The latest version of the global World Happiness Report, which is based on Gallup surveys that ask regular people in more than 90 countries to weigh in on various “life evaluation” measures, ranked the United States as the 19th happiest country in 2020.
Americans stuck on a lower happiness rung
A key component of the overall score asked participants to imagine their life as a ladder with the best life at 10 and the worst possible life at O.
The United States ranked 19th on the ladder section, with an average score of 6.95, trailing Canada (14th place; score of 7.10) and ahead of Mexico (36th place; 6.32). The top five most contented nations are Finland (7.84), Denmark (7.62), Switzerland (7.57), Iceland (7.55) and the Netherlands (7.46).
Money can’t buy you love, but happiness?
A decade ago, two Nobel laureates (one an economist, one a psychologist) looked at two ways to measure happiness. They differentiated our daily emotional well-being (did we experience joy, fascination, anxiety, sadness) from our longer-term “life evaluation” of how we think our life stacks up.
They found that income above $75,000 didn’t improve one’s day-to-day sense of emotional well-being. (That’s about $90,000 in today’s dollars.) As for the big-picture life evaluation, that did improve when incomes rose. But someone at the lower end of the income scale, who had a 10% income bump, experienced the same rise in life evaluation as someone with a high income who got a 10% bump.
How to be happier day to day: Don’t just look up
Even if you’ve yet to hit the $90,000 income level, how you view your financial standing in your world plays a role in your day-to-day happiness.
Part of the human condition is to rate ourselves relative to others. Yet a Morningstar study found that, regardless of income, we typically compare ourselves to people on ladder rungs above us, and, well, that makes us feel crummy.
The Morningstar study roped in nearly 700 participants and ran them through a series of questions that zeroed in on their financial well-being, and how they self-ranked themselves in terms of financial status, based on how (and who) they were choosing to compare themselves to.
The study found that both lower- and higher-income participants shared a trait: They chose to compare themselves to people with more money, not less. (There were five income tranches, from those earning less than $25,000 to those earning more than $125,000.)
“Participants who compared their financial situations with those they deemed better off were less satisfied, more stressed, and felt less capable of handling the pressures of their financial lives,” wrote Morningstar behavioral economist Sarah Newcomb.
Over a six-month period, in every income group, the smaller group of participants who managed to compare themselves by “looking down” the ladder, rather than “looking up,” scored better on their sense of financial well-being.
The upside of ignoring the Joneses
If you’re constantly striving to keep up with the Joneses, the Morningstar research makes a case that you are setting yourself up for disappointment. It’s not hard to see why. When you’re chasing after people who have more, you are likely more prone to spend more and borrow more.
You trade in the perfectly fine car for a newer model, taking on more debt without any change in how fast you get to work or run the errands.
You buy the bigger house, or choose the house in the hotter neighborhood, funnelling more precious dollars into shelter at the cost of having dollars for other goals.
Or you tell your kids not to sweat the financial crunch of colleges, and just shoot for their top choice (which on some level can be a 17-year-old’s version of keeping up with the Joneses), regardless of cost. When what just might land you and your kid in a happier place post-graduation is to focus on an affordable school.
In the vernacular of personal finance, there are needs and there are wants. And wants are often an exercise we engage in out of our desire to keep up with the Joneses. To the extent you can catch yourself doing that, and recalibrate your spending to fulfill the need (the affordable car/home/college, etc.) and not stretch for the want (the too expensive car/home/college. etc.) you just may buy yourself some added happiness.
Rate.com/research/news covers the worlds of personal finance and residential real estate. Carla Fried is a freelance personal finance columnist. Distributed by Tribune News Service. ©2020 Rate.com News. Distributed by Tribune Content Agency, LLC.