Understanding the Link Between Money and Happiness
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Chapter 1: The Nature of Happiness and Financial Reference Points
The connection between happiness and money is often influenced by our personal reference points—essentially, our previous earnings and our feelings of envy towards others.
In Yale University's course on The Science of Well-Being, I found it astonishing to discover that 56% of individuals would rather undermine their own happiness than allow colleagues to feel superior. Our aspirations for the future are frequently shaped by our current earnings. For instance, someone earning £30,000 may believe that a salary of £50,000 is essential for their happiness, even though significant salary increases are uncommon. In fact, those with higher incomes tend to set even more unrealistic targets; a person earning £100,000 might think they need £250,000 to feel fulfilled.
Research by Van Praag and Frijters (1999) revealed that individuals who feel underpaid desire significantly more—every additional dollar they earn makes them wish for $1.40 more. This illustrates our constant yearning for higher earnings, which serves as a primary reference point in our financial evaluations.
Another metric we often use involves comparing ourselves to others. We are continuously assessing our place within a social hierarchy, examining who has more or less than we do and seeking ways to elevate our standing, often at the expense of others. This social comparison—where we assess aspects such as salary, physical appearance, and possessions—has become a pervasive habit, overshadowing our contentment with our current situations.
Section 1.1: The Impact of Colleagues' Salaries
A study conducted by Clark and Oswald involving 5,000 British employees indicated that job satisfaction declines when colleagues earn more. I experienced this firsthand after receiving a promotion. A colleague expressed concern about being left behind, and naively, I encouraged her to strive for a higher position. Shortly after, during a casual gathering, she revealed her new salary, which exceeded mine by £2,000. Despite my initial happiness for her, I realized that my own satisfaction had diminished, as I felt outdone despite having lost nothing financially.
This revelation led me to understand the pervasive nature of envy in workplaces. David Burkus argues against the cultural norm of keeping salaries secret, suggesting that transparency regarding earnings could benefit both employees and companies.
The first video discusses the surprising reality of how much money is actually needed to achieve happiness, challenging common misconceptions.
Section 1.2: The Psychology of Envy
A fable illustrates the concept of "Czech envy" between two neighbors, each with a goat. When one goat dies, the owner of the deceased goat kills the other out of spite. This story exemplifies the destructive nature of envy.
In a modern study by Solnick and Hemenway at Harvard, students were given two job options: one with a salary of $50,000 while others earned $25,000, and another at $100,000 with peers making $250,000. Surprisingly, over half chose the lower salary in order to feel superior to their colleagues, showcasing a tendency to prioritize social status over financial gain.
Chapter 2: The Effects of Unemployment and Social Comparison
Clark's research also revealed that an unemployed person in a community of employed individuals feels worse off than one in a predominantly unemployed area. This suggests that social comparison can drastically affect self-esteem and happiness.
The second video delves into the relationship between income and happiness, exploring the threshold at which money begins to affect our overall well-being.
When we compare our earnings, it's essential to recognize that not all comparisons are valid. For instance, comparing oneself to a celebrity like Kylie Jenner is unrealistic and often leads to dissatisfaction. Research by O'Guinn and Schrum found that excessive television consumption increases our tendency to make unfavorable salary comparisons, leading to a diminished self-image.
Conclusion: Breaking Free from the Comparison Trap
Ultimately, social comparison—whether upward or downward—can be detrimental to our well-being. Studies indicate that people who compare themselves to those they perceive as more successful often report lower self-esteem. Conversely, comparing to those worse off can yield a slight boost, but neither approach truly enhances happiness.
To foster a healthier mindset, it's crucial to resist the urge to compete with others or feel envious of their achievements. Instead, focus on your financial needs and acknowledge everything beyond that as a bonus. This shift in perspective can lead to a more fulfilling and content life, driven by genuine aspirations rather than societal pressures.