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When Finances Meet Mental Health: The Relationship Between Income & Well-being

Does income impact well-being?

How is the relationship between income and well-being portrayed? Various long-term studies show that there is a positive relationship between individuals with high income and having an overall healthy well-being. Therefore it is evident that most people living on low incomes are likely to have an unhealthy lifestyle. Despite what long-term studies show about the relationship between income and well-being there are also many other significant factors relating to income - that dictate the mental state of an individual.

How does income lead to good or bad well-being?

The most significant factor on why having a high income relates to healthy well-being, is the ability to afford basic needs. An individual with a high income will pay for all their essential obligations such as food and rent without any stress. On the other hand, individuals on less income are likely to be subconsciously thinking about how they are going to afford their obligations on a day-to-day basis. Having the constant thought of struggling to provide for yourself and your family can put severe pressure on yourself, potentially leading to bad mental health.

But does having a high income always result in good mental health? The majority of individuals with high incomes usually have high-pressure jobs that require long working hours. The combination of being under constant pressure and having a poor work-life balance can impact your mental health in a negative way as much as having a low income can. A good example of an occupation like this is investment banking in the banking and Finance Industry. Research shows that investment bankers work up to 100-hour weeks on a regular basis. These excessive work hours have proven to exhaust the majority of bankers leading to bad mental health. This shows that despite having one of the most well-paid jobs in finance, your well-being can still be impacted in a negative manner through the work environment.

In contrast, having a less stressful job, which has a better work-life balance can lead to good mental health. Are people with high incomes able to actually use their large abundance of disposable income to pursue and explore a variety of activities that they are interested in outside of work? The answer is, most of these people simply don’t have enough time outside of work to do so. This raises the question of why people choose jobs that are so mentally exhausting, negatively impacting health, for a reward that they don’t have time to enjoy. The lack of enjoyment derived from a large amount of income earned will continuously destroy people’s well-being. Despite earning a low income, individuals are more likely to work in a less stressful job, with a better work-life balance providing the opportunity, in terms of time, to spend money on things that they enjoy outside of work. This is likely to result in good well-being.

How much happiness can money buy?

The relationship of having a high income resulting in good well-being is true to a certain extent. A 2010 study shows that once income exceeds the wage bracket of $75,000, extra income earned on top of this does not contribute to an individual’s level of happiness. So why do people sacrifice their work-life balance and mental health for money that won’t increase their level of happiness? Is this greed?

It could be due to the fact that they feel the need to constantly impress their superiors, for job security. A lack of job security can lead to high levels of stress resulting in bad well-being. Investment Banking can again be used as an example, despite it being a highly paid job, job security is not good in this ‘cut-throat’ business. This is shown through Goldman Sachs cutting 6.5% of its workforce in a corporate restructuring in January 2023.

It also could be because some people are so passionate about their job, they perceive it as a hobby. Therefore income received is not a relevant factor to their happiness hence working helps maintain their good well-being.

In conclusion, there is a positive relationship between high income and good well-being to a certain extent. This is because having a high income can consistently provide you with all the basic necessities that build a foundation for a good-wellbeing. However, other factors can negatively impact your mental health, regardless of annual income earned, such as poor work-life balance, lack of job security, and constant working under high stress, which also contributes to bad well-being.


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