The relationship between money and happiness is complicated
Health & Money
High financial debt is associated with poorer self-reported general and mental health in young adults. As the younger generation tackles mounting debt, their health and wellness suffers. What causes this generation to take on more debt?
One theory is FOMO: Fear of Missing Out. We wrote about it here, and it particularly plagues millenials, who grow up comparing their lives to others through social media. It can create a pressure to overspend in order to keep up. For more on How FOMO Can Ruin Your Financial Goals, click here.
The consequences could be dire. In a new study published in Social Science and Medicine, researchers used data from the National Longitudinal Study of Adolescent Health to explore the association between debt and psychological and general health outcomes in 8,400 young adults, ages 24 to 32 years old.
Twenty percent of participants reported that they would still be in debt if they liquidated all of their assets (high debt-to-asset-ratio). Higher debt-to-asset ratio was associated with higher perceived stress and depression, worse self-reported general health and higher diastolic blood pressure.
The researchers found that individuals with high compared to low debt reported higher levels of perceived stress (representing an 11.7 percent increase relative to the mean) and higher depressive symptoms (a 13.2 percent increase relative to the mean). “You wouldn’t necessarily expect to see associations between debt and physical health in people who are so young,” says Elizabeth Sweet, lead author of the study.
Love & Money
“Arguments about money is by far the top predictor of divorce,” says Kansas State University researcher Sonya Britt, assistant professor of family studies and human services and program director of personal financial planning. “It’s not children, sex, in-laws or anything else. It’s money — for both men and women.”
Britt conducted a study using longitudinal data from more than 4,500 couples. The study, published in Family Relations, reveals that “it didn’t matter how much you made or how much you were worth. Arguments about money are the top predictor for divorce because it happens at all levels.” Britt suggests young couples planning to get married see a financial counselor. See our previous article on money in relationships here.
Happiness & Money
Research is clear that some things completely override any happiness that can be gained from money or work success. It’s just hard to realize that because money is tangible, measurable, and universal, whereas the “other factors” Kahneman mentions that have a greater impact on our happiness are vague and nuanced.
What are those “other factors” Kahneman mentions?
The field of positive psychology studies what makes people happy. It’s a young and constantly changing field, but researchers broadly agree that four major points have a big impact on making people happy:
Control over what you’re doing.
Progress in what you’re pursuing.
Connections to other people.
Having purpose and meaning.
You’ll notice “more money” isn’t on the list. But you can easily see how money ties into these points. Money can grant you freedom from a nine-to-five job, offering control over what you’re doing. It can provide the tools necessary to achieve progress in whatever you’re pursuing. It can afford you time off to and a chance to spend time with other people. It can give you the ability to provide for people other than yourself, bringing meaning and purpose. To the extent that money can buy happiness, most of us would do better to think of how it can help us achieve these four points.
Look at how you view money, what it allows you to do, and how it might hold you back. How’s your relationship with money?