When we wonder whether money can buy happiness, we may consider the luxuries it provides, like expensive dinners and lavish vacations. But cash is key in another important way: It helps people avoid many of the day-to-day hassles that cause stress, new research shows.
Money can provide calm and control, allowing us to buy our way out of unforeseen bumps in the road, whether it’s a small nuisance, like dodging a rainstorm by ordering up an Uber, or a bigger worry, like handling an unexpected hospital bill, says Harvard Business School professor Jon Jachimowicz.
“If we only focus on the happiness that money can bring, I think we are missing something,” says Jachimowicz, an assistant professor of business administration in the Organizational Behavior Unit at HBS. “We also need to think about all of the worries that it can free us from.”
The idea that money can reduce stress in everyday life and make people happier impacts not only the poor, but also more affluent Americans living at the edge of their means in a bumpy economy. Indeed, in 2019, one in every four Americans faced financial scarcity, according to the Board of Governors of the Federal Reserve System. The findings are particularly important now, as inflation eats into the ability of many Americans to afford basic necessities like food and gas, and COVID-19 continues to disrupt the job market.
Buying less stress
The inspiration for researching how money alleviates hardships came from advice that Jachimowicz’s father gave him. After years of living as a struggling graduate student, Jachimowicz received his appointment at HBS and the financial stability that came with it.
“My father said to me, ‘You are going to have to learn how to spend money to fix problems.’” The idea stuck with Jachimowicz, causing him to think differently about even the everyday misfortunes that we all face.
To test the relationship between cash and life satisfaction, Jachimowicz and his colleagues from the University of Southern California, Groningen University, and Columbia Business School conducted a series of experiments, which are outlined in a forthcoming paper in the journal Social Psychological and Personality Science, The Sharp Spikes of Poverty: Financial Scarcity Is Related to Higher Levels of Distress Intensity in Daily Life.
Higher income amounts to lower stress
In one study, 522 participants kept a diary for 30 days, tracking daily events and their emotional responses to them. Participants’ incomes in the previous year ranged from less than $10,000 to $150,000 or more. They found:
- Money reduces intense stress: There was no significant difference in how often the participants experienced distressing events—no matter their income, they recorded a similar number of daily frustrations. But those with higher incomes experienced less negative intensity from those events.
- More money brings greater control: Those with higher incomes felt they had more control over negative events and that control reduced their stress. People with ample incomes felt more agency to deal with whatever hassles may arise.
- Higher incomes lead to higher life satisfaction: People with higher incomes were generally more satisfied with their lives.
“It’s not that rich people don’t have problems,” Jachimowicz says, “but having money allows you to fix problems and resolve them more quickly.”
Why cash matters
In another study, researchers presented about 400 participants with daily dilemmas, like finding time to cook meals, getting around in an area with poor public transportation, or working from home among children in tight spaces. They then asked how participants would solve the problem, either using cash to resolve it, or asking friends and family for assistance. The results showed:
- People lean on family and friends regardless of income: Jachimowicz and his colleagues found that there was no difference in how often people suggested turning to friends and family for help—for example, by asking a friend for a ride or asking a family member to help with childcare or dinner.
- Cash is the answer for people with money: The higher a person’s income, however, the more likely they were to suggest money as a solution to a hassle, for example, by calling an Uber or ordering takeout.
While such results might be expected, Jachimowicz says, people may not consider the extent to which the daily hassles we all face create more stress for cash-strapped individuals—or the way a lack of cash may tax social relationships if people are always asking family and friends for help, rather than using their own money to solve a problem.
“The question is, when problems come your way, to what extent do you feel like you can deal with them, that you can walk through life and know everything is going to be OK,” Jachimowicz says.
Breaking the ‘shame spiral’
In another recent paper, Jachimowicz and colleagues found that people experiencing financial difficulties experience shame, which leads them to avoid dealing with their problems and often makes them worse. Such “shame spirals” stem from a perception that people are to blame for their own lack of money, rather than external environmental and societal factors, the research team says.
“We have normalized this idea that when you are poor, it’s your fault and so you should be ashamed of it,” Jachimowicz says. “At the same time, we’ve structured society in a way that makes it really hard on people who are poor.”
For example, Jachimowicz says, public transportation is often inaccessible and expensive, which affects people who can’t afford cars, and tardy policies at work often penalize people on the lowest end of the pay scale. Changing those deeply-engrained structures—and the way many of us think about financial difficulties—is crucial.
After all, society as a whole may feel the ripple effects of the financial hardships some people face, since financial strain is linked with lower job performance, problems with long-term decision-making, and difficulty with meaningful relationships, the research says. Ultimately, Jachimowicz hopes his work can prompt thinking about systemic change.
“People who are poor should feel like they have some control over their lives, too. Why is that a luxury we only afford to rich people?” Jachimowicz says. “We have to structure organizations and institutions to empower everyone.”
[Image: iStockphoto/mihtiander]
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Selling Out The American Dream
I've delved deeply into the intricacies of how money intertwines with happiness, stress, and societal structures. I've spent considerable time analyzing various studies and empirical data that dissect the relationship between income and well-being, much like the research conducted by Harvard Business School professor Jon Jachimowicz. His work, as outlined in the article, traverses the terrain of financial scarcity, stress alleviation, and the psychological impact of income on everyday life.
The central idea that emerges is the multidimensional role of money beyond its capacity to procure material comforts. It extends into the realm of stress mitigation and the ability to navigate life's challenges with a sense of control and agency.
Firstly, the concept of money providing a buffer against daily stressors is substantiated by empirical evidence. The research demonstrates that while people across various income brackets experience comparable frequencies of stressful events, those with higher incomes exhibit lower intensity of negative emotions in response to these events. Moreover, higher incomes correlate with an increased sense of control over adversities, thereby reducing overall stress levels.
Another aspect pertains to the choices individuals make when faced with challenges. The study illustrates that individuals, especially those with ample financial resources, are more inclined to opt for monetary solutions to their problems rather than relying on social networks for assistance. This preference reflects the profound impact of financial stability on one's perceived ability to tackle hurdles independently.
Furthermore, the research delves into the psychological ramifications of financial scarcity, highlighting the shame spiral experienced by individuals facing economic challenges. This sense of shame, rooted in societal perceptions and structural inequalities, contributes to a cycle of avoidance and exacerbation of financial difficulties.
Ultimately, this body of work emphasizes the need for systemic changes in societal structures and mindsets. It challenges the prevailing notion that financial struggles solely arise from personal failures, advocating for a restructured approach that empowers individuals across all economic strata.
These insights underline the intricate interplay between money, stress, societal constructs, and individual well-being, shedding light on the broader implications for societal cohesion and individual empowerment.
