It’s human nature to attach a lot of meaning to things. People get a sense of identity and control from things they can associate with themselves: gifts they receive from others, clothes they buy for themselves, and even the furniture they use at the office. The more they “own,” the better they tend to feel.
But owning more things can actually have a negative impact on people’s well-being in the long run, according to an article published by Forbes
The report cites a paper from Sarah Newcomb, a behavioural economist with Morningstar. Newcomb surveyed US adults with varying degrees of wealth and income, asking them how much “control” they felt over their financial lives. She also got information on how they viewed their finances (whether they felt positive or negative), as well as their emotional well-being as gauged through positive feelings like joy, peace, and satisfaction.
Newcomb found a strong correlation between a sense of power over the financial choices they make and the experience of positive feelings. The amount of money people had or earned wasn’t the biggest factor in determining happiness. In fact, the effect that feelings of empowerment have on emotional being was more than twice that exerted by income.
One surprising finding was that people with higher salaries often reported feeling stress. Newcomb explained this by pointing out how costs of upkeep can pile up, and people who live a more minimal lifestyle don’t have to deal with that. “One of the benefits of scaling down is your maintenance costs are lower,” she said. “The more that you have, the more that you need to maintain.”
A similar line of thinking can be applied to retail therapy. The exercise can provide a temporary high, but it often leaves behind a greater downside. “What we need to understand is that the cost is permanent, and the benefit is not,” she said.
Newcomb concluded that sticking to the bare necessities frees up more mental and emotional resources over the long run, which could lead to an enhanced feeling of control. “It is the feeling of power, not necessarily the exercise of it, that we found was linked to emotional well-being,” she said.
For more of Wealth Professional's latest industry news, click here.
The lifelong habits your retired clients need to kick
OSC releases behavioural insights report