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A reflection on money, happiness and mental health!


Many years ago, during my training as a psychiatrist, I had the luxury of access to one of the largest psychiatric libraries in the world, the library at the Institute of Psychiatry in London. One night, while working on some long forgotten piece of work, I came across a fascinating paper. It was a Dutch study from the 1970´s comparing the happiness of on the one hand people who´d won big in the lottery, on the other hand people that had been severely injured in an accident (Brickman et al 1978). The conclusion of the paper was that one year after either event, people´s happiness or contentment had reverted back to their level before the event. And if anything, those who´d won the lottery were more miserable! Now this was a surprise! If given the choice, I think any sane person would prefer a lottery win over an accident, but here was a paper saying that actually neither event had very much effect on people´s happiness in the long run. Clearly I knew nothing about happiness – and from that day on I started looking into the issue.

As I psychiatrist my focus had been squarely on unhappiness, mental illness, all the travails of modern life, using what evidence there was available. So when my gaze turned towards the opposite end of the spectrum I did it based on evidence. How do you define happiness? What characterises the happy person? Can you increase your happiness and if so, then how?


Data was lacking in the field. This has changed in the years that have passed, and the quality of evidence has improved as well. There are clear definitions of happiness (long-standing contentment, not bliss, even measured by such simple measures as a Likert scale asking how content you are with your life now) (OECD 2013). Clearly having happy parents helps, both due to genetics and an upbringing that instils self-confidence. But in addition to a favourable constitution, there are also certain life-style issues (partly under our control) which are correlated with a happy life. These include things that seem to matter less (a short commute, having control over your work environment, access to nature etc.) and more important things (being religious, having a long-term partner, having friends and socialising with them, having a purpose and working for the good of others) (Waldinger et al 2023).

Clearly having happy parents helps, both due to genetics and an upbringing that instills self-confidence. Image by Wix.
Having happy parents helps, both due to genetics and an upbringing that instils self-confidence. Image by Wix.

Money and happiness?

One thing that comes up repeatedly in discussions about happiness is the role money plays. I realised this when Iceland suffered a severe economic depression in 2008, soon after I moved back there from England. People were losing their homes and livelihood and for some reason I ended up giving talks all over the country about happiness and the role money plays in bringing it about. I visited rotary clubs and small countryside churches´ congregational meetings, university halls and large staff meetings of the now bankrupt banks. People were craving reflection and guidance on the topic and it was obvious to me, that at least in times of economic collapse, the relationship between happiness and money is of core interest to many.

So what is the connection? Is there one? Oh, yes, there is definitely a correlation. When people have nothing, some money goes a long way. But as people get more money, the relationship blunts and then disappears more or less completely. This is easy to understand with reference to Maslow´s hiearchy of needs (Maslow 1943). When you don´t have food and shelter then more “lofty” needs, like belonging, relationships, fulfilling one´s potential, are less relevant. And those basic needs can be fulfilled with money. You can buy food, buy a house. But it is trickier to buy relationships or personal fulfilment! This can even be seen on a country-wide scale. In the first half of the 20th century the average happiness of Americans increased in tandem with people´s rising income. But since the 1950s the income of Americans has increased fourfold, but people´s happiness levels have at best been stagnant, a phenomenon called the Easterlin paradox (Ortiz-Ospina et al 2017). So whatever people are spending their money on now, it´s not increasing their happiness. There are actually indications that being too focused on material gains and wealth can decrease well-being in the long term (Nickerson et al 2003).

Another element that I believe has an effect on people´s fraught relationship with money is the fact that we are social beings and we use money as a status symbol and a token of our success, desirability and attractiveness. It is well known in repeated experiments on “relative deprivation” that people would rather have a lower pay rise, as long as it was higher than that of their co-workers or neighbours, than a higher pay rise where co-workers got a higher rise still (Sweeney et al 1990). Can you imagine people would feel this way about their holidays? No, they would just be grateful for more leave, even if it meant that others got even more leave still.

There is some correlation between nations´s financial status and happiness, but countries with vastly different incomes , e.g. Mexico and the USA have similar happiness levels. Image by Unsplash.
There is some correlation between nations´ financial status and happiness, but countries with vastly different incomes , e.g. Mexico and the USA have similar happiness levels. Image by Unsplash.

Yet another issue to consider, when thinking about money or material goods, is the fact that we get used to our situation pretty fast. I know on the occasions that I´ve got a nicer hotel room than I paid for or got upgraded on a flight, that within 5 minutes I´m used to it and back to my “normal state”. Same with that new car, new TV, new washing mashine. It´s just things, stuff, you get used to. And vice versa, I get used to bad things as well, not as fast, but I adapt.

