We often blame money for our unhappiness. Whereas it is true we require a certain amount to meet our basic needs of food, shelter, and security it has been proven, that beyond a certain level of income, money in the long-term does not increase happiness. Professor Richard A. Easterlin conducted research on this topic in the 1970s and his conclusions became known as The Easterlin Paradox.
All my working life, money has either been the subject of what I do or the objective of what I do – sometimes both. My experiences both with clients and personally confirm the principle in the paradox.
There have been dissenting opinions but Easterlin and a colleague Kelsey J. O’Connor updated the research (covering several decades) in 2020, and that reaffirmed the paradox. The importance of the paradox for the individual is that a person’s reference level for their income is pegged to two things. The first is the comparison of their income to others in their job, community, family etc. People can go from feeling happy in their jobs to unhappy, if they find out that other workers get paid more for doing similar jobs in the same company. It affects their self-esteem. Also, if they themselves have been paid more than others but lose that difference if those other people receive a pay increase, it can make them unhappy.
Typically, our money values come from our personal experiences. We usually start becoming aware of the importance of money during childhood. From then on, a lot of our mental and physical energy goes into thinking about money, how to acquire it and what to spend it on.
The two first keys to money mastery are:
Get rid of comparisons with others. What they have does not matter. Adjust our expectations to what we need from what we think we want.