The common adage, “money can’t buy happiness” may be false.

GDP per capita has been globally correlated with life satisfaction; researchers have found a logarithmic correlation demonstrating that wealth has positive and diminishing effects on happiness once basic human needs are met. Studies in developed countries have revealed income predicts 2-4.5% of subjective well being in individuals. However, researchers are quick to point that income may still be confounded with unemployment, job satisfaction, social connections, physical health, and consumer debt, despite the rigors of statistical analysis.

Economic growth also has a misleading relationship with happiness. Longitudinal research has shown that short-term economic expansions are correlated with similar growth in subjective well being (and vice versa), but this relationship disappears once a data set of 10 years or greater is considered.

While the relationship between happiness and wealth is still somewhat hazy, credit card debt has a significant negative correlation to life satisfaction. Inversely, positive financial behaviors such as increased savings, risk management, cash flow management, and long-term financial planning have been positively correlated with happiness and financial satisfaction. Therefore, while global factors and economic trends are beyond personal control, you can increase happiness by making your money work for you. Talk to your financial planner to strategize risk management and create a long-term financial plan.

References

Ahuvia, A. (n.d.). Wealth, consumption and happiness. In Consumer behaviour in the private sector (pp. 199-226).

Easterlin, R. A., McVey, L. A., Switek, M., Sawangfa, O., & Zweig, J. S. (2010). The happiness–income paradox revisited. PNAS, 107(52), 22463-22468. Retrieved from www.pnas.org/cgi/doi/10.1073/pnas.1015962107

Heady, B., & Wooden, M. (2005). The importance of wealth for subjective well-being. Journal of Financial Transformation, 15, 59-67.

Pew Research Center. (2014, October 30). People in emerging markets catch up to advanced economies in life satisfaction. Retrieved from http://www.pewglobal.org/2014/10/30/people-in-emerging-markets-catch-up-to-advanced-economies-in-life-satisfaction/

Veenhoven, R. (1989). National wealth and individual happiness. Understanding Economic Behaviour, 9-32. doi:10.1007/978-94-009-2470-3_2

Woodyard, A. S., & Robb, C. A. (2016). Consideration of financial satisfaction: What consumers know, feel and do from a financial perspective. Journal of Financial Therapy, 7(2). doi:10.4148/1944-9771.1102