Monthly Archives: March 2015
Social scientists have often researched, analyzed and graphed the relation between dollars earned and feelings felt. And the findings are exactly what we thought -– except when they aren’t.
Does Happiness Rise with Income?
Yep. The more money we make, the happier and more satisfied we feel, according to Betsey Stevenson and Justin Wolfers of the Gerald R. Ford School of Public Policy at the University of Michigan.
The researchers used 2007 Gallup polling data to determine the relationship between happiness and household income. Only 35 percent of respondents earning less than $10,000 per year reported they were “very happy,” while 100 percent of those earning more than $500,000 described their lives as “very happy” and “very satisfied.”
In their 2013 paper — “Subjective Well‐Being and Income: Is There Any Evidence of Satiation?” — they concluded — sit down for this – the more money people earned, the generally happier they felt, with “no signs of petering out even at the very high incomes.”
Is There an Income Threshold for Day-to-Day Happiness?
Yes, again. And $75,000 per year seems to be the income sweet spot; below that, people generally feel less happy day-to-day, but above that, moods don’t change, according to a 2010 study by psychologist Daniel Kahneman and economist Angus Deaton.
Researchers looked at the link between income ($10,000 to $160,000 annually), daily mood (joy, stress, sadness, anger and affection) and how people generally felt about life.
The results: Poverty is a real buzzkill, and people feel better about life as their income rises. But their day-to-day happiness tops out at $75,000; more money isn’t better, when it comes to mood.
Can You Spend Your Way to Happiness?
Assuming you have money to spend, the way you dole out those dollars will boost or bust your happiness. In their 2010 paper, “If Money Doesn’t Make You Happy, Then You Probably Aren’t Spending It Right,” researchers Elizabeth W. Dunn, Daniel T. Gilbert and Timothy D. Wilson say that people “routinely squander [money] because the things they think will make them happy often don’t.”
Case in point: People generally think that buying tangible, permanent “things” will give them more happiness that buying experiences, which happen then exist only in our memory and in smartphone photos.
In fact, studies have shown, the opposite is true. People report greater happiness thinking about a vacation they took or a concert they attended, than thinking about, say, the large-screen TV they bought.
Why?
“One reason is that we adapt to things so quickly,” the researchers say. “After devoting days to selecting the perfect hardwood floor to install in a new condo, home buyers find their once beloved Brazilian cherry floors quickly become nothing more than the unnoticed ground beneath their feet. In contrast, their memory of seeing a baby cheetah at dawn on an African safari continues to provide delight.”
What’s the Real Secret to Happiness?
Give your money away.
In a Harvard Business Review article, Elizabeth Dunn and Michael Norton say spending money on others – whether giving to charity or buying a gift — makes people more reliably happy than spending money on themselves.
And here’s the good news: You don’t have to spend a lot to feel a lot better, says Dunn and Norton, authors of “Happy Money: The Science of Smarter Spending.” Spending as little as a fiver on someone else can make you feel warm all over.
When most of us think of spring-cleaning, we think about dusting and sweeping and polishing. But there are other areas besides your home that could use a good annual cleanout, like your finances. Here are six things you should do this spring to make sure your money management strategy is as neat and orderly as your house will soon be.
1. Remove Unnecessary Expenses
Are you paying for more cable channels than you really need? Do you still have a gym membership when you haven’t gone in months? Take a look at your annual and monthly expenses and slash anything that’s no longer serving you.
2. Come Up With a Debt Payment Plan
If you have any outstanding debt, it’s time to come up with an aggressive debt payment plan.
The “snowball” method is a popular strategy that works for many people. It involves throwing any extra money you have (like that cash you saved by slashing expenses in the previous section) toward paying down the account with the smallest balance, regardless of interest rate. Once that one’s taken care of, you move down the list to the account with the next-smallest balance, until eventually everything has been paid off.
The idea behind this method is that crossing debts off your list will give you the psychological victory of “winning,” which keeps you motivated. Debt is a burden that seriously limits your ability to make the most of your money. Make this the year you finally eliminate it.
3. Review Your Insurance Coverage
Chances are you’ve had some changes in your life since you first signed up for your various insurance policies. Review these annually to make sure you’re still getting the coverage you need.
Call up your insurance agents for your home/renter’s insurance, auto insurance and life insurance to discuss your current needs and find out if any plans or features have been added recently that you may qualify for. It may take a little time on the phone, but it’s worth it when you have the peace of mind of knowing you’re adequately covered in case of emergency.
4. Check Your Credit Score
Your credit report is one of the most important pieces of your financial life. The difference between applying for a loan with great credit versus applying for a loan with bad credit can yield a difference of tens of thousands of dollars over a 30-year mortgage.
You’re entitled to request a free credit report each year from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. Head to annualcreditreport.com to get yours.
Scan your report carefully to make sure nothing looks off. If you see a late payment you don’t recognize, a balance that doesn’t match your records or any other discrepancies, contact the reporting agency immediately to open up a dispute.
5. Shop Around for Better Rates
We often shop around for the best deal when we sign up for a new service, but once it’s become a monthly line in our budget, we tend to pay it and forget about it. Take this time to re-evaluate your regular expenses and see where you can save some money.
Examine things like your cellphone bill and cable bill and do some research to find out if there are any new plans or promotions you qualify for. Call up customer service and negotiate — they’re often willing to make a few concessions to keep a longstanding customer, whether it’s giving you a discounted rate or some premium features for free. Don’t forget to arm yourself with the prices competitors are offering; threatening to switch providers can go a long way in making a your provider willing to work with you.
6. Revisit Your Budget
Our needs change over time, so your budget should be flexible enough to change with them. Revisiting your budget at least once a year ensures that it still works for you. Your budget will only be successful if it’s in line with your current life and priorities.
Review your budget’s performance over the past few months to see if there are any areas you can cut, any areas you need to increase or any new categories that should be added. If you’re struggling to keep up with your budget, try adopting the anti-budget: pull your savings from the top first, spend the rest without constraint.