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Does Money Really Make You Happier?

Managing your money is all about your financial behaviour. When we say the word finance, you are likely to image skyscrapers in a financial district, number crunching accountants or bank account administration. Today, however, we will look at money from a different perspective. The psychology of money can answer questions such as: do credit cards really have the power to make you fat? How can the lipstick save the economy? Or can money make you happy? Welcome to your ultimate guide to becoming happier in your financial and personal life!

Credit cards as the root of all evil Studies have shown that people are twice as likely to buy something if they are paying with a credit card as opposed to cash. Credit card users not only buy more in general but also leave bigger tips in restaurants. Frequent credit card usage is even likely to make you fatter. Unhealthy snacks and other junk food are among items we tend to purchase impulsively. Rarely do we plan in advance to fill up our shopping carts with bars of chocolate and packs of crisps. While the “pain of payment” with cash may reduce the feeling of pleasure when it comes to purchasing the unhealthy snack, with a credit card this does not happen. You manage to escape potential feelings of guilt in two ways. Paying with credit card does not make you feel like you spent any (extra) money and eating a junky snack will give your brain a momentary boost of happiness.

How lipsticks save the economy Although during a recession sales tend to decline in general, the beauty industry is an exception to the rule. While in 2008 the sales of companies were on a decline, L’Oreal was experiencing growth of 5.3%. The lipstick effect, describes the notion that women tend to spend more money on beauty products during an economic recession. The theory is even supported by the unexpected boom of the cosmetic industry in the great recession.

While some suggest that this is part of the strategy to attract financially stable partners, others hypothesise that lipsticks and other beauty products are more affordable than other luxury goods such as leather handbags or designer clothes. Lipsticks are simply a touch of luxury anyone can afford.

Investments are a girl's best friend (or soon to be) Men tend to obsess more about money than women do. For them it is more of a sign of power, security and hard work. Women not only have lower levels of wealth and have a lower income but are also more risk averse than men, making them less likely to invest their money in the first place. In comparison to men, women feel like they have lower levels of financial knowledge. It is debatable whether women do know less in regards to finance or simply have less confidence in their knowledge.

Purchasing wellbeing The truth is people often overestimate the impact of money on their level of happiness. Of course if you find yourself going through financial difficulties, not being to pay for rent or even weekly groceries, you will not think of yourself as particularly happy. However, once our basic needs are satisfied and you feel secure in your financial situation, earning more than you need is not going to make you any happier.

Plus what you spend your money on actually matters too! People show higher levels of wellbeing if they spend their money on experiences as opposed to material possessions. There is a simple explanation for this. Experiences are more often than not connected to other people and help us to create stronger relationships.


Happiness, for richer or poorer Having money means having the feeling of security, power and freedom. Saying I want more money is not enough. Consider the motivation. Why do you want more? Having a million euros in your account will not make you much happier if you could not spend it on anything. But if given the option, what would you use the money for? Would you want to travel? Then perhaps it is the freedom and change of scenery you are seeking. Would you buy a house? Then maybe having a safe stable harbour is what you desire. Looking deeper into what it is you want and questioning why bring you one step closer to figuring out what you really want.

The truth is people don’t want money. Swimming around in a pool of dollar bills might seem like fun but it is not the reason why you go to work everyday. People want the possibilities. The possibility to live the life of their dreams. To achieve the seemingly impossible. But until that day comes and we all become successful millionaires, you can live a financially happier life with these couple of tricks: don't use credit cards, allow yourself the pleasure of small luxuries from time to time and be grateful for what you have. You know what they say... you're never truly rich until you have something money can't buy.


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