From bank balance to happiness index.

“The balance in our bank account has an impact on us,” says Odermatt. One potential reason for this is that money is closely linked to status in our society. People are seen as successful if they earn a lot and can afford a high standard of living, rather than if they have particularly good friendships. The researcher’s theory is therefore that “in a materialistic society, account balance becomes a proxy for happiness.”

Many studies have looked at the relationship between happiness and people’s material standard of living. For example, Odermatt himself has investigated how buying your own home affects life satisfaction. Although this increased, the increase wasn’t as permanent as future homeowners expected. “This is due to the adaptation effect, whereby many things are seen in relative terms over time. Status is generally overestimated. In my view, we think about it too much,” he explains.

The same is true of money: “In the short term, everyone’s happy to receive a pay rise, but for many people, work is about more than just generating an income.” Surveys of employees show that appreciation and relationships with others are more important in the long term — and those striving to earn more and more money should perhaps ask themselves what price they are paying for it.

Odermatt knows from personal experience that it’s not all about the paycheck. When he became a father, he reduced his workload and he feels that the extra time he can spend with his children is worth the loss in earnings. “Time is a limited resource, and you have to ask yourself where you get the greatest return on investment for the time you’ve put in, in terms of satisfaction.” Ultimately, the question is nothing less than: “How do I want to spend my life?”

Bank account vs. happiness account

Nevertheless, money certainly can contribute to happiness if it’s spent on the right things. This obviously differs from one person to the next, but researchers have some insights to offer. According to Odermatt, there are three types of spending: The first revolves around material consumption. In the short term, buying yourself something nice can lead to a feeling of satisfaction. This is generally short-lived, however, and so we need to make another purchase. “Here, the adaptation effect comes into play again,” says Odermatt.

The second type, experience-oriented spending, is more sustainable in this regard. If you invest in a trip or other kind of experience, you’ll form lasting memories. The third way of spending money is on experience-oriented material investments. These are a means to an end, so to speak — a guitar that you’d like to play or boots that allow you to go hiking in the mountains. “Experiential consumption generates greater happiness and, to some extent, undermines consumption as a status symbol, because it’s harder to compare,” says Odermatt.

“Talking about and sharing experiences that made you happy is a great way to escape the status race.” If someone brags about it, however, experience-oriented spending also takes on a veneer of status. What’s more, people who only travel the world because it’s “what you do” or in order to tick off certain destinations will potentially experience less happiness than if they’d stayed in their familiar environment. “Intrinsic motivation is decisive. It’s about what really makes you happy,” says Odermatt.

To this end, it can help to look beyond ourselves now and then. Doing something good for others also boosts our own level of happiness. In one randomized study, people were given an envelope containing 20 dollars. One group was instructed to treat themselves to something, while the other group was instructed to buy someone else a gift. In the subsequent analysis, the second group showed higher happiness levels. “The positive effect of prosocial behavior is generally underestimated. We’re not so much homo economicus as social beings. Relationships with others are paramount,” says Odermatt.