It’s a question pondered across generations and debated in countless conversations: Can money buy happiness? While we often think of luxury purchases – the fancy cars, gourmet meals, and exotic vacations – when considering this age-old query, new research suggests a different, perhaps more fundamental, way that money impacts our happiness. It’s not just about acquiring lavish items; it’s about something far more crucial in our daily lives: reducing stress and gaining a sense of control.
A recent study led by Harvard Business School professor Jon Jachimowicz reveals that money acts as a buffer against life’s inevitable daily hassles, those unexpected bumps in the road that can trigger significant stress. Whether it’s the minor annoyance of a sudden downpour when you’re without an umbrella, easily solved with a quick ride-share, or the major anxiety of an unforeseen medical bill, financial resources can provide a sense of calm and agency.
“If we only focus on the happiness that money can bring in terms of material goods, I think we are missing something really important,” explains Professor Jachimowicz. “We also need to consider the profound impact money has in freeing us from everyday worries and anxieties.” This perspective is particularly relevant today, as economic uncertainties and inflationary pressures weigh heavily on households, not just those in poverty, but also middle-income families facing financial strain. In fact, pre-pandemic data from 2019 indicated that a significant portion of Americans – one in four – experienced financial scarcity. With ongoing economic fluctuations and job market disruptions, understanding the stress-reducing power of money is more critical than ever.
The Science Behind Money and Reduced Stress
Professor Jachimowicz’s exploration into this link was sparked by a piece of advice from his father, given as Jachimowicz transitioned from the financial struggles of graduate student life to the stability of a Harvard faculty position. His father advised him to “learn how to spend money to fix problems.” This simple yet profound statement prompted Jachimowicz to examine how financial security could alter our experience of everyday challenges.
To investigate this relationship between income and life satisfaction, Jachimowicz and his colleagues from the University of Southern California, Groningen University, and Columbia Business School conducted a series of studies. Their findings are detailed in their paper, “The Sharp Spikes of Poverty: Financial Scarcity Is Related to Higher Levels of Distress Intensity in Daily Life,” published in Social Psychological and Personality Science.
Key Findings: How Income Impacts Daily Stress Levels
One of the studies involved 522 participants who meticulously recorded their daily events and emotional responses over 30 days. The participants represented a broad income spectrum, ranging from less than $10,000 to over $150,000 annually. The analysis of this detailed daily data revealed some compelling insights:
Money Diminishes the Intensity of Stress
Interestingly, the frequency of distressing events was consistent across all income levels. Everyone, regardless of income, experienced a similar number of daily frustrations. However, the crucial difference emerged in the intensity of the negative emotions triggered by these events. Participants with higher incomes reported significantly lower levels of negative intensity in response to daily hassles. In essence, while everyone encounters daily problems, money cushions the emotional blow.
Financial Control Leads to Reduced Stress
The study further uncovered that individuals with higher incomes felt a greater sense of control over negative events. This feeling of control was a key mediator in reducing stress. People with ample financial resources felt empowered to proactively manage and resolve issues as they arose. This agency, this feeling of being in control, is a significant pathway through which money reduces stress.
Higher Income Correlates with Greater Life Satisfaction
Unsurprisingly, but importantly confirmed by the research, individuals with higher incomes reported greater overall life satisfaction. This finding reinforces the broader understanding that financial well-being is a significant contributor to overall happiness, and this study pinpoints stress reduction and increased control as key mechanisms in this relationship.
Professor Jachimowicz summarizes this point succinctly: “It’s not that wealthy people are immune to problems, but financial security equips you with the resources to address them effectively and efficiently, minimizing their impact on your well-being.”
Cash as a Practical Solution: The Dilemma Studies
In another experiment, the researchers presented approximately 400 participants with hypothetical daily dilemmas. These scenarios ranged from practical challenges like finding time to prepare meals and navigating areas with limited public transportation, to the difficulties of working from home in crowded conditions with children. Participants were then asked to consider how they would resolve these problems, with the options of either using money or seeking help from their social network (friends and family).
Social Support Remains Constant Across Income Levels
The study revealed that relying on social support is a consistent human behavior, irrespective of income. People across all income levels were equally likely to suggest seeking help from friends and family – asking for a ride, childcare assistance, or help with dinner, for instance. Social connection and reciprocity are fundamental to human problem-solving.
Financial Resources Offer Independence and Agency
However, a significant divergence appeared when considering financial solutions. The higher an individual’s income, the more likely they were to propose using money to resolve the presented hassle. This could involve options like ordering takeout to solve the mealtime dilemma or using ride-sharing services to overcome transportation challenges. This highlights that while social support is universally valued, financial security provides an additional layer of agency and independence in tackling daily problems. It offers the option to solve problems autonomously, without needing to rely on or potentially burden social connections.
This finding underscores a subtle but crucial point: frequent reliance on social networks for problem-solving, when driven by financial necessity, can strain those relationships over time. The ability to use one’s own financial resources to navigate daily hassles not only reduces personal stress but also potentially preserves the health and equilibrium of social relationships.
Breaking Free from the “Shame Spiral” of Poverty
Further research by Professor Jachimowicz and his colleagues delves into the psychological burden of financial hardship. Their paper, “Poverty, Shame Spirals, and the Consumption of Predictable versus Unpredictable Expenses,” highlights a damaging phenomenon: the “shame spiral.” Individuals experiencing financial difficulties often internalize shame, wrongly attributing their situation to personal failings rather than acknowledging systemic and environmental factors.
This internalized shame can be paralyzing, leading to avoidance of problems and a compounding of difficulties. The researchers argue that society often perpetuates this harmful narrative, inadvertently blaming individuals for their poverty and fostering a sense of shame.
Professor Jachimowicz points out, “We have, to some extent, normalized the idea that poverty is a personal failing, leading to unwarranted shame. Simultaneously, societal structures often create significant barriers for those with limited financial resources.” He cites examples like inaccessible and expensive public transportation disproportionately affecting those who cannot afford cars, and inflexible workplace policies that penalize lower-wage workers.
Addressing these deeply ingrained societal structures and challenging our perceptions of financial hardship is essential. The consequences of financial strain extend beyond individual well-being, impacting job performance, long-term decision-making, and the quality of interpersonal relationships, with broader societal repercussions.
Professor Jachimowicz concludes with a powerful call for systemic change: “The sense of control over one’s life should not be a luxury reserved for the wealthy. We must strive to structure our organizations and institutions in a way that empowers everyone, regardless of their financial circumstances.” Recognizing the stress-reducing power of money and addressing the systemic issues that contribute to financial hardship is not just about individual happiness; it’s about creating a more equitable and just society for all.
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