02 May Debunking the Happiness = Money myth
The spectre of higher interest rates notwithstanding, Canadians are a confident lot when it comes to spending. Don Povilaitis and Lori Harris, analysts at credit-rating agency Standard & Poor’s, said in a recent report on the retail industry that consumer spending rose by 4% in 2005, the strongest rate since 2000. That was bolstered by an increase in purchasing power, thanks to low unemployment rates, the extra equity that comes from a booming housing market, and rising incomes. Consumer confidence remains supported by low inflation – with core inflation growing at 1.9% in 2005, little changed from where it’s been during the past three years.
That’s the good news. The bad news is that personal indebtedness is simultaneously growing at staggering rates. In the mid 1980s, Canadian and U.S. household debt represented about 70% of disposable income (the money left after taxes). That grew to 100% in the 1990s. Today, it’s over 120%, the highest levels in 40 years. More people now use their disposable income just to service their debt, and even those with good, high-paying jobs carry huge debts and have virtually no savings.
So what’s driving this consumer frenzy? Recent research by Andrew Clark, a professor of economics at PSE Ecole Normale Superieur in Paris, provides some clues. He claims it all comes down to the elusive goal of trying to achieve happiness through physical possessions – a goal he says we will never really achieve. Why? Because the more you have, the more you want. We spend – and go into debt – to make ourselves happy, but once we get what we think we want, we want more. So we spend, and pile on more debt, to keep pursuing the holy grail of happiness. Making more money doesn’t help the situation either, because it simply raises our expectations. You think a $100,000-a-year salary is great until you reach that goal and realize that what you want is more.
To read more about happiness, and money…click here.