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Does money make you happy?

Posted 15 March 2016

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It seems that money does play a part in our overall feelings of well-being and happiness. Learn how to increase your feelings of security and well-being when it comes to your finances.

It’s an age old question: does money make you happy? There are those that would have you believe it doesn’t and then there are those that say it’s so important it makes the world go round. Well, here at Debt Advisory Centre, we’re not content with leaving it to old sayings, we want to know the truth! We’ve been doing some digging into the issue to find out how people really feel about money. So what is link between your bank balance and your happiness? 

 

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What does the research say?

As part of their over-arching Well-being programme, The Office for National Statistics (ONS), have conducted research into whether feelings of well-being increase along with the income of a household. Now looking into these sorts of areas can be very tricky, mostly because of the number of other factors that can influence the outcome.  For instance, people’s age, sex or physical health could all have an effect on how they associate wealth and well-being. So, when the ONS were carrying out this research, they made sure to control these other factors so the results they got were more trustworthy and an accurate reflection of what’s really going on. 

They found that an individual’s sense of well-being is strongly related to the level of wealth in the household that they live. Interestingly, this increased sense of well-being was associated most strongly with the net-wealth of a household, rather than wealth tied-up ventures or plans (like property or pensions). So it’s the money we have coming into the household after tax, and which is readily available to us, that seems to have a bearing on how secure and happy we feel overall. 

What we found

It seems that the biggest reason for this is the sense of security money can give us – simply knowing that the funds are there should we need them. Having that financial buffer can go a long way in reducing our feelings of anxiety about our lives in general. 

This is backed up by our own research. In the second part of our Women and Debt report we asked women what they would change about their financial situation if they had the power to change anything. Sixty percent of the 2,500 women questioned, said that they wanted to achieve things in their financial lives that would provide more security for them and their families, like paying off their mortgage or getting rid of unsecured debts. So these things are far more important across the board than being able to buy luxury items or spend simply for the sake of spending. 

For those of you who may have been dealing with cash-flow or debt problems for a while, learning that the security money can bring can make people happier, may not come as a complete surprise. The good news is that there are ways we can take control of our own destiny and control, to a certain extent at least, how we feel about our finances. If you’re looking to increase your feeling of well-being and security by working on your finances, we’ve a few tips for you that could make all the difference. 

How to feel more financially secure

Save – this is always sound advice! If you’re in the fortunate position of knowing you’ve got something coming in every month, strike while the iron’s hot and save as much as you can. 

In fact, the only time that we would advise you don’t save is when you’re still in the middle of paying off debts. This is because the rates of interest that you pay on borrowing are higher than the rates of interest that you earn when you put money in your savings account. So not paying off debts you currently have will cost you more in the long-run than anything you could earn from saving. There are some cases where you might be paying of some small debts and coping fine with making your payments. You might find that you want to save a little at the same time, just for a rainy day and this is completely fine. Just don’t jeopardise making your debt repayments for the sake of putting most of your spare money in savings, as this doesn’t make sense in the long-term. 

Some people find that saving comes naturally to them, but for others it can a bit more of a struggle. If you’re having trouble putting the pennies aside, have a look at our blogs, Are You Leaking Money part one and part two

Tackle your debts – Tied into the above point is the idea of getting rid of your debts. If you’re steadily paying off debt according to your plan when you first took the credit out that’s great! But we know, from the many people we’ve spoken to over the years, that life doesn’t always go according to plan and this can have an effect on your ability to pay back what you owe. 

Illness, separation, bereavement and redundancy are all life events that very often come completely out of the blue, and can have a serious knock-on effect on the other areas of your life. If you’re struggling with your debt repayments, either because of unexpected life events or any reason for that matter, make sure you get the help you need. If you feel that something is holding you back from getting help, read our blog Reach out as soon as you know you’re not coping with your debts should help. 

It may be that you can adjust your spending habits and find that you’re able to cope with your bills more easily. However, if you’re really finding it impossible to maintain your credit repayments, it may be time to start looking into a debt solution. Make sure you use the money smart report above for a thorough assessment of your financial health, and use the options to the left if you want to speak to someone about a debt solution. 

Supplement your income – If you think the problem is that you’re not earning enough during the month full stop, then have a look into whether it would be possible to supplement your income. 

You could try and take on more hours at work, if your timetable allows it, or see whether you could take on an extra casual or part-time job somewhere else. All you have to do is search on the internet for part-time work in your area and you’ll soon see what’s out there. 

Consider whether there is anything you could do at home to earn a little more. Do you have a skill that people will find useful, such as tailoring or proofreading? Is there something you could teach for a few hours a week, like a language or a musical instrument? Or do you know anybody starting or expanding a business that you could help out with? 

Money can make you happier…but it’s not everything

It’s important to point out that money can make you happy – but only up to a point. For example, if you were really struggling financially, then a sudden influx of money would probably make you very happy! But if you were already wealthy and financially secure, acquiring more money probably wouldn’t make you that much happier. The freedom and peace of mind that having spare cash can bring is clearly an attractive prospect for us all, but there are some things, like feeling connected to those around you and being in good health, that can be even more important. 

So there you have it, money is definitely connected to happiness, but how happy it can make you depends on your financial situation to start with and the other aspects of your life. Remember, if you’re struggling with money, see whether there’s anything you can do to feel a little more secure – there’s always a way to make things better. And remember to reach out as soon as you know you’re not keeping up with your debts. 

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.