Does money matter?

Aug 24 2012 13:30

HANDS up if you honestly think you'd feel down about winning R1 000 000 – or getting an unexpected bonus the same size? Or bigger?

I'm sure there are some readers whose sense of social justice would be outraged. But most of us would be wearing a monster grin all over our faces.

Just sitting at my desk daydreaming of being in either of those two situations brings splash-that-cash thoughts floating to the fore. Holidays, cars, education, good deeds...lovely...yes please.

And that tells me when I focus on the money, it feels good. No surprise to read recently that money thoughts follow the same neural pathways as food within the brain – no wonder we can't seem to shake those additional kilos.

But is money truly motivating? As part of a five-year research programme into happiness at work, the iOpener Institute in the UK looked at the role money played.

Right at the start, it was revealed that money didn't seem to matter at all in building happiness at work. In fact, there was no correlation between happiness at work and pay. Meaning: no role for money. 

Can that really be the case? Unfortunately, there's lots of conflicting evidence.

Back in the 1980s Ed Diener, one of the grandfathers of happiness research, asked 100 members of the Forbes list of richest Americans about their overall happiness.

Amazingly, 49 people took the time to reply. Out of those 49 responses, 47 reported that they were more satisfied with their lives than a similar non-rich group.

Not enormously so, but enough to write about. Since then, the research connecting money and happiness has been stacking up. It's not always clear, but it is interesting.

For example, Gallup's world survey in 2006 showed an amazingly high correlation between money and happiness (for anyone who understands statistics, it's an incredible .82 – which is just about as good as it gets in numerical terms).

And Gallup also found that in the USA 90% of people earning at least $250 000 call themselves very happy, while just 42% of those earning under $30 000 say they are.

In fact, this finding about income and happiness is so clear that German researchers are suggesting that it should be used as an overall happiness measure. Because virtually everyone, monks and nuns excepted, would prefer more money to less money.

What's interesting about this recent work is that it defies the folklore that money doesn't make you happy. When you ask people to rank order a list of 32 items that contribute to overall happiness (including things like being loved, a good social life, close relationships, self-confidence, etc) money only comes in at number 26.

That's probably because it's not socially desirable to admit to anyone – especially a psychologist – that money matters. We can know this because economists who've looked at tons of data retrieved over decades conclude that when everything is bundled together and then analysed, there's a clear association between increasing wealth and increasing happiness. 

Of course, it goes without saying that if you don't have enough to live on you'll definitely be unhappy. Freedom from financial worries is one of the two most important sources of happiness.

But as you achieve and exceed this sum of money, your happiness will also rise. And rise even further once you hit a much higher level of wealth. That's because you can see what you have over and above everyone else; you're likely to be happy because you're well ahead of the Joneses.

So does money really make you happy?

What Diener found in his Forbes study was that good relationships, fulfilment, pride in achievements and work made these Forbes list members happy - not their money.

Money is a means to an end, rather than the end in itself. And it gives you additional perks too. For example:

• Additional status and respect – people look up to you;

• More control – you can avoid or delegate unpleasant tasks;

• Increased fun – like shopping, travelling and other leisure pursuits; 

• Special moments – especially with others; and 

• Unique opportunities. If you're wealthy you can help others and achieve amazing things. Like Bill Gates, Warren Buffett and James Martin.

And here are some of the things that actively detract from your happiness in relation to money:

• Aspirations that don't match your means;

• Perceptions about wealth which are untrue in relation to your real situation. For example, thoughts like "I don't have enough money" when you do; and

• Materialism – expecting extrinsic things like status, possessions or money to boost short-term happiness rather than intrinsic things like a sense of purpose which builds happiness long term.

In short, having money and using it to buy experiences boosts happiness, while wanting stuff detracts from it. 

But does it make anyone actually work harder to get it?

Well, recent findings by Kathleen D Vohs suggests that handling cash gives people inner strength to keep going both in the USA and China.

Cash is in fact king. And it makes you act like one too: people seem to become more aloof when their screen saver is a pile of cash.

On the other hand, experiments at MIT also show that money actively reduces performance for any job which requires thought and intellectual effort.

And what was our final conclusion about money?

Well, at iOpener the consultancy looked at pay and general happiness. And what they found is a strong correlation between money and happiness with life.

It's not associated with happiness at work because that's not where you generally get to spend it. Just remember that spending it well is what counts most.

 - Fin24

* Jessica Pryce-Jones is CEO of the iOpener Institute for People and Performance. She is the latest guest columnist taking part in Fin24's Women's Month campaign celebrating women in business.

Fin24 welcomes your participation in the campaign. Send your views to editor@fin24.com and you could get published.

Previous women's month columns:

Starting from scratch
- Karen Short, founder and chairperson of By Word of Mouth

It's all in alignment - Anli Kotzé, general manager at Ladbrokes.co.za

Make it a team effort - Lulu Letlape, executive head of group corporate affairs at Sanlam

Life isn't like the movies - Judith Middleton, founder and CEO of DUO Marketing + Communications

Ramp up your fun factor - Marteen Michau, head of fiduciary and tax at Sanlam Private Investments

Map your delivery plan - Jackie Carroll, managing director for Media Works

Fine balancing act - Managing director of MUA Insurance Acceptances

Small victories are sweet
- CEO of Save the Children South Africa

Head in the clouds - Marketing manager at kulula.com

The sky's the limit - Tsidi Luse, quality control manager at Lafarge's Lichtenburg plant

In the driving seat - Dawn Nathan-Jones, CEO, Europcar

Get your hands dirty - Sandra Burmeister, CEO of the Landelahni Recruitment Group

Manage like a woman - Wahida Parker, director of Equillore

Four tips for working moms - Glynnis Jeffries, head: business development at Futuregrowth

Women a force for change - Amelia Jones, CEO of Community Chest

Don't be an ice queen - Nicole Fannin, financial consultant at deVere Group


* Follow Fin24 on FacebookTwitter and Google+.

workplace  |  happiness  |  women  |  money



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Are you participating in #BackFriday sales?

Previous results · Suggest a vote