Money Buys Happiness When Spending Fits Our Personality
Psychological Science (2016)
In contrast to decades of research reporting surprisingly weak relationships between consumption and happiness, recent studies suggest that money can indeed increase happiness if it is spent the “right way” (e.g. on experiences or on others). Drawing on the concept of psychological fit, we extend this research by arguing that individual differences play a central role in determining the “right” type of spending to increase wellbeing. In a field study with over 76,000 bank transaction records we find that individuals spend more on products which match their personality and that those whose purchases match their personality report higher levels of life satisfaction. This effect of psychological fit on happiness was stronger than the effect of individual’s total income or their total spending. A follow-up experiment showed a causal effect: Personality-matched spending increases positive affect. In summary, when spending matches personality, it appears that money can indeed buy happiness.
How Your Bank Balance Buys Happiness:
The Importance of “Cash on Hand” to Life Satisfaction
Could liquid wealth, or “cash on hand”—the balance of one’s checking and savings accounts—be a better predictor of life satisfaction than income? In a field study using 585 UK bank customers, we paired individual Satisfaction With Life Scale responses with anonymized account data held by the bank, including the full account balances for each respondent. Individuals with higher liquid wealth were found to have more positive perceptions of their financial security, which in turn predicted higher life satisfaction, suggesting that liquid wealth is indirectly associated with life satisfaction. This effect persisted after accounting for multiple controls, including investments and indebtedness (which predicted financial well-being) and demographics (which predicted life satisfaction). Our results suggest that money is a predictor of happiness, but not as previously thought. We find that immediate access to money, rather than raw earnings or investments, is of primary importance to life satisfaction. Therefore, to improve consumer well-being, policymakers should focus not on boosting incomes but on increasing people’s immediate access to money.
The Relationship between Income and Status Spending Depends on Personality
To Appear in Psychological Science (2017)
Research documents the tendency for low-income individuals to spend more of their money on high-status products and services. In a novel data set of individuals who provided full access to their bank records over a twelve-month period, we offer empirical evidence showing that the link between low income and status spending depends upon the person: Extraverts, relative to introverts, spend more money on status when poor (as a percentage of their total spending and as a raw amount). These findings highlight the need to consider personality differences in theories of how low income affects spending behaviors, and offer a way in which personality research can deepen our understanding of who may be likely to engage in behaviors that perpetuate the conditions of financial hardship.
Available upon request.
The Consumption Consequences of Couples Pooling Financial Resources
Under Review (with Emily Garbinksy)
Does the decision to pool money with your significant other affect how it is spent? The results of five studies show that couples who have a joint (vs. a separate) bank account are more likely to spend money on utilitarian purchases, and less likely to spend money on hedonic purchases. Evidence for this effect is found by analyzing over 160,000 bank transaction records, comparing spending patterns of couple members who hold a joint versus a separate account, as well as lab experiments, where couple members are randomly assigned to consider their money as joint versus separate. These different spending patterns are driven by the increased need for justification experienced when money is pooled together. If the need for justification is removed, the effect of account type on spending patterns disappears. These findings are discussed in light of their implications for research on what prompts consumers to choose utilitarian versus hedonic goods, as well as the burgeoning research area of financial decision making within couples.
Available upon request.
Long-Run Planners Live Longer
Under Review (with Sean Hundcrofte)
We find that individuals who plan for their financial futures live longer. We analyze data on a representative cohort of older people in the U.K., using the English Longitudinal Study of Aging (N=10,243, average age 64). Individual planning horizons are measured in Wave 1 (2002), and subsequent mortality observed over the following ten years. We find that ‘long-run planners’, those who state that they plan for their future and consider time horizons of more than a year in their consumption and savings behaviour, experience a cumulative mortality rate of 6%, compared to 10% otherwise. A Cox proportional-hazards regression model of monthly mortality estimates that long-run planning is associated with a monthly hazard ratio of 0.79 (95% confidence interval, 0.68-0.92), controlling for demographics. The relationship is robust to controlling for subjective life expectancy, mental wellbeing, cognitive functioning, and wealth. We replicate the findings in a U.S. sample using the Health and Retirement Survey (N=11,713), and present evidence that—in addition to displaying better health behaviours—long-run planners are less likely to experience financial distress, and less likely to experience adverse health, conditional on financial distress.
Available upon request.
Sticking to Your Medication:
A Randomized Controlled Trial to Improve Medication Adherence in PharmacieRun
Under Review (with Jon Jachimowicz et al.)
Low levels of medication adherence represent a growing problem for global health systems. We report evidence from a pre-registered randomized controlled trial aimed at increasing adherence rates and delivered through 278 UK pharmacies. Patients (N=16,191) were asked to commit to taking their medication as prescribed by signing their name on a sticker designed to attach to their medication packaging. In two additional trial arms, the commitment was paired with a message describing the negative consequences arising from non-adherence; either the increased risk to the patient’s own health, or the financial costs to society. Our results indicate that for participants who signed the pre-commitment without reference to the negative consequences arising from non-adherence, there was no change to their medication adherence levels in comparison to the control group. However, participants who signed a pre-commitment paired with the health warning were significantly more likely to adhere to their medication than the control group (odds ratio = 1.59, CI95% [1.02; 2.48]). Conversely, participants who signed a pre-commitment paired with the financial cost warning were less likely to adhere to their medication (odds ratio = .64, CI95% [0.41; 1.02]). Our results provide new insights into the reasons underlying medication adherence and the effective design of pre-commitment contracts.
Available upon request.