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The Impact of Money on People’s Happiness and Life Satisfaction

money can lead to a better and more comfortable life/Photo By Masson via Shutterstock

 

“Money can’t buy happiness” is a common saying among people. Ironically, most of the general public still pursue wealth and see it as a means to their proverbial happiness. Although being poor does not necessarily mean that one is living a sad life, there is definitely a role that money plays in an individual’s life and their overall satisfaction.

This currency, which a person may possess or lack, can be perceived in certain ways. This can also depend on the individual’s socioeconomic status. One perception of money is that it is the root of all evil. There is the impression that the more a person has or desires money, the greedier and more selfish they are. Another perception of money is that it can lead to a better and more comfortable life. There is also the impression that the more money a person has, the more improved their life experiences will be.

Compared to those of the middle class and below, the wealthy elite has experienced more comfort and luxury. Wearing costly designer outfits, eating at the finest restaurants and having the most expensive cars are often part of what they consider their normal lifestyle. However, does this mean that they are more satisfied in life than those who are simply living within their means?

According to CNBC, only one percent of the world’s population is part of that elite. The rest, as stated by Gapminder, belong to those who live in between. It is estimated that approximately one billion people survive on less than a dollar a day.

 

Definition of Money

Dictionary.com defines money as “any circulating medium of exchange, including coins, paper money, and demand deposits.” They also define it as “gold, silver or other metal pieces of convenient form stamped by public authority and issued as a medium of exchange and a measure of value.

Money is noted to be a means for a person to exchange what he has with what he desires, Economics and Liberty elaborates.

Three Crucial Characteristics of Money

It is said that money has three crucial characteristics. These traits are:

 

1. Being a form of trade.

In earlier days, before the advent of money, people used the barter system to be able to obtain the goods that they wanted. For example, a shepherd who wanted to have corn had to look for someone who possessed corn and wanted a sheep.

Then, indirect barter gradually developed. To illustrate, continuing from the previous example, the shepherd may have found a farmer who produces corn. Unfortunately, he did not want to have a sheep. He tells the shepherd that he wants a blanket. In the process, the shepherd exchanges the sheep to blanket vendor who gives the blanket. Upon receiving the blanket, he can finally exchange it for some corn.

2. Being an economic good.

As time passed, various commodities were used as mediums of exchange. However, the marketability and durability of that commodity had to be considered. Food was one of those commodities, yet it was a perishable one so it was not an ideal means of exchange. Gold and silver soon became the most durable and marketable of commodities since they did not rust or rot. It was because of this that gold and silver became the most common medium of exchange.

3. Being a means of economic calculation.

It is said that money is a form of exchange value. Exchange value is the cost that the traders give to the goods in the marketplace. Since there is a need for exchange value, the marketplace was drawn to the utilization of exchange value based on the established weights of gold and silver.  

As a demonstration, the first American silver Dollar was based on the Spanish Dollar which had a fixed amount of silver. Its weight consists of 371 4/16 grains of pure silver or 416 grains of the standard silver.

Since this is a less complicated way of economic calculation, which only involves weights and measures, this makes trade become better and promotes economic growth.
 

having a higher income equates does not mean  having more happiness/ Photo By Dean Drobot via Shutterstock

 

Definition of happiness

According to How To Be Happy, happiness is the condition of being happy. It is also defined as the feeling or exhibiting of pleasure and contentment.

Charles Spurgeon says that it is now how much a person owns that makes happiness but how much they enjoy them. Some people may be perceived as cheerful most of the time. It is explained that the happy people pay attention to what they have while those that are unhappy dwell on what they lack.

The happiest individuals may not have all the best things in life, but they are able to use what they possess and make the best of it. The Secret Society of Happy People states that individuals cannot be happy at all times, but they can be happy most of the time. Humans are made to feel a range of emotions and one of them is happiness. However, happiness is not the only emotion that people should feel.

 

What is Life Satisfaction?

Positive Psychology Program explains that life satisfaction is “one’s evaluation of life as a whole, rather than the feelings and emotions that are experienced at the moment.” According to the research The Study of Life Satisfaction, the quality of life is linked to an individual’s living conditions. This may include their shelter, food and health.

It is shown that education and income can help boost a person’s life satisfaction. However, individuals are advised to create connections with loved ones, make personal goals and place themselves in situations where they are able to use their talents and strengths so that they can truly increase their satisfaction in life.

 

How does Money Affect Happiness and Life Satisfaction?

A study conducted  by Christopher Boyce, Gordon Brown and Simon Moore reveals that money and happiness are not causally linked.The relationship between happiness and money is found to be small, but the countries most affected by this relationship are the ones that are developing and have low-incomes. This may represent genuine differences in happiness, but that does not mean that having a higher income equates to having more happiness.  It is stated that according to the conventional economics, that money may have the ability to purchase happiness since it can be traded for commodities that can increase an individual’s utility.

 

an individual being surrounded by people who have a higher economic status can negatively affect their well-being/ Photo By Dean Drobot via Shutterstock

 

They are convinced that the rank of a person’s income and not their income alone is what affects their life satisfaction. It is also presented in their study that people focus on how their income is compared to the average employee. This what they refer to as the reference income of a socially constructed comparison group.

Their research also expounds that an individual being surrounded by people who have a higher economic status can negatively affect their well-being. As a result, the person’s utility is affected not by the absolute level of income, but how high their income is compared to their peers.

Additionally, the study Would You Be Happier If You Were Richer? A Focusing Illusion claims that “people with above-average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense and do not spend more time on particularly enjoyable activities.”

Daniel Kahneman and his team, the authors of the aforementioned research, also note that rich people focus more on conventional achievements when they assess their lives and compare them to others.

In another research headed by Jordi Quoidbach, titled Money Giveth, Money Taketh Away: The Dual Effect of Wealth on Happiness, it is explained that possessing an adequate or large sum of money can boost a person’s feeling of self-sufficiency or independence.

It has also been shown that just thinking about money can cause a person to believe that anything they want to experience can be attained. Still, this view of abundance may keep them from experiencing the joys of life.

To quote Quoidbach and his colleagues, “Wealth, of course, opens the door to a wide range of experiences, from lattes and pedicures to fine dining and luxury travel. Indeed, just thinking about wealth may increase one’s perceived access to such enjoyable experiences, introducing the risk that everyday pleasures may be taken for granted.”

Their study also asserts that scarcity, of money perhaps, can increase savoring. Savoring is defined by theorists as a method of managing emotion used to preserve and improve positive emotional experiences. Essentially, it is proven that instead of directly affecting a happiness, it money has a more causal association with savoring.

Wealth, therefore, can ruin a person’s ability to enjoy simple life pleasures. Indirectly, if a person cannot savor simple pleasures that means it is harder to make them happy. Since those that are rich have become accustomed to having commodities that are the finest, the best and the most superior, it would take much more for them to be satisfied about certain life experiences than the people who come from a lower class who are unable experience these things on a daily basis.

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