Financial Wellbeing

Money doesn’t make you happy… but bad debt makes you sick

Instinctively we know having lots of money doesn’t make us happy; you only have to look at the permanent scowls on the faces of any number of banking moguls or major CEOs.

Research backs up the motherhood statements too. Daniel Kahneman and Angus Deaton, of Princeton University found, essentially, that after an income of US$75,000, earning more money does not increase happiness.

In 2010, the pair studied the survey responses of 450,000 Americans and found that “high income buys life satisfaction but not happiness”, aka emotional wellbeing.

It seems equally obvious that people with lots of debt are not happy, but the extent to which this is true is shocking.

In 2016, Australian investment advice company Acorns Grow Australia surveyed 1000 people and found 70 per cent suffered depression and anxiety because of their money worries, while 76 per cent had trouble sleeping for the same reason. More than half assigned physical health problems to financial stress.

In 2013, University of Southampton researchers Thomas Richardson, Ronald Roberts and Peter Elliott found unmistakable links between severe unsecured debts (such as credit card debt, student and personal loans) and poor health, especially mental health, by reviewing 65 previous studies.

Those with unsecured debts were 3.24 times more likely to suffer “mental disorders” than those without unsecured debt and 2.77 times as likely to have depression. They were 2.68 times more likely to be problem drinkers but a scary 8.57 times as likely to be dependent on drugs. Sadly, people with debt are 7.9 times more likely to take their own lives.

Back to the Acorns survey results, a third of Australians aged between 25 and 44 had “abused” alcohol because of financial stress, while 20 per cent coped with money worries by using illegal drugs. It did not say how many turned to prescription drugs to manage.

“The majority of studies found that more severe debt is related to worse health,” the Southhampton university team found. Their research was published in the Clinical Psychology Review.

Australia has a world-leading level of personal debt, although most of it (92.8 per cent, according to finder.com.au) is related to wealth creation or an asset, such as a home loan. The average household owes A$250,000 (including around A$20,500 of bad debt). While in the US bad debt accounts for an alarming 26.3 per cent of household debt, according to the Federal Reserve Bank of New York.

Citizens of both nations – and people throughout the so-called ‘first-world’ – cite money worries as at or near the very top stressors in their lives.
The Southampton university study didn’t go into which came first – poor mental health or money problems. But the links are clear and so is the message: heavy financial stress will either make you sick, or keep you that way.

The study also didn’t go into what to do about severe financial stress – but there’s plenty of advice out there. The traditional options include consolidating debt, budgeting and financial planning, or studying or working longer hours to try and land a more lucrative role. The latter approaches can come with their own problems: the stress that results from overwork and social disconnection.
One widely praised and usually inexpensive option is to develop a regular mindfulness practice.

Mindfulness, defined by some as moment-by-moment awareness, helps to still the mind and improve messy and negative thinking. A huge amount of research worldwide has shown mindfulness positively affects a range of mental health issues including depression, anxiety, memory loss and sleeplessness.

If you need to speak to someone urgently about your mental health and live in the United States, try the National Suicide Prevention Lifeline (800-273-8255) or if you live in Australia, phone Lifeline (131144) or Beyond Blue (1300 22 4636).

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