Does money make us happier? Here's what the research says

Money only makes you happier if you live below the poverty line and you can’t put food on your table and then you can afford to. Whether getting superrich actually affects different aspects of your well-being? There’s a lot of evidence it doesn’t affect your positive emotion too much.

There was a recent paper by Matt Killingsworth where he was trying to make the claim that happiness continues as you get to higher incomes. And yeah, he’s right, but if you plot it, it’s like if you change your income from $100,000 to $600,000 your happiness goes up from, like, a 64 out of 100 to a 65. For the amount of work you have to put in to sextuple your income, you could instead just write in a gratitude journal, you could sleep an extra hour.

Yale cognitive scientist Laurie Santos, quoted in the New York Times

Exponential growth bias

Imagine you are offered a deal with your bank, where your money doubles every three days. If you invest just $1 today, roughly how long will it take for you to become a millionaire? Would it be a year? Six months? 100 days? The precise answer is 60 days from your initial investment, when your balance would be exactly $1,048,576. Within a further 30 days, you’d have earnt more than a billion. And by the end of the year, you’d have more than $1,000,000,000,000,000,000,000,000,000,000,000,000 – an “undecillion” dollars.  

If your estimates were way out, you are not alone. Many people consistently underestimate how fast the value increases – a mistake known as the “exponential growth bias.”   

David Robson writing for the BBC

The Cause of Overspending

Ample market research shows that people who overspend usually do it to feel good or to feel in control, not because they need the items they buy. Slapping down the plastic makes them feel powerful, secure, able to make their way in the world. 

So chiding your spouse, or even just stressing the virtues of scrimping and saving, is going to backfire. The more you talk about that stuff, the more your spouse will feel out of control - the same emotion that drives the indulgences in the first place. 

A more effective strategy is to encourage your spouse to own the problem. Keep track of what your household spends, weekly or monthly, and ask him or her to review those accounts. Don't say anything else. That way the choice to cut back is under your spouse's control, making it more likely to happen. 

If that doesn't work? You know the time has come to get separate bank accounts. 

Finally, you might consider lightening up a little. Marriage is one of life's great blessings. If you think the occasional iToy is expensive, wait until you see how much a divorce costs.  

Tyler Cowen in Money Magazine