It’s International Day of Happiness, so we are taking a deep dive into the relationship between wealth and money! Can money truly buy you happiness or is there more to it?
Can money buy you happiness?
To a certain degree! Money can of course buy you some essentials, from basic necessities to physical gratification (clothes, food, housing and more). But research suggests that money alone is not enough. It’s thought that wellbeing can increase with income, but only to a point, capped at around $75,000 a year. Beyond this, more money doesn’t equal more happiness.
Researchers argue that things that bring you true happiness have intrinsic value, which means they’re valuable to you personally. Meanwhile, money has extrinsic value, a meaning that is generally shared with the rest of the world. So money itself may not bring you full happiness on its own… but you can use it to buy things that will add more intrinsic value to your life. For example, think about the intrinsic happiness that comes from buying a gift for a loved-one, building a secure home, or learning new things. Having enough money to pursue these opportunities in the first place can be an important step.
It’s also important to recognise that money can impact people differently depending on their background. A 2018 study saw an increase in emotional wellbeing and health when families living in poverty in Zambia received regular cash transfers over a 4 year period.
So having money in your pocket can make a limited difference. But what else do we need?
The difference between wealth and financial wellbeing
Research suggests that it is actually financial wellbeing and good money management that can bring you happiness in the long run. Financial wellbeing is about having the knowledge and confidence to make the most of your money. This helps you with your daily spending and also means you are financially prepared for any unexpected expenses. Having secure and stable finances can alleviate stresses and have a greater impact on your happiness than just cash alone.
How to go about improving your financial wellbeing to boost your happiness
1. Change your mindset
Being optimistic and taking an interest in your finances can really help you to achieve your goals! 58% of those who approach their finances optimistically go on to have conversations about goals and feel that this makes them more productive. Having conversations, listening to others and thinking about the future positively can have a huge impact on your ability to achieve your financial goals.
2. Think about how you spend your money
How you go about spending your money will impact your financial wellbeing and your happiness. Evidence suggests that prosocial spending, spending for the benefit of others, improves happiness. Spending money on experiences and avoiding comparison shopping are also thought to be very beneficial.
3. Start Saving
We all know that saving our money is a good thing, but it can improve your financial health and have a positive effect on your overall wellness too. Saving your money and putting aside funds means you’ll be prepared for unexpected or emergency expenses. This can help to reduce stress and improve your emotional wellbeing. Saving will also help you to reach your long-term financial goals and eventually support you during your retirement!
Here at Maji, we specialise in financial wellness and have loads of tools to help you out. If you’re an employer, introducing a financial wellbeing strategy to your organisation can reduce stress and help make your employees more productive. You can learn more about our services here. And, if you’re an individual looking to get on top of your financial wellbeing yourself, take a look at what we can do for you.