This week I am posting a guest blog by Dr. Daniel Crosby
Dr. Daniel Crosby
We’re all familiar with the phrase “keeping up with the Joneses” but we might not understand just how deeply it is ingrained in our concept of wealth and success. Each year, a Gallup poll asks Americans to determine “What is the smallest amount of money a family of four needs to get along in this community?” Gallup finds that the answers to this question move up in line with average incomes of the respondents. In a developed country like ours, the notions of “relative wealth” and “relative poverty” are very much at play.
No doubt there is true hunger, poverty, and want in our country, and I don’t want to minimize that. But among the middle and upper socio-economic classes, people tend to look to others to determine whether or not they are successful rather than pointing to some static measure of wealth. Studies show that the most noticeable way in which money impacts happiness is negatively! We see that the very rich enjoy a slight bump in happiness given their comparative superiority, but the “have nots” are made absolutely miserable as they look up at their better resourced counterparts. Given that the increase in happiness is slight and that the rich make up a small fraction of the total population, in general, the tendency to view money in comparative terms is the source of a great deal of woe.
Given our tendency to compare our own incomes with what others have, we only feel better off if we move up relative to those with whom we compare ourselves. Thought of in this comparative light, wealth creation becomes a contest where your gains are tantamount to my losses and vice versa. In this paradigm, my striving for a greater income and working longer hours has decreased your happiness in aggregate. In a very real sense, we attempt to climb to the top of the corporate ladder on the backs of those with whom we interact, and in so doing, we are sacrificing a great deal of what would really make us happy along the way. Given this human tendency to compare and construe wealth in relative terms, it’s easy to see how the work/life balance we are constantly striving to achieve continues to shift increasingly toward work. After all, if we take a break, the people with whom we are comparing ourselves will be that much further ahead in the race upon our return. As long as work remains a “you win, I lose” scenario, our relationship with others will be strained at best as we continue to push each other in the direction of greater and greater imbalance.
The American tendency toward outward displays of wealth and comparative measurement is not endemic to all developed countries. Switzerland is just one example of a very wealthy country with a philosophy diametrically opposed to showy wealth. As opposed to the American mantra of, “if you’ve got it, flaunt it,” the Swiss take an “if you’ve got it, hide it” approach so as not to provoke envy in others. The Swiss approach demonstrates that our views are an outcropping of a specific way of viewing wealth rather than something fundamental about human nature. It is up to us to determine to support each other on the way to balance and true happiness rather than prodding each other toward jealousy and excess.
Beyond The Purchase is a website dedicated to understanding the psychology behind spending decisions and the relationship between money and happiness. We study how factors like your values and personality interact with spending decisions to affect your happiness. At Beyond The Purchase you can take quizzes that help you understand what motivates your spending decisions, and you’ll get personalized feedback and tips. For example:
How do you score on the five fundamental dimensions of personality? Take our Big Five personality test and find out.
How do you feel about your past, present, and future? Take the Time Attitudes Survey and learn about your relation with time.
How happy are your Facebook updates? We can analyze your last 25 Facebook status updates and determine how happy you have been.
How happy is your subconscious? Take our Happiness IAT and find out.
With these insights, you can better understand the ways in which your financial decisions affect your happiness. To read more about the connection between money and happiness, go to the Beyond the Purchase blog.
Educated at Brigham Young and Emory Universities, Dr. Daniel Crosby is a psychologist and behavioral finance expert who helps organizations understand the intersection of mind and markets. His clients include Brinker Capital, Morgan Stanley, RS Funds, Guardian Life Insurance and NASA. Dr. Crosby’s well-reviewed book, “You’re Not That Great” applies elements of behavioral finance such as loss aversion and availability heuristic to the pursuit of a meaningful life. You can follow Dr. Crosby (@incblot) on Twitter.