How much does your bank balance really impact your day-to-day life?
Are the rich really given as much of a head start in life as we are led to believe… or is the saying “money doesn’t buy happiness” closer to the truth?
It’s all well and good for someone like me, who has means and wealth, to say that money doesn’t buy happiness.
It’s also, to a degree, not true.
Money does improve your life
Money may not buy happiness and success, per se, but it certainly secures a number of things that are vital to your own well being!
For instance, studies from across the globe have consistently demonstrated a strong correlation between the economic development of a country and the health of its inhabitants.
At the individual level within countries, the gap between the "haves" and "have not's" has a massive impact on health and well being.
Those living on lower incomes tend to have much poorer health outcomes than middle- and high-income earners, including higher rates of depression, heart disease and cancer.
With barriers precluding access to quality health care, and their sense of self-worth eroded by social ills, low-income Australians are more vulnerable to the effects of preventable diseases, too – such as alcohol-related conditions, and those caused by obesity and smoking.
Poor diet and unhealthy habits are often synonymous with low levels of education, meaning that those at the bottom of the socio-economic spectrum don’t have the same opportunity to live a full, health life as those at the top.
When viewed in that context, one could certainly say that money goes a long way towards securing happiness.
And yet, mindset also plays a massive role in determining your success…
"Locus of control"
The "locus of control" is a psychological concept, referring to how we attribute responsibility for what happens in our lives.
People with an external locus of control perceive outside factors – such as other people, the government or bad luck – for the things that happen to them.
Meanwhile, people with an internal locus of control believe they are personally in control of their destiny, and that their efforts and hard work are directly linked to the success they achieve.
For those from low-income backgrounds, an entrenched sense of powerlessness and lack of control over their lives leads them to adopt an external locus of control, which then becomes a vicious cycle – they feel stuck in their situation, but don’t believe they are able to change it, and so on and on it goes.
On the contrary, individuals from higher-income families tend to believe more in their own ability to steer their ship.
Their mindset is tuned so that they are more likely to take steps to improve their lives, such as complete a degree that boosts their job opportunities.
This, too, is self-reinforcing, as higher education levels are linked to a more internalised locus of control – so the more people achieve, the more they think they can achieve, and so on.
This means that rich kids start out with an unfair advantage, but it also shows how, with the right attitude, anyone can succeed.
But does money make us happier?
Several studies have shown that on the individual level, there is no causal relationship between money and happiness.
Once you hit a basic standard of income, you don’t become any happier by getting richer – for example, lottery winners interviewed a year later are not significantly happier than they were before their stroke of luck.
However, those in poverty do report being less happy than those living comfortably, because they are constantly worried about being able to afford the necessities in life, such as food, accommodation and health care.
The stress of living in poverty is also widely accepted as having a substantial influence on relationship breakdown – and it’s also true that relationship failure can leave one or both parties in dire financial straits.
Unfortunately, this has a knock-on effect on the children, too, leading to the types of disadvantage I’ve talked about above.
Research has revealed that lower-income families are more likely to fracture than those with more cash behind them – and that it’s mothers with young children who suffer most when this occurs.
While money certainly can’t buy true love, it can be a constant source of arguments when it’s scarce, making it harder to hold onto love when you do find it.
However, all hope is not lost if you’re not one of the lucky ones born with a trust fund and a big ol’ silver spoon in your mouth…
Some of the most successful people on the planet hail from the most humble of backgrounds, and they’ve achieved that through hard work, determination and refusing to give up, despite the odds.
Oprah Winfrey, Ralph Lauren, Daniel Craig and Novak Djokovic are just some of the living legends who escaped the obscurity into which they were born to become leaders in their field.
It reminds me of the saying: “It’s not where you start out that matters most, but where you’re going.”
Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.