Here’s How the Happiest People Think About Money, According to a Psychologist

Do happy people have a different attitude toward money than the rest of us? Intriguing research suggests that the answer may be yes. In a piece for Psychology Today, psychologist Mark Travers digs into some fascinating research about human needs. Meeting those needs can contribute to your happiness.

He starts by revisiting a classic framework for happiness, Abraham Maslow’s Hierarchy of Needs. This is usually rendered visually as a pyramid, and there’s a good reason for that. If the lower levels of the pyramid are missing, the higher levels collapse, just as in an actual pyramid. Near the bottom of the pyramid, just above things like food, water, and air, is safety. That delivers a simple message: It’s difficult to feel happy if we don’t feel safe. And financial insecurity, especially in uncertain times like the ones we’re living in, can make you feel very unsafe.

Travers cites a study of 60,000 people that confirms Maslow had it right: The more your needs in the hierarchy are met, the happier you are likely to be, independent of your status, position, achievement, or income level. Then he looks at a second study that confirms something many of us know from experience: worrying about money can negatively affect your cognitive function.

Put that data together, and it suggests a few simple ways to change how you think about money and make yourself measurably happier.

1. The money you don’t spend might make you happiest.

We tend to think that a great new car, new home, or even new stylish clothes will make you feel happier or “better about yourself.” Research tells us the opposite is true. Even buying something you’ve desired for years will only make you happier in the short term. After that, it just becomes part of your norm, in a phenomenon called hedonic adaptation.

On the other hand, if this shiny new purchase contributes in any way to your economic uncertainty, that will make you less happy. In other words, it could have the opposite of the desired effect. And then, consider the cognitive consequences of financial insecurity. As an entrepreneur, you may think that driving a new sports car will impress investors and customers, and help you build a successful business. But if worrying about car payments occupies your mind, it will make you a less effective leader. The tradeoff likely isn’t worth it.

2. Pay yourself, and everyone else, a living wage.

It’s common for entrepreneurs to forgo a salary during the early stages of their businesses, and to pay employees partly in equities instead of cash. The problem with this approach is that you risk setting off the kind of financial worry that can affect employees’ job performance, or your own.