Does more money lead to more well-being?

 

Money Happiness Blog

 

Well-being

There are two common constructs that describe well-being: First, subjective well-being (Diener, 1984) and second, psychological well-being (Ryff, 2014).

Diener (1984) describes subjective well-being by distinguishing between cognitive and affective well-being. The cognitive well-being is long-term and is, for example, a general satisfaction with life or a satisfaction with a part of life (work or family). However, this cognitive well-being can be disturbed or promoted by short-term affects - positive or negative at the same time.

Ryff (2014), on the other hand, describes psychological well-being as consisting of the following key components:

  1. autonomy
  2. environment mastery
  3. personal growth
  4. positive relationships
  5. meaningful life
  6. self-acceptance

At this point it can already be shown that money itself is neither a component of subjective nor psychological well-being.

 

Money and life satisfaction

Even though money is not a specific component of well-being, money is still a very important factor when it comes to well-being or life satisfaction.

The Aspiration Theory by Easterlin (2001) shows that people are happier the higher their income is. During the lifecycle, however, people's income tends to increase, but not their life satisfaction. How come?

Life satisfaction does not depend on the absolute amount of money. Personal aspiration versus actual circumstances are deciding, whether a person feels satisfied or not. If the personal aspiration of the person regarding their salary are met, then their life satisfaction is high. However, dissatisfaction arises when personal aspiration of income is higher than actual circumstances. “But since aspiration actually grow along with income, experienced happiness is systematically different from projected happiness” (Easterlin, 2001).

External factors, therefore, only have a limited influence on life satisfaction and happiness.

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Conclusion

Indeed, it is true that people are happier the higher their income is. However, if we take a look at the lifecycle perspective, it becomes clear that satisfaction remains stable despite rising incomes, as the expectation rises proportionally to income. Thus, this leads to a habitational effect.

Consequently, money is not everything, although it is an important part of our happiness. Therefore, it is definitely worth to take a look at other components of our lives to achieve general life satisfaction.

 

"Money consists of numbers, numbers are endless. One who needs money to be happy, his or her search for happiness will be endless."

 
Diener, E. (1984). Subjective well-being. Psychological Bulletin, 95(3), 542-575.
Easterlin, R. A. (2001). Income And Happiness: Toward A Unified Theory. The Economic Journal, July (111), 465–484.
Ryff, C. D. (2014). Psychological Well-Being Revisited: Advances in Science and Practice. Psychother Psychosom, 83(1), 10–28.
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