Who Actually Feels Satisfied About Money?
Who Actually Feels Satisfied About Money?
Joe Pinsker July 21, 2019
“It’s not just how much you have—it’s what you do with it,” says one researcher who studies money and happiness.
These days, not even the rich feel rich. According to a recent survey by the financial-advisory firm Ameriprise Financial, only 13 percent of American millionaires classify themselves as wealthy. Even some of those surveyed who had more than $5 million across their bank accounts, investments, and retirement accounts said they didn’t feel rich. If multimillionaires don’t feel wealthy, who does?
I decided to go to Elizabeth Dunn, a psychology professor at the University of British Columbia and a co-author of Happy Money: The Science of Happier Spending, with my question: Once people have enough money to cover their basic needs and then some, what would make them feel satisfied—happy, even—with what they have? Dunn said she didn’t know of any academic studies that addressed this question head-on, but she did point to some related research that provides possible answers.
First: “Social comparison, we know, is critical,” she told me, meaning, roughly, that if a person is richer than the people he compares himself with, he’s going to feel rich. One 2005 study based on data from Germany looked at how people’s incomes compared with those of people who were similar in terms of age, education, and region of residence, and found that “individuals are happier the larger their income is in comparison with the income of the reference group.”
In fact, the study found that “the income of the reference group is about as important as [one’s] own income for individual happiness.” Similarly, a more recent paper found that middle-income people were less satisfied financially if they lived in American states with higher levels of income inequality.
These dynamics play out on a much smaller level, too. Research that looked at fine-grained data from Canada found that when people won the lottery, their neighbors were more likely to run up their debts and file for bankruptcy—the idea being that they tried and failed to keep up with their lucky peers. In a different study, not as focused on such an extreme outcome, people tended to be less happy the more their neighbors earned.
“If you live in a neighborhood where everybody has about the same as you do, then you don’t feel as perpetually behind as [when] you’re in a place where it’s more diverse economically,” says Keith Payne, a psychology professor at the University of North Carolina at Chapel Hill who studies the mental effects of inequality.
Dunn also noted a couple of variables, other than peers, that might lead people to feel richer. She brought up a 2016 study that found people’s bank balances—viewed separately from just spending, or investments, or debt—to be, in its authors’ words, “of unique importance to life satisfaction.” “One reason why middle-income people might feel pretty good about their level of income is if they just happen to be living their lives in such a way that even if they don’t actually have a lot of net worth, but they always have 8,000 bucks in the bank,” Dunn speculated.
To continue reading, please go to the original article here:
https://www.theatlantic.com/family/archive/2019/07/who-feels-rich/594439/