An Open Debate: How Important is Money to Our Well-being?

- When two contrasting views met....

This “debate” was originally the responses to a note, back and forth between Mr. James Bollen, who writes about personal finance, and Dr. Jane Xu, who writes about well-being and happiness.

As the discussion deepened, the two contrasting viewpoints drove and clarified each other, with some fruitful results.

Considering the relevance to the topics of both James’ and Jane’s, we decided to turn the debate-style conversation into a co-authored post for both communities, with relevant quotes from our previous posts when needed.

We would also like to invite our dear readers to join in!

The conversation started on a post of Jane’s about some people spending beyond means for “proving” themselves.

James:

Today, it’s referred to as ‘fake rich.’

The problem is that it is harder than ever to get ahead. The middle class in the United States is shrinking.

(Jane’s note: The problem James cited involves a much wider topic on economic, political, and social issues, etc., that seemed beyond the scope at this time.

In the scope was: How do we handle our lives in the current social context.

                                                                                      (Graph created with Craiyon)                       

“Fake rich” was the way some people handle their lives. So Jane responded on that, and the discussion continued into a “debate”.)

Jane:

Thanks, James, for bringing up the term “fake rich”.

Rather than doing “fake rich” to “prove” oneself, or even devoting one’s life to really becoming rich to show others, wouldn’t it be much better to just focus on enriching one’s own well-being?

One would be richer than the rich to have better well-being and happiness.

The key is to realize that after basic needs are met, money is no longer the most important factor for well-being and happiness, as this and many other studies showed.

If you were given US$10,000, what would you spend on to feel the happiest?

James:

Money does play a role in personal happiness and well-being. Finances often rank as the top cause of stress.

Soomin Ryu and Lu Fan found in a study that:

"Growing evidence reveals that financial strains and worries play significant roles in mental health."

From CNBC:

“90% of individuals say that money has an impact on their stress level.”

Once someone has met their basic needs, it’s wise to save and invest money.

Money and wealth are not evil.

This isn’t an either/or. It’s a both/and. Money goes along with personal well-being.

Jane:

(Note: A long response below as this gets into some core issues).

Correct, money has a significant impact on stress level. However:

1. Not all stress is the same.

The most concerning stress comes from basic needs not being met; that’s the more legitimate type of stress.

But much of the stress felt by the “90%” points to some other roots (e.g., social mentality, societal system design, social pressure), which may include “unnecessary stress”.

“Unnecessary” here does not mean that people should not feel it; it could mean that those social forces created it unnecessarily. More on that later.

I am all for making money to reduce unhappiness from need-related stress, and, as you suggested, to save or invest for some added security, without devoting your life to further money pursuits for “getting rich”, that is.

2. Reducing stress is not the same as increasing happiness.

To see the issue more clearly, it helps to distinguish happiness from unhappiness; unhappiness is NOT exactly the same as “negative” happiness.

Reducing unhappiness is therefore different than increasing happiness. Reducing unhappiness with different root causes should also be different.

Feeling financially stressed is a kind of unhappiness; its root causes may include frustrated or unfulfilled needs, wants, the “unnecessary stress”, etc.

While money helps substantially for needs, it is not an effective solution for “wants” or “unnecessary stress”, even less so for increasing happiness.

Because “wants” never end; and the “unnecessary” should be removed.

3. The “Get Rich” pressure is a stressor in itself, hindering our well-being.

Both unhappiness and happiness are relevant to well-being.

But beyond basic needs (and, we may add, reasonable comforts including a sense of security), money is really no longer the most impactful for our happiness and well-being, although in many people’s illusion it “is”.

That has been demonstrated time and again in empirical studies with hard data evidence, some of which cited in my posts.

However, so many people are yet to be convinced by that, understandably given the powerful social pushes in the other direction, with detrimental results.

And people might not have seen clearly that much of the “stress” (that people beyond needs and reasonable comforts still feel) have been introduced into our lives by the collective misconception: Only the rich have a successful life.

In other words, the social pressure of getting rich, by itself, has become a significant “stressor” - You risk being considered as a “failure” if you can’t get rich!

This manifests itself frequently, e.g., in dating scene, in “keeping up with the Joneses”, in many other social settings….

