurance can make you feel less stressed. A 2017 study by the American Psychological Association found that adults without insurance reported an average stress level of 5.6 in the previous month on a 10-point scale, where 1 is ‘little or no stress’ and 10 is ‘a great deal of stress’.
Conversely, those adults with insurance reported a significantly lower average stress level (4.7).
Putting the right insurance in place means that you have the reassurance that you and your family get financially support if, for example, you’re diagnosed with a serious illness or you pass away.
The NHS report that one in four adults experience mental illness. Despite what you may have read, it is possible to get life insurance if you have experienced mental health issues in the past.
As life insurance and critical illness experts, we work closely with some of the UK’s largest insurers to get you the cover that you need. If you have experienced mental health including depression and anxiety issues in the past, don’t let it stop you applying for the protection you need. Get in touch for a chat and to find out how we can help.
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