Does money make us happy? We all have different beliefs on how important money is and how it relates to our happiness. Some dismiss the notion, believing money and happiness are not (or shouldn’t be) directly connected. They can point to countless examples of the rich and famous who are very publicly unhappy. Others actively enjoy building wealth and revel in the status money affords them.

Wherever you may fall on the spectrum, there’s an increasing amount of research analysing the link between wealth and happiness, and the results may challenge your opinion and change your outlook. 

What Does the Research Say?

There is substantial research that clearly demonstrates a link between money and happiness. A higher income gives us access to better nutrition, a better education, and more fulfilling work (if we are lucky!). Also, those on lower wages experience ever-present financial anxiety that can dramatically decrease happiness. And with the high cost of living, it’s true that a significant percentage of the population experiences at least some level of financial anxiety fairly regularly.

Based on this research, it would be safe to assume that as you earn more money, your happiness increases along with the figures in your bank account, right? Well, maybe not. Once someone’s basic needs are fulfilled and financial anxiety is removed, most people soon discover that money’s benefits are offset by some surprising negative effects.

According to the 2010 Nobel prize-winning duo of economist Angus Deaton and psychologist Daniel Kahneman, there is a ‘happiness saturation point’ for money. Overall, once you reach a certain income level, your happiness will not necessarily increase with more money. In fact, it may even decrease as you become wealthier. In 2010, Deaton and Kahneman suggested this figure was $75,000. In 2018, it was increased to approximately $90,000.

Why isn’t that amount higher? One reason is because once you move into higher income brackets, you start experiencing more ‘lifestyle creep’, otherwise known as ‘keeping up with the neighbors’. You start to feel compelled to live a life that reflects your new, higher financial status. For example, an increase in income can lead to purchasing a larger house, which then means taking on a bigger mortgage. To pay for that mortgage, many people find themselves spending more hours working at an often-stressful job, or if they are unhappy with their workplace, they feel trapped because they have to make that mortgage payment on time, every month.

You may have more, but you need to work harder in order to maintain the lifestyle your extra wealth has afforded you. So, where there was once financial anxiety about making ends meet and paying bills on time, now there is new pressure to have the latest, biggest, newest, and best of everything.

Changing Mindsets About Motivation and Money

More and more people are really questioning the benefits of increasing wealth for its own sake. At Continental, one major change we are seeing amongst our clients is that fewer people want to place the pure pursuit of wealth at the top of their priority list when they are planning their retirement. Or they are designing a lifestyle that takes a far more holistic approach than that of their peers.

Whereas financial and material wealth were once the major, and sometimes only, measures of success, now people are seeking overall happiness through methods that don’t necessarily focus on material gain. Whilst it is still the case that purchasing material objects, such as a new gadget, a car, or even a house, will provide you with an immediate hit of endorphins, your happiness levels decline quickly afterwards – sometimes in just a few months.

That’s because money is no longer our only (or even strongest) motivator. According to researchers like New York Times and Wall Street Journal best-selling author Dan Pink, people are searching for autonomy (i.e., having some control over the work environment), mastery (i.e., feeling challenged in a way that promotes growth), and purpose (i.e., working on something of importance). 

This also explains why people are much more willing to change jobs and careers than ever before. According to LinkedIn data, millennial graduates are likely to have four jobs in their first decade after leaving university, whereas Gen Xers have averaged just two. The time when you could stay in your first job your entire career is now long gone.

But keep in mind that changing jobs or career trajectories is not the same as saying people no longer care about earning higher wages or that they do not want to work hard. It’s simply that pure financial reward is no longer people’s prime motivation. Their top priority now is spending time with their families, seeing the world, developing themselves, giving back to their community, and trying new experiences. Therefore, they pursue money to meet these goals, not just to build wealth for no defined purpose. 

How Continental Can Help

Continental is committed to helping our clients achieve their financial goals and for many, that means pursuing happiness, not just wealth. That’s why our professional financial advisors work closely with clients to design and execute for personal and financial prosperity. 

With a range of investment and insurance solutions, we help our clients plan and protect their happiness. Whether it’s a customised retirement design, a sophisticated structured note, or life insurance with critical illness cover to protect it all, our smart financial planning safeguards our clients’ financial well-being so that they can use their wealth to live their dreams.