It is also the very reason, or a major one, that some people “fake” rich, a not-so-smart reflection of the fact that “rich” is being “esteemed”.

4. The “evil” is not money.

No, “money and wealth are not evil”.

It is the social mentality that esteems being rich, or rather, the consumerism pushing that mentality (and shaping the society according to it and in service of it), that is evil-ish.

Why? Because it imposes unnecessary stress and anxiety, and causes unnecessary self-doubt and unhappiness, etc., to so many!

And it could eat off our lifetime chasing wealth in the illusion of reaching for happiness, often at the expense of our true well-being and happiness.

James:

I’ve discussed the problems with consumerism in past articles. I’ll probably write about it again.

I brought up the connection between stress and finances to show that there’s a link between personal finance and mental health and well-being.

Financial instability isn't just discomfort. Financial anxiety is your body's reaction to perceived danger.
The danger is being unable to fully provide for yourself, save money to pay off debt, and invest to grow your wealth so you can retire.

Redfin's housing market data from May 2025 shows that the current median home sale price in the United States is just under $450,000.

Boundless Estates notes that to afford a house in the United States at the current median price, you would need to earn an annual income of $114,000.

The majority of Americans don't earn a six-figure income, which means homeownership is only possible for those in the top income brackets.

"The national average card debt among cardholders with unpaid balances in Q1 2025 was $7,321, up 5.8% from $6,921 in Q1 2024. That includes debt from bank cards and retail credit cards."

Consequences Of Debt Traps: You'll trap yourself in a reactive financial mode by being in debt without proper savings and depreciating assets. You'll constantly be putting out financial fires. You'll never build lasting wealth and appreciating assets.
....

Jane:

You could see I agree with your point that “there’s a link between personal finance and mental health and well-being”.

The issue is, without discerning “personal finance for fulfilling basic needs with a sense of security” from “money as the symbol of having a successful life and the like”, it is hard to address the related mental health/well-being issues correctly.

You noted that “The danger” that causes the ‘financial anxiety” has several levels: 1. unable to “fully provide for oneself”, 2. pay off debt, and 3. grow wealth.

Are these all authentic “dangers” in themselves? Or are they partially man-made?

For 1., Based on your notions above and in your linked article, “fully provide for yourself” includes at least: Housing and associated expenses, groceries, healthcare, transportation, (car, house, health) insurances.

While these by definitions are in the “basic needs” category, some have been made unnecessarily burdensome, thus generating unnecessary anxiety.

Take your example, housing: It is the LARGEST household expense of all (Mortgage encompasses 70% of U.S. household debt).

But it is made unnecessarily LARGE -- While U.S. household size keeps decreasing, average house size keeps increasing, now over 1000 sq ft/person!

                                                                               (Credit: Population Connection)

So, is “not being able to afford” a medium, or “average” house (~2500 SQ FT by 2019 and rising), really a “danger” to well-being?

Nevertheless, I can see the anxiety from it being very real - After literarily “buying” into the societal-wide “race” of owning as large a house as possible, affording the mortgage and the upkeeping becomes a real burden to many.

For well-being’s sake, a wiser choice may be not to fall for the large (or, “average”) house allure, and live in a home just sufficient for the household (likely much smaller than 2500 sq ft), saving much stress, anxiety, and “not affordable” unhappiness.

Were we happier when we lived simpler lives?

So even at the “basic needs” level, there are choices we can make to greatly reduce financial stress and mental anxiety.

For 2., pay off debt, you talked about “debt trap”. Indeed, from 2024 data:

credit card debt in the U.S. is at a record level ($~1.2 trillions), with APR as high as 21.91% to 35% or more!

But how much of the debt is from necessary, or even reasonable, spending?

~50% of all U.S. purchases are impulse purchases; about the same percentage are driven by status or trends; 27% luxury good buyers earn less than $50k annually, 61% earn less than $125k; 30–40% of luxury purchases involved using BNPL (Buy Now Pay Later), and nearly 60% used credit cards....

A pattern emerges: We are incurring much of our debt not for our needs or well-being, but our impulses, or our wants for “brand ownership”, luxuries, large houses, status… All the while adding anxiety to our lives from the debt.

We can choose not to trap ourselves into the “debt trap” from unnecessary or excessive spending with the associated anxiety and stress.

For the anxiety and stress from 3. building wealth, I have discussed above.

