Links between money and happiness uncovered

Changes in income do not affect most peoples’ happiness, most of the time, according to a new study carried out in collaboration with The University of Nottingham.

The research, led by the University of Stirling , which examined levels of life satisfaction and income changes in more than 18,000 adults over a nine year period, revealed that income change is only important when individuals with specific personality characteristics experience a loss in income.

The study: ‘Individual Difference in Loss Aversion’ published today in Personality and Social Psychology Bulletin (PSPB) found that for most people, stable levels of happiness are likely to rest on avoiding loss, rather than aiming for continual financial gain.

The study, involving two separate samples from Germany and the UK, asked participants annually about their income level and how satisfied they were with life. Participants also answered questions at the start of the study on their personality.

Professor Eamonn Ferguson , an expert in health psychology, in the School of Psychology at The University of Nottingham, said: “Losing income leads to a greater reduction in well-being than gaining income improves our well-being. This negative effect of losing income is stronger for people who are hardworking, methodical, and conscientious, characteristics normally associated with success in many area of life. Thus vulnerability to income loss is greatest for traits linked to success.”

Results revealed that regardless of a person’s personality, income increases did not affect life satisfaction at all. When people lost income, however, there was a reduction in their life satisfaction. This reduction was far greater for those who reported themselves as being conscientious, namely they were thorough in their attitudes to life and work, energetic, and effective and efficient in how they did things.

Leading the research, Dr Christopher Boyce of the Behavioural Science Centre at the University of Stirling, said: “It is often assumed that as our income rises, as does our life satisfaction, however we have discovered this is not the case. Income only effects well-being when it is lost by people who are highly conscientious.

“Although we knew that increases in income do not affect levels of life satisfaction to the same extent as losses, we have now been able to show for the first time for whom these losses matter the most.

“Our study, which accounted for shifting circumstances such as entering or leaving work, and changes to health and household make up, found that for people that were only even moderately conscientious, a loss of income had a negative impact at least two and a half times greater than for less conscientious individuals.

“Our research suggests that when it comes to well-being, income doesn’t matter for most people most of the time. What really matters is when income is lost and this is only important for certain types of people.

“As such, continually increasing our income is not an important factor for achieving greater happiness and well-being for most people living in economically developed countries. Instead, we should aim for greater financial stability and look at protecting those individuals who experience negative income shocks.”

Data used in the study was made available by the German Institute for Economic Research and the ESRC Data Archive. The study was funded by funded by The Economic and Social Research Council (ESRC).

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