Financial goals can make you feel good — if you follow 3 key rules

Previous research has shown that money can’t buy happiness, but what is it about the pursuit of money that makes people so unhappy?

“Our research suggests that people who base their self-worth on money believe that the more time they spend working, the more likely they will be to achieve financial success,” study co-author Dr. Lora Park, associate professor of psychology at the University of Buffalo, tells Inverse. “However, the downside is that when people's self-worth is tied to money, they spend less time with their family and friends, which is related to feeling more lonely and disconnected from others.”

Park and her co-authors based their findings on research that involved more than 2,500 participants over five different studies that looked at factors such as time spent with others, loneliness, and social disconnection. Participants were asked to document their feelings in a daily diary for two weeks to assess their feelings about the importance of money and time spent engaged in various social activities. The findings were published in the journal Personality and Social Psychology Bulletin.

The Buffalo researchers based their paper on the psychological concept known as Financial Contingency of Self-Worth, when people view their financial success as being tied to the core of who they are as a person. These individuals feel good when they think they’re doing well financially but have feelings of worthlessness when they feel financially insecure.

Study co-author Deborah Ward, a Buffalo graduate student and adjunct faculty member in the psychology department, pointed out that it’s not the desire to achieve financial success or the pursuit of money that’s an issue. It’s only when a person’s self-worth is tied to these things. So how could people maintain a healthy relationship while pursuing financial goals?

“Goals related to mastery, autonomy, and relatedness will ... lead to greater happiness and psychological well-being.”

“Reflect on why you want to achieve financial success,” Park said. “Oftentimes, we think that what we are pursuing will make us happier, but in fact, research shows that after a certain amount of income, money doesn't buy happiness. So rather than pursuing money as the ultimate goal, think about ways to satisfy fundamental psychological needs of competence (feelings of mastery), autonomy (feeling like you have choice and ownership over your life), and relatedness (close, mutually caring relationships with others) — and spend time directly fostering those needs.”

For individuals in a crunch or hustle period, Park advised that they carve out certain times daily or weekly to focus on strengthening their relationships with others. Not only will loved ones appreciate this time, but it will also benefit everyone’s mental and physical health.

Many times, however, the pressure to succeed or earn more money doesn’t come from within but from others, such as partners or parents. This is classified as external motivation, Park said, meaning people may feel pressured to avoid a negative outcome, including disapproval from others or to achieve a positive outcome such as seeking approval. Park said that motivations can shift.

“Instead of being motivated by external reasons, or even a desire to feel good about oneself (and not feel badly about oneself), individuals can value a goal because it's an important part of their value system or beliefs,” she said. “For example, we might say that financial security is an important goal because we want to be able to provide for ourselves and our family. When you've adopted a goal that you feel is your own, rather than being dictated by those around you, then you feel ‘freer’ to pursue the goal and feel less controlled and pressured to achieve it.”

Park said that it can be difficult to change people's contingencies of self-worth or what they base their self-worth on, so if a loved one has tied their financial success to their self-worth, it’s important to help them find other goals to pursue.

“Goals related to mastery, autonomy, and relatedness will better fulfill psychological needs and lead to greater happiness and psychological well-being,” she said, “than trying to boost your self-esteem by pursuing financial success.”

Abstract: Although people may think that money improves one’s relationships, research suggests otherwise. Focusing on money is associated with spending less time maintaining relationships and less desire to rely on others for help. But why does focusing on money relate to worse social outcomes? We propose that when people base their self-esteem on financial success—that is, have financially contingent self-worth—they are likely to feel pressured to pursue success in this domain, which may come at the expense of spending time with close others. Consistent with this idea, results of four cross-sectional studies (N = 2,439) and a daily diary study (N = 246) revealed that basing one’s self-worth on financial success is associated with greater feelings of loneliness and social disconnection, and this may be related to experiencing less autonomy and spending less time with family and friends.