This is an interesting topic given that Craig James (economist at Commsec) announced this week that people are significantly better off than they have been - his statement was:

With another round of tax cuts due next week, and taking inflation into account, the average person is more than $425 per month better off than six years ago, an analysis by Commonwealth Securities shows.

The question with this is, so what?  Are we any happier?  Are we able to convert the extra money we have to happiness?

There is some great research on money and happiness.

Firstly - there is research that says that money does lead to happiness up to a threshold - usually around $65,000 in the Australian environment.  Once people have that threshold of money, extra money does not tend to lead to happiness.

Some researchers at the Hass School of Business in the USA found that for people who had an extrinsic orientation, money did in fact make them happier the more than they earned.  However - and very interestingly - those people with an intrinsic orientation found that more money made them less happy!

(In this study - Extrinsic people were those who valued work for the pay that they received, and put a priority on material possessions.  Intrinsic people valued work for the satisfaction and fulfilment (love of work) that it gave them - eg through helping others).

Secondly - the journal SCIENCE recently published a story that looked at spending money and happiness.  People generally spend 10 times as much on themselves rather than on charitable donations.  There was no link between the level of spending on themselves and happiness, but a very strong link between higher charitable donations leading to higher levels of happiness.  This is very interesting to think about at this time of year (just prior to July 1) when people often make charitable donations.

'Affluenza' is an interesting phenomenon.  Clive Hamilton wrote an interesting book on that topic.  It is defined as:  a painful, contagious, socially transmitted condition of overload, debt, anxiety and waste resulting from the dogged pursuit of more.

There is an interesting paradox at work - we are working hard (Australian's are amongst the hardest working in the world), getting paid a lot ($425 per month increase as per the Commsec figures) but many people still struggle under the stress of financial pressure.  Are they correct in assuming that the $1 million house and the debt that comes with it makes them happier than the $400,000 house and having to work a lot less to pay it off?

We may have lost the link between earning money and spending money.  The average person earns around $20 an hour after tax.  So they have to work for an extra 1,000 hours (25 weeks) to buy a new $40,000 car compared to a second hand car (for example).  Does the happiness from the new car equal the 25 weeks of work?  Credit cards, personal loans, electronic payments and store credit may have reduced that link that we had from the times when we were paid cash - work for 40 hours, get a pay packet of cash, live on that cash until the next payment.  At least people saw the relationship between money and work.