This relationship we have with money, is a tool – it can be used for good, as a therapeutic tool and in our own lifes. We don´t need a whole lot of money to get by (as such) and to make us happy. We compare ourselves constantly to others and we get used to good and bad situations pretty quickly. When I was meeting all these people around Iceland after the economic collapse back in 2009 and 2010 it was amazing to see people pull together, normalise their situation, be grateful they were not as unlucky as Jón down the street, who not only lost his savings but also his house. And then supporting each other, focusing on things they had, relationships, family, walks in the park. It is perhaps no surprise that childrens´ mental health improved after the economic collapse, as families huddled together (Gudmundsdottir et al 2015).

If we are looking at whole nations, the picture is less clear (Diener et al 2018). The same Likert-scales have been used to look at whole nation happiness. There are big variations here, from Afghanistan with a happiness index of 1.86 (on a Cantril ladder from 0 to 10) to Finland with an index of 7.8 (Ortiz-Ospina et al 2017). There is some correlation between nations´ financial status and happiness, but countries with vastly different incomes , e.g. Mexico and the USA have similar happiness levels. Income disparity within nations has some effect on happiness levels within countries, but less than one might think. What seems to be most strongly correlated with the happiness of nations is not money in any form, but rather freedom and good governance. That people trust their countries´ institutions, perhaps some sort of social capital (Diener et al 2015).

What about mental health?

Should I dare to complicate things further by bringing mental health and mental illness into the equation? Yes, I must, since money, mental health and happiness are three important aspects of our lives that are often interconnected. While having money can provide a sense of security and stability, financial difficulties can cause significant stress and contribute to mental health problems. Poor mental health, can in turn also impact happiness and overall well-being and it is well known that people with mental health problems have lower incomes and are more likely to live in poverty, within a cycle of negative outcomes.

To promote the well-being of individuals and communities, it is important to take a holistic approach that considers the complex interplay between money, mental health, and happiness. By addressing financial and mental health concerns simultaneously and promoting positive mental health, we are well on the way somewhere – but easier said than done!


So if I return to where I started, with that study by Brickman et al (1978), it seems that much of what we know now about happiness, subjective well-being, contentment or whatever we like to call it, can explain the results that so puzzled me twenty years ago. First, our state tends to regress towards the mean – being super happy or very sad is likely to digress towards our normal state in the medium to long term. Secondly, if we win the lottery we are at risk because it upends the equilibrium in our lifes, we might stop working (working is good for us for so many other reasons than just to earn money!), grow resentful or suspicious of our friends and relatives. If we start getting depressed we have an endless stream of money to try and buy happiness (which we know doesn´t work), hence spiralling further into misery. Thirdly, if we have an accident, we are forced to pause, take stock, rely on our friends and family and focus on things that really matter in life, we might even feel grateful for being alive. All things we know are associated with being more content and happy.

Perhaps what can be said about the effect of money on happiness boils down to this: it is better to have it than not, it is best in moderation and it actually matters less than you think, since happiness is right in front of you and can be found in what your grandmother told you (if she was a wise woman!). – How mental health connects to this can be simplified such: having good mental health certainly helps you being happy, having poor mental health makes it harder (but not impossible), poor mental health affects your wealth and poverty affects your mental health.

In the Hitchhiker´s guide to the Galaxy by Douglas Adams, the answer to the meaning of life was 42! The problem was not the answer, but finding the right question to ask. And so it is with us, the right question is certainly not how we can make more money, but perhaps how we can find the right path, the right balance, the right way to be content. □

Uncategorized references by request

  • Brickman, P., Coates, D. & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative? Journal of Personality and Social Psychology, 36(8),917-927.

  • Diener, E., Tay, L. (2015). Subjective well-being and human welfare around the world as reflected in the Gallup World Poll. Int J Psychol. Mar; 50(2):135-49.

  • Diener, E., Seligman, MEP. (2018) Beyond money: Progress on an economy of well-being. Perspect Psychol Sci. 13(2):171-175.

  • Gudmundsdottir, D., Asgeirsdottir, B. B., Huppert, F., Sigfusdottir, I. D., Valdimarsdottir, U., & Hauksdottir, A. (2015). How does the economic crisis influence adolescents´ happiness? Population-based surveys in Iceland in 2000-2010. Journal of happiness studies. 17(3).

  • Maslow, A. H. (1943). A theory of human motivation. Psychological Review, 50, 370-396.

  • Nickerson, C., Schwarz, N., Diener, E., & Kahneman, D. (2003). Zeroing in on the dark side of the American dream: A closer look at the negative consequences of the goal for financial success. Psychological Science, 14, 531-536.

  • OECD (2013). OECD guidelines on measuring subjective well-being. Paris: OECD Publishing; 2013 March 20.

  • Ortiz-Ospina, E., & Roser, M. (2017). Happiness and life satisfaction. From:

  • Sweeney, P. D., McFarlin, D.B., & Inderrieden, E. J. (1990). Using relative deprivation theory to explain satisfaction with income and pay level: a multistudy examination. The Academy of Management Journal 33,(2): 423-436.


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