Why Positive Emotions Could Be The Key To Creating Wealth
Research shows that wealth creation comes easier to those who strive for a happy life.
By Mark Travers, Ph.D. | October 2, 2022
A new study published in Personality and Individual Differences suggests that money and happiness is a two-way street that is regulated, at least in part, by our unique personality traits.
I recently spoke to the lead author of the paper, Sarah Asebedo of Texas Tech University, to understand how our personality traits and positive emotions could make us wealthier.
What inspired you to investigate the topic of wealth creation, personality traits, and positive emotions?
Existing research tends to interpret relational results (without evidence for causality) in favor of a directional relationship from money (e.g., income, wealth) to positive emotions and life satisfaction. In other words, it interprets that money leads to happiness.
Despite this favored interpretation, there is a robust body of theoretical and empirical evidence that positive emotions actually support and create the behaviors necessary for people to succeed in their financial life (e.g., earn money, exercise control, stay out of debt, take more time before making decisions, save, etc.).
Our research builds on this work by generating evidence that positive emotions also have a causal relationship with wealth creation as defined by net wealth (assets minus liabilities). Net wealth holistically captures how consumers convert income into assets and how they manage their financial situation to grow their wealth and manage their debt.
What is the broaden-and-build theory of positive emotions?
Barbara Fredrickson's broaden-and build theory of positive emotions (BBT) asserts that positive emotions broaden a person's mindset and enable them to think more creatively, identify and engage in a broader array of behaviors, and improve problem-solving capability. Negative emotions, on the other hand, constrict these abilities.
Financial behaviors are complex and encompass a person's psychological, social, and intellectual resources. Under the BBT, positive emotions expand these resources.
Furthermore, there is often not just one possible financial solution to a financial problem or goal. Therefore, having the capacity to think broadly and identify multiple possible outcomes and pathways is essential for financial success. So, positive emotions (according to the BBT), would help consumers execute upon the financial behaviors necessary to acquire and grow their wealth.
What personality traits did you study for the purpose of your research? Are there certain personality traits that are better than others for creating wealth?
We studied the Big Five personality traits:
- Openness
- Conscientiousness
- Extraversion
- Agreeableness
- Neuroticism
Our current research investigated whether personality traits have any moderating effect on how positive emotion affects wealth creation. We did not examine the magnitude of these moderating effects or the direct effects of the personality traits on wealth creation.
So, it is difficult to say, based on our research, if certain personality traits are better than others at creating wealth.
However, drawing from other studies, conscientiousness and extraversion tend to result in greater wealth levels over time.
Your data comes from three time points: 2008, 2012, and 2016. Could you tell me how the time point of 2008, the year of the Great Recession, affected your study?
We found a significant cross-lag effect of net wealth on positive emotions, which was actually larger than the effect of positive emotions on net wealth.
The combined results suggest a bidirectional relationship between positive emotions and net wealth.
The Great Recession might be influencing these results because of the major impact this event had on the economy and investment markets during that time. For example, it is logical that a significant and sudden decline in net wealth could impact someone emotionally, and that this emotional connection to their level of net wealth might endure during the economic recovery.
There is a general belief that the process of amassing wealth is "stressful." What does your research say about this belief?
Our study showed that personality does play a role in accumulating wealth. There are various behaviors necessary to amass wealth (e.g., self-control, taking risks, tracking expenses, managing debt, etc.) and these behaviors could be more "stressful" for some than others.
There are differences based on personality for risk tolerance, money management tendencies, and so on. So, it is hard to say that amassing wealth is stressful in general for everyone.
It is certainly different for everyone and some may find exerting, say, self-control easy while others find it incredibly difficult and "stressful."
What are the wider implications of your study for people who want to change their financial behaviors to become happier?
This study supported a bidirectional relationship between positive emotions and net wealth, and a moderating personality effect.
The directional inferences between positive emotions and financial outcomes observed in the literature and this study may appear nuanced. However, they present markedly different implications for consumers.
If financial resources produce positive emotions, it suggests that pursuing income and wealth is necessary for happiness.
On the other hand, if wealth creation results from differences in how people think, feel, and behave, it signals that the consumer has greater control over their psychological and financial future. Therefore, consumers can shape their current thought patterns, emotional states, and behaviors through awareness and intervention to create meaningful financial behavior change.
It should not be overlooked that consumers' net wealth can also affect their positive emotions. Therefore, positive psychological interventions might be necessary to protect positive emotions during economic crises or general market fluctuations that change net wealth levels (e.g., the Great Recession).
Do you have plans for follow-up research? Where would you like to see research on human well-being and wealth go in the future?
Yes. Additional research into the moderating effect of personality is necessary to deepen our understanding of how fundamental individual differences in personality affect these relationships.
We have plans to investigate the following research questions in our future research:
- What are the magnitudes of the direct effects of personality traits on wealth creation?
- What are the magnitudes of the moderating effects of personality traits on how positive emotion affects wealth creation?
- Can positive emotion mediate the relationships between personality traits and wealth creation?
We would like to see longitudinal research investigating the moderating and mediating effects of social capital, psychological capital, and financial capital on the relationship between human well-being and wealth creation.