Avoiding Unhappiness

Edmund Marsh

“DOES MONEY BUY happiness?” That’s one of the questions in HumbleDollar’s Voices section. I hesitate to say that happiness is a commodity we can buy. But studies—and many people’s personal experiences—suggest a lack of money can bring on unhappiness.

A recent paper, “Financial Stress and Depression in Adults” by researchers at the University of Birmingham in England, supports this conclusion. The researchers reviewed 40 studies examining the relationship between depression and financial stress, 32 of which were conducted in high-income countries like the U.S., Japan and the U.K.

Perhaps it should come as no surprise that research has found that financial hardship—defined as difficulty affording the basic requirements of daily life—can lead to depression. A lack of money to buy food, make rent or pay for medical services could challenge anyone’s happiness.

Such a dire situation can force folks to sell assets or ask for assistance so they can purchase necessities. Lest we think this phenomenon is confined to “the other half,” remember the increasing number of adult children in the U.S. who live with their parents because they can’t afford to live independently.

The study also found that absolute income didn’t reliably predict the risk of depression. Rather, it was relative income that was a stronger indicator. Our feelings about our finances are tied to how we measure up against our neighbors, according to the research. We are happier hanging out with people who have the same amount of stuff or the same buying power that we have.

Debt is a similarly nuanced measure of the risk of depression. Two of the studies examined indicated that debt can lead to better mental well-being if it eases financial stress or assists us in attaining a coveted status. When we borrow to buy a home or business—and pass a background check of our finances—we can experience added feelings of well-being.

Secured debt, such as a mortgage, didn’t cause stress—unless the borrower was behind on payments or if the debt exceeded 80% of the home’s value. But unsecured debt, such as an outstanding credit card balance, is a significant marker for depression.

Once again, these findings are relative. Total debt is not as reliable at predicting depression as the ratio of debt to income or debt to assets. People who go from no debt or low debt to substantial debt have a corresponding rise in their risk for depression.

On the brighter side, if we pay down our debts, our risk of depression falls. The implication: Money may not buy happiness, but it can help ward off depression if it’s used to pay off excessive debt.

Having little savings to fall back on can also produce foreboding about our financial future, according to the study. We could lower our stress by choosing not to live at the outer limit of our income or by adding more money to our emergency fund.

To answer the question posed at the start, it seems that we can’t buy happiness with a fistful of dollars or a stack of credit cards. The thrill of a new purchase is short-lived. But money spent to reduce our financial worries, such as by paying off credit card debt, may help stave off the unhappiness that can lead to depression.

Ed Marsh is a physical therapist who lives and works in a small community near Atlanta. He likes to spend time with his church, with his family and in his garden thinking about retirement. His favorite question to ask a young person is, “Are you saving for retirement?” Check out Ed’s earlier articles.

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