Can Money Buy Happiness? Psychological Research Suggests It Can

Studies show how your financial and emotional well-being can overlap in three different ways.

By Mark Travers, Ph.D. | January 22, 2024

A new study published in Frontiers In Psychology examined the relationship between income and subjective well-being, which comprises one's level of life satisfaction and frequency of positive or negative emotions. Researchers found, unsurprisingly, that individuals with higher incomes experience higher levels of well-being while lower income groups tend to experience lower well-being.

While lower income affects well-being by limiting access to necessities, adequate living conditions, healthcare, leisure or financial security, researchers assert that this does not fully explain socioeconomic disparities in well-being.

The study found that the gap is also likely due to three distinct processes of social comparison that influence how individuals feel about themselves and their wealth, which in turn affect their well-being.

1. Subjective Socioeconomic Status

Subjective socioeconomic status refers to an individual's perception or self-assessment of their own social and economic standing within a community or society. Unlike objective socioeconomic status, which is determined by tangible factors such as income, education or occupation, subjective socioeconomic status is usually based on factors such as personal experiences, comparisons with others and cultural or societal norms.

Researchers found that individuals with lower subjective socioeconomic status may feel deprived of opportunities and resources compared to others, creating anger and frustration.

Individuals' subjective socioeconomic status is often based on "upward social comparison," where they compare themselves to those they deem superior. This may inspire them to improve their circumstances or induce negative self-perceptions and feelings of inadequacy.

Individuals may also engage in "downward social comparison" by comparing themselves to those they perceive to be socioeconomically inferior, which results in positive self-perceptions of being better off, but is usually an unhelpful social behavior.

2. Comsim

"Comsim" refers to comparing one's present socioeconomic status to others who had similar backgrounds growing up, such as childhood friends, similarly aged family members or schoolmates. Researchers suggest that comsim exerts a powerful influence on well-being due to the perceived similarity in upbringing.

The researchers write, "These findings are in line with the similarity hypothesis of social comparison theory, which suggests that individuals tend to place greater importance on comparisons with similar others when evaluating their own well-being."

People often resort to comsim to evaluate themselves, finding this comparison less distressing than comparisons made with markedly different or seemingly superior individuals.

Researchers explain that having had direct contact or close associations with one another can fuel social comparison. For instance, individuals might feel a sense of being "left behind" or believe they should have achieved certain milestones in a timeline similar to their peers.

Consequently, believing one has achieved less than others can hamper self-esteem, which plays a substantial role in experiencing well-being. Self-esteem is often largely based on self-evaluations of how one has fared in life. This suggests that positive evaluations of oneself and one's accomplishments are essential to well-being, at any level of income.

3. Self-Perceptions Of Power

Researchers found that viewing oneself as having personal control over important life outcomes significantly impacts well-being. This sense of control is often derived by one's social class and income.

The researchers write, "Being positioned lower in a social system is often associated with increased unpredictability, threats, adversities, reduced social support and future opportunities, as well as reduced levels of protection, power and popularity."

These circumstances can lead to a lower sense of control, confidence, independence as well as a lack of faith in one's ability to reach their socioeconomic goals, thereby affecting their overall well-being.

Conclusion

Contrary to the notion that wealth alone guarantees happiness, research shows that one's self-perception as a result of social comparison plays a pivotal role in shaping well-being outcomes. While addressing income inequalities is crucial, these findings also highlight the vital importance of self-worth. No matter how similar, better or worse off we perceive others to be, the true key to happiness seems to lie not solely in additional income but also in how individuals choose to value themselves and their accomplishments at every stage of life.

A similar version of this article can also be found on Forbes.com, here.