The financial planning journal

Does money buy happiness?

4 May 2021

Does money buy happiness?

One question we all like to think about: “if I earned more would I be happier?”

It’s a pretty significant question and there has been some considerable scientific research into the matter. Psychologists at Purdue University would suggest that, to a certain extent, there is a correlation between happiness and income levels. They took a sample of 1.7 million people from 164 countries and, using both qualitative and quantitative data, tried to determine the optimum amount of income that makes an individual happy.

What were the results? They concluded that an annual income of £43,000 – £54,000 was the ideal amount for emotional wellbeing and that £68,000 was the level at which people felt they were successful.

So, a minimum of £43,000 per annum is needed to maintain emotional wellbeing. Yet, the average pension in the UK provides just £5,800 a year to live off.

Of course, many joyous things in life are completely free. I love going for dog walks with my partner and going out for a fresh morning run. Although, even then, our dog certainly isn’t free and neither were the swanky new trainers that arrived for Christmas.

Over and above some of my cheaper hobbies, I also find happiness in things like travelling, my home, going out for nice dinners and to the theatre. Unfortunately, none of these are free and can even be fairly expensive. It’s for this reason, I find it rather baffling that so many people consider pensions, savings and investing a boring subject matter. Taking the time to organise your finances and ensure you save and invest in the future, is ultimately choosing to make sure you and your family can continue to do the things that you love doing.

Money certainly can’t buy you love or friendship, but it probably will make sure you can go travelling with your loved ones or go out for nice dinners with your friends.

Overall, money may not be able to ‘buy’ happiness, but it can impact the things which you are able to do. So next time you’re thinking about whether to finally create that budget, consolidate your pensions or take some advice, it might be time to take action.

Taking care of your finances now may help make your future just a little bit happier.

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