Wealth and Happiness are Loosely Connected

Recently I heard a doctor talking about the crisis in Sudan, where intense clashes between military forces have threatened the lives of thousands. He had spoken to another doctor in Sudan who was the sole MD in charge of patient care for nearly a million people. Every day, he saw all sorts of medical problems that we would never imagine suffering from here in the US. However, he went on to say that the US and other developed countries suffer from one illness that the Sudanese largely do not: depression.

In recent years, researchers and economists have recognized the limitations of GDP as a measure of progress and have sought other metrics to assess the well-being of citizens. One such metric is the World Happiness Report, which measures the overall happiness of citizens in a country.

According to the 2021 World Happiness Report, there is a weak correlation between GDP and happiness once you get over a certain threshold. Overall wealth can contribute to happiness levels up to a certain point. However, once basic needs are met, such as access to healthcare, education, and adequate housing, additional wealth does not necessarily translate into increased happiness. The graph below demonstrates the level of happiness as you move up across the average levels of wealth around the world.

Across the world, once you are in the top 20% of wealth, happiness tends to peak and may start to go down after that. This may be because people in the top 20% have a lot more to worry about related to their money. This idea is supported by a study from the Journal of Personality and Social Psychology that found focusing too much on one’s wealth often has a negative impact on overall well-being and happiness. Other resources beyond our finances end up playing a much bigger role in our overall happiness, such as social support, freedom of time, and physical health.

Happy Planning,

Alex

This blog post is not advice. Please read disclaimers.