Why So Few People Feel Secure About Money

Why So Few People Feel Secure About Money — Even When They Have Lots of It

And why the neighbors of lottery winners are often worse off.

Yahoo Creator  Sean Kernan  June 21, 2024

I’m not rich by any means. But I’ve done well enough to be comfortable, mostly because I saved aggressively early in my career. Yet I still feel like I’m only a stone’s throw from being in poverty, which is slightly irrational.  I remember having no money and having to budget until my next paycheck or risk groveling to my parents for help. It wasn’t a good life. And it still feels like yesterday, even though so many years have passed. Sadly, many people feel this way.

And to some extent — this stress can be constructive. It can mitigate risky spending. You’ll certainly never catch me with problematic expensive hobbies. But I wish I could feel more at ease about my station in life. Many of my friends are in this same psychological boat too. My buddy Brian is a software engineer, who has been making north of $180K per year — for years on end — while living in a low-cost area, and he’s still as cheap as he’s ever been.

So Why Are We Like This? How Do We Level Up And Counteract This Financial Anxiety?

The Origins Of The Problem

People tend to downgrade their financial standing. For example, per a survey by the financial firm Ameriprise Financial, only 13% of American millionaires classify themselves as wealthy. Even among those who had more than $5M in total assets — many still said they didn’t feel rich.

These weren’t people living in Silicon Valley, where $5M only gets you a shack. These were everyday people from all around the United States — still feeling underfunded.

Part of this is because of the disappearance of pensions — and fear that we’ll live on our savings and social security to get us through to old age. Both of my grandfathers had pensions, with one of them having two full separate pensions (military and government). But we are now the 401K generation — in a system that is more stressful than ever.

Why do people who have so much still feel sad about their financial standing?

Elizabeth Dunn, psychology professor at The University of British Columbia, and co-author of Happy Money: The Science of Happier Spending, looked into this very question. She found that social comparison, in particular, drives much of our financial dissatisfaction.

How we compare our income to others of similar age, education, and region of residence, greatly shapes our self-perceptions and satisfaction. Unsurprisingly, those who compared themselves to groups of higher income, tended to be less happy and more anxious about money.

Unfortunately, a majority of people tend to do upward comparisons. The severity of this impact was most notable: “The income of the reference group is about as important as one’s own income for individual happiness.”

It pains me to admit it: I’m 100% a victim of this statistic. I often watch videos of lavish mansion tours on YouTube, despite knowing the likelihood of me ever owning such a property is slim (unless I somehow write the next iteration of Atomic Habits).

But I still enjoy oohing and aahing over the stunning architecture, classy furniture and paintings hanging on the walls. It’s entirely possible this admiration is only heightening my anxiety about money.

Yet I know as well as you that the person in that mansion isn’t likely to be happier than the rest of us. Within a year of becoming rich, or facing tragedy, the vast majority of people return to their baseline happiness.

What’s most telling is that winning the lottery can significantly impact your neighbor’s wellbeing. One study in Canada found that as the magnitude of someone’s lottery winnings went up, their neighbors odds of financial distress and borrowing increased alongside it.

TO READ MORE:  https://www.yahoo.com/lifestyle/story/why-so-few-people-feel-secure-about-money--even-when-they-have-lots-of-it-212029309.html