To be fare, nobody chooses stress; much of the financial stress has been imposed on us by the “social forces”. But we can make smart personal choices to not get trapped into much of the stress, to safe guard our well-being.

James:

Financial security yields dividends that benefit both your financial well-being and overall well-being, extending far beyond your bank balance.

Wealth allows you to stop trading your hours for time. When you're working forty to eighty hours a week, you're unable to spend it doing what matters the most to you.

Money allows you to reclaim your time by enabling you to retire early....

Stress-Free Relationships. Money fights disappear. You can be generous with loved ones who are struggling financially. ....

....

You can then spend your time on activities that bring you the most happiness.

Jane:

I can see that what you described resonates with many people - That’s what so many are striving for with all their might: Money…Wealth…Happiness!

One major problem is, so many strive for that all their lives, but very few get to the “wealth” stage, as the race of getting there is fierce and life consuming.

And, eventually getting there or not, they might find that in the process it has costed too much time, energy, heart and soul, money, opportunities… that they could have used to directly pursue well-being and happiness.

From this stand point, we could see that so many people’s way (aligning with what you described) is a round-about way: Chasing wealth first (which may consume your whole life’s time, and if, a BIG if, successful), “You can then spend your time on activities that bring you the most happiness”.

But there is a more direct, effective, and surer way: Focusing on building well-being, not wealth, once true basic needs are met, with some rainy-day funds.

Here well-being includes physical, mental/emotional, relational, community involvement, spiritual (meaning/purpose), self-actualization well-being, etc.

James:

The core problem stems from not properly defining terms. Ultimately, “happiness” and “wealth” depend upon how someone defines the term for themselves.

Jane

Actually, there are proper, “scientific definitions” of these terms, which my writing adopts if they have been soundly theorized and empirically validated.

That said, I agree with you that personal definitions are a core problem.

Wealth is less a problem in definition, but more so in practice (getting there). In the U.S. in 2024, for example, to be “wealthy” takes $2.5 million net worth.

The bigger problem is: Many people’s concept of “happiness” (often vague to begin with) have been heavily influenced, or if I may say, misguided, by the “getting rich is the route to happiness” social mindset, fueled by consumerism or materialism.

If such a mindset would actually help people achieve lasting happiness, or increase their authentic well-being, I would have much less problem with it.

But strong and ample research evidence has proven that it does not.

(Note: From here, the conversation turned to specific studies and got more technical, so we will omit that here).

Jane:

One of your points, James, that I found valid but have not addressed is that money and happiness are not “either/or”, but can be “both/and”.

I see it valid in that money in itself is not the problem against happiness. One could indeed have both money and happiness.

The problem against happiness is the focus of life’s energy on pursuing money in the hope of achieving happiness, which more likely than not may lead to disappointment and even unhappiness, based on research evidence.

At the same time, it takes away energy, time, mindset, and goal orientation from pursuing well-being directly. which is an effective route to happiness.

A point to support your point: One major aspect of pursuing well-being is self development and self actualization - e.g., develop your talents and pursue your passions.

Focus on that, and if it naturally results in big financial gains, that would be another “both/and” scenario (“Do what you love, money will follow”); But if not big in financial gains, you will still find this approach very rewarding.

So it is a matter of focus, or a mindset shift after basic needs are covered.

Focusing on pursuing wealth, you may have a long-shot chance of getting wealthy; but even with that, you will most possibly not achieve lasting happiness.

Why Does the “Happiness” That Comes with More Money/Material Possessions Do Not Last for Long?

Instead, you may likely suffer much stress, anxiety, and frustration along the way, and possibly disillusion at the end.

Focusing on pursuing well-being, among which self-actualization, you may also achieve financial success, without intensely targeting it.

And, financial success or not, you will much more certainly achieve better well-being and increased happiness.

*********

So much debating for now.

What’s your take on any, or all, of the above, our dear reader? Share your thoughts with us in the comment section:

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Check out another collaborative post touching the core of the above one:

"In fact, research on the “very wealthy” showed that they are barely happier than average people; some even maintain that "money decreased their happiness".

This reminds us that seeing money (even lots of money as in the case of the “very wealthy”) as the source of happiness is quite an illusion or misperception."

Happiness: Did We Get It Right? -Section II