Financial planning can buy you happiness


According to a study by Aviva, self esteem and a feeling of happiness are strongly influenced by good financial planning.

Insurers Aviva, with help from psychologists at City University in London, looked into how money and financial planning affect confidence, self-esteem and a sense of well being. Contrary to what you may think simply earning a lot of money does not automatically lead to happiness, the study found that people who earn £50,000 or more were more likely to suffer low self-esteem than high self-esteem.

According to the report 85 percent of people who thought that they were in control of their finances, and not just well off, were said to have high self-esteem, which equates to about two-thirds of the population.

One of the psychologists who assisted with the study, Dr Malcolm Cross, said: “It is a widely held belief that financial stress has an impact on overall health and happiness. Through this study we now know there is a direct correlation between money and self-esteem, and one that is unrelated to salary, employment status or age. Having the financial services industry understand the causes of fear, stress and anxiety around money is a key step to improving people's financial situations and, in turn, their self-esteem and happiness.”

The survey found that about two-thirds of the people who had good self-esteem were happy with their day-to-day financial planning, and that they had a good view of their long-term goals. However 70 percent of people with low self-esteem were said to have difficulty taking care of financial matters, day-to-day and long term.

Indeed the study found that financial matters are strong in our minds, regardless of worry of happiness. Over a quarter of the quizzed thought about their finances every day and 2 percent even claimed to think about money every minute. A lack of understanding also came up, 16 percent of the low self-esteem section said they have absolutely no understanding of financial products such as pensions and investments, the figure drops to 5 percent amongst the people with good self-esteem.

Gary Price, a director at Aviva, hopes that the findings will encourage people to understand the connection between financial planning and mental wellbeing: “It has long been said that money doesn't buy happiness, but there has been little evidence to prove it. This study shows a strong link between financial behaviour, self-esteem and happiness, and proves that those with sensible financial plans in place are happier overall. By understanding the psychological impact of money and by helping people to face their financial fears we can hopefully pave the way to happiness – whatever their bank balance says.”