What’s the link between happiness and money? Does making more make you happier? Or is it all about how you spend it?

The relationship between money and happiness is the Ross and Rachel of philosophical conundrums. It’s never quite resolved. Whenever researchers and theorists find a link between, say, a country’s GDP and life expectancy, there’s another high-ranking boffin waiting in the wings to deny that life expectancy has anything to do with happiness anyway.

After all, there are different kinds of happiness. There’s happiness as a measure of our overall satisfaction with our lot (“I’m healthy, I have friends, I’m employed”) but then there’s daily satisfaction (“I had such a nice time today – I felt so empowered and free”).

When wealth doesn’t equal mental health

Most high earners are hard workers. And working hard means putting in long hours. And long hours in the office means a lack of agency over what you do in your spare time. Just ask any busy working parent who has to spend all weekend doing laundry, waiting for a fractious hour in the children’s shoe shop, scheduling house repairs and catching up with admin.

We wrote recently on Vestpod about a new research paper that showed how spending money on outsourcing annoying errands and housework can create a greater feeling of wellbeing than spending money on a luxury item. So that’s one practical way we can make our money work in the service of our happiness.

It’s a global problem

Concerns about work-life balances are evident on a macro level, too, such as the University of Southern California’s recent findings about per capita income versus life satisfaction.  

• Economics Professor Richard Easterlin discovered that countries like China and South Korea, an increase in national wealth has been undermined by a decrease in individual well-being.

• Disintegration of communities and an awareness of unattainable lifestyle goals must play a part here.

There’s a lot of interesting research being done comparing happiness across different countries, and the results reveal a lot about our human nature and the real meaning of this thing we’ve invented called money.

• Wharton academics Betsey Stevenson, Justin Wolfers and Daniel Sacks have recently completed a massive project collating information on well-being in different countries and cross-referenced it with international statistics on economic development.

• Their data encompassed hundreds of thousands of individuals questioned over 40 years in 155 countries and their findings confirmed what most of us would suspect: richer countries tend to have happier people.

• Within this generalization, however, is a subtler truth: humans are happiest when we can compare ourselves favourably to our neighbours. For example, even if a woman lives in a poor country with minimal health and social care, she reports more happiness than a rich American if she feels she’s doing well compared to the other people around her. Whereas the poor old American, with her big house and two cars, feels miserable because she looks out of her window every day at her neighbour’s really massive house and four cars.

When ££ = 😊

In some areas of life, however, there’s no doubt that living in a wealthy country can increase happiness:

• It is because of the health and wellbeing we can enjoy as a result of scientific advances. Knowing we have a good chance at a long life with decent healthcare and access to healthy food takes away the daily anxiety felt by those below the breadline.

• And this is especially good news for women, who historically have suffered terrible emotional hardship as a result of poor sanitation and medical care.

Women, poverty and mental health

• We all know that in “the old days” many women and children died young due to complications from childbirth and infant disease. The knowledge that every pregnancy (over which you had no choice, due to there being no access to family planning) might well end in a fatal infection, and your babies are likely to perish young, would bring a level of unhappiness that none of us in the Western, modern world can conceive of. No, not unhappiness: serious mental trauma.

• But that horrible fate is happening right now in underdeveloped countries across the subcontinent, so whereas there’s a dearth of research from history about how healthcare and hygiene affected women’s mental health in the past, it’s sadly all too easy for academics to measure it now.

• Although to be honest, it doesn’t take a Harvard-educated sociologist to work out that constantly fearing imminent death is likely to be marked down as “unhappiness” on anyone’s mood board.

• Another way money and happiness intersect in women’s lives is work and childcare provision. It’s now the norm for mothers of young children to pay a huge chunk of their salary towards childcare. Perhaps they’d rather be at home with their kids, but can’t quite afford it, or fear that it would sabotage their career long-term? Perhaps they enjoy working but wish their job were a bit more family-friendly. Gender inequality in the developed world is all about money, and the “mental load” women carry - taking on the bulk of domestic decision-making and donkey work - is something that research shows makes even wealthy women unhappy day-to-day.

What does money mean to you?

The solution for some is to outsource the dreary jobs wherever possible, as we’ve said before. But maybe there’s a deeper solution to be found if we all – men and women, rich and poor – sit down and think about what money really means to us. When we were talking last week about DIY financial planning, we noted that the cornerstone of any successful plan is working out what you really, really want. It’s worth thinking long and hard about that, because your first answer might not be the true one. Many of us would say we’d like to never work again. But… really? Would that honestly make you happy? To never contribute to a common professional project; never further your skills and be recognized for them; never enjoy the satisfaction and camaraderie that comes with finding a job you love with a group of people you respect?

So while it’s almost impossible to empirically map the relationship between money and happiness, we hope this summary of the current thinking on the subject has got you… thinking. And especially, thinking about what makes you happy. Now that’s something worth saving up for.