Sarah C. Newcomb Ph.D.


Money Doesn’t Buy Happiness, but Power Might

Psychographic research shows the effect of empowerment on financial wellbeing.

Posted Jan 13, 2017

Which statement do you most agree with? The answer you choose could make all the difference in the world:

  • a. I create my financial destiny.
  • b. I have very little power over my financial situation.

In a recent study of U.S. residents, we asked hundreds of people to choose between the two sentences above, and then looked at how their answer to that question correlated with other factors in their financial lives. We examined income, age, education, gender, financial habits, and the emotions people experienced when dealing with money. With respect to emotions, we wanted to know how often people were experiencing positive and negative emotions when dealing with money in general. We asked them to fill out the following scorecard:

 Morningstar, Inc.
Source: Source: Morningstar, Inc.

The results were striking.


First, the obvious: Yes, there was a significant, positive relationship between income and overall happiness.

But, as the plot below shows, there was not a very strong difference between groups, and overall, when we only looked at income, nobody was very happy. What was especially striking was what happened when we separated people according to their feelings about personal power in their financial life.

 Morningstar, Inc.
Source: Source: Morningstar, Inc.

We found that people who believe that they create their own financial destiny were having mostly positive experiences with money, while those who felt powerless were having mostly negative ones.

 Morningstar, Inc.
Source: Source: Morningstar, Inc.

This effect was still significant when we controlled for Income, Age, Gender, Education, and Number of Dependents. People earning less than $10K/year who feel empowered in their financial lives are having a better experience with respect to money than those who earn $200K/year, but feel powerless.

The lesson here is fascinating: A sense of personal power, not money itself, may be the key to peace, joy, pride, and satisfaction in our financial lives.

What’s a Person to Do?

If you are experiencing financial anxiety, helplessness, or malaise, try to see the power that you DO have. Think about the results that your choices have made, and allow yourself to take credit for positive change over time.

Even people who are not earners often have much more control over their financial life than they think. Are you the shopper of your household? Do you participate in decisions about vacations, living costs, children’s schooling, etc.? Are you a source of emotional and moral support for the breadwinner? These are all areas where your power is manifest in your financial life. By feeling the power that you DO have, your sense of financial well-being may naturally improve.