Money and Happiness: The Problems of Understanding its Dynamic Relationship The want of money is the root of all evil. - Samuel Butler- Our society holds a taboo when it comes to explicitly speaking of the desire for money. However, at the same time our behaviors implicitly show us the extent of this desire. Many people spend much time analyzing the stock market for their next bid, millions of people buy lottery tickets looking for their big break, and many people fight with their siblings over their dead parents’ fortune.
And the reason we so desperately pursue the accumulation of wealth is because we believe in its positive influence. We believe it will change our lives into a better one. We think it will make us happier. (Campbell, 1981) However, this is an issue still in question and an important one especially for counseling psychology. In this field, the relationship between money and life satisfaction is essential due to its relevance to career counseling. Considering that a jobs’ financial reward and hence its socioeconomic status is influential in career orientation for some people, the clarification of such relationship becomes crucial.
And in accord to the importance of this issue, there has been abundant research relating to it. However, the results seem to be mixed and confusing. The purpose of this paper is to point out the shortcomings of previous works on this issue and additionally, to provide a new scope into which will be a guide for further research on this issue. Problems in samples and variables Previous studies have attempted to see if money increases happiness by looking into the lives of those who have a lot of money.
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But some of these studies seem to have missed out on a vital factor, sample size. In a study of some of the wealthiest people in the United States, Diener et al. (1985) found the happiness levels of these people to be only slightly above average than that of people with regular incomes. However, the sample size for this study was only 49. Also, Brickman et al. (1978) found that lottery winners were not happier than controls even after their sudden fortune. But his research contained only 22 lottery winners as participants.
In both cases the sample size was much too small to make a general rule out of their research. There could have been plenty of other happier wealthy people who are on the Forbes 500 list or won the lottery but did not participate in the study. So it seems obvious that in future studies, the sample size should be enlarged as much as possible. This would be easier nowadays due to the increased number of millionaires and billionaires in general and quicker access to them through e-mail. Sometimes researchers seem to have failed to fully analyze the variables they used in their research.
In a more recent study, researchers found that income increase over the course of 10 years had only a small positive impact on happiness (North et al. , 2008). This time the size of the sample was relatively large by 274, but certain variables within this sample diminished the implication of this study. Apart from the sample being from a concentrated area (San Francisco Bay area) and being mostly consisted of Caucasians (89%), the researchers have not fully analyzed the spending patterns of the samples’ income. They simply tried to correlate the total income with other variables such as happiness.
But considering the possible fluctuations of expenditure during the course of 10 years, for example, due to emergencies or children’s college tuitions, the net worth of the increased income could have been no different during those 10 years. According to other research, having a strong sense of control over ones financial state can be linked to greater overall satisfaction and that strong sense of control is possible if there is sufficient net worth of income (Cummins, 2000). So without knowing whether the participants had sufficient net worth it would be somewhat misleading say that more income does not contribute to more happiness.
Mixed Results The researches shown above are only a few of many that touch upon this issue of money and happiness. And due to many variables that complicate the relationship of the two, there have been plenty of mixed results. It has been shown that happiness is strongly correlated with increasing income at poverty levels (Diener & Biswas-Diener, 2002) whereas once income exceeds that level and basic needs are met, money matters only a little (Myers, 2000). On the other hand, there has been research that money generates opportunities for individuals to make better decisions that allow them to improve their well-being (Schwartz, 2004).
But then again, more money seems to open possibilities for negative events in life such as divorce (Clydesdale, 1997). What all these findings and many others lead us to conclude is the old adage: “Money isn’t everything. ” Considering Other Variables But knowing just that would not be fruitful. So in response to this unsurprising insight there have been many attempts to clarify the variables in which allow the correlation between money and well-being to be more clear.
In one study, Johnson and Krueger (2006) collected a nationwide sample of 719 twin pairs in the United States. The researchers have demonstrated, through methods of self-report surveys, that an individual’s actual available money explained only about 10% of people’s perceptions of financial well-being, proving the old adage. Along with this finding they showed that perceived financial situation and perceived control over various life domains mediate the relationship between wealth and life satisfaction.
In other words, those who believed that they have more control over their financial state and/or those who perceived their financial state in a positive light were happier with regard to how much money they had. This research is meaningful in that it tried to connect relative psychological factors that take crucial part in this issue of money and happiness. However this research is qualified in terms of understanding the question “Will earning more money make us happy? The main defect it has is that, because their study was not based on longitudinal data it does not show whether more money now than before effects happiness. It focused more on the effect of money on people’s well-being at a fixed time. Research Questions Considering that psychological factors can have a significant contribution to life satisfaction concerning money, an attractive research question would be whether increased income and the ability to perceive change, or retrospect, one’s socioeconomic status have an impact on life satisfaction.
One can assume that if an individual can clearly perceive how much better oneself is doing than before then that person might feel happier than someone who does not see that upward change. But one major factor these studies mentioned above miss out on is personal desire and values. So it would be also interesting to find out if people with different values or desires have different affects by increasing incomes. More specifically, finding out whether people who peg certain emotional rewards to the cquisition of material goods, and hence are extrinsically motivated, are more likely to become happier as their income increases would be a relevant research question. It would be recommendable for both research questions to be done by longitudinal studies. Conclusion This paper has looked into researches concerning money and happiness. This theme was found to be important not only because it concerns our modern life perception about happiness but also because this perception is a crucial element in making career plans for one’s life.
Current research has shown problems with sampling and choosing the right variables. Some studies proved to be fruitful in that it factored in relevant psychological concepts that would mediate satisfaction regarding money. Also, it turns out that longitudinal studies are much more informative in knowing the effects of income change on well-being. The research question provided by this paper is relevant to current issues of this topic and to career counseling because it would clarify elements such as ability of retrospection and motivation types to be predictors of subjective well-being with regard to one’s income.
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