Dr. Ed Diener and Robert Biswas-Diener
Photo: Lori Adamski-Peek
Ilene was among the first casualties of the economic downturn. In January, she was dismissed from her job as an administrative assistant, a position she had held for 17 years. We met Ilene at a local farmer's market, where she was volunteering at a booth sponsored by the public library. Ilene clearly lamented her lack of income, lack of structure and lack of certainty in her financial future. At the same time, she spoke highly of her free time, crooning about how great it was to have the chance to volunteer for meaningful causes.
Ilene represents the somewhat bipolar face of the current economic situation: Most of us have felt the sting of lower housing and investment values, but, at the same time, there seems to be something hopeful and cleansing as well. The trick, when your well-being is concerned, is to learn how to weather economic hardship by appreciating your true psychological wealth.

When we talk about "psychological wealth," we mean your true net worth. Your quality of life is determined by much more than just your financial bottom line; it is also made up of your health, social relationships, spirituality, attitude and meaningful activities. The problem is most people have a habit of focusing on their pocketbook while overlooking their other social and psychological resources.

One of the ways that an economic recession takes a mental toll on us is that we focus our attention on a single issue...in this case, money woes. Researchers call this the "focusing illusion," which is our tendency to narrowly focus attention on unique aspects of a circumstance. Football fans, for example, tend to overestimate how much a win or a loss will affect their future happiness because they focus on the sporting contest while overlooking work, health, relationships and the bevy of other factors that affect daily well-being. In the same way, you are more likely to mentally weigh the effects of money troubles while overlooking your great friends, personal values and other rewarding aspects of life.

In the end, there is no denying that part of the difficulty of the current economic tides is not just a matter of positive thinking; there are legitimate problems and stresses associated with feeling the pinch of a mortgage payment, watching your retirement or college savings account dwindle and having to cut back on enjoyable pastimes. In fact, much of the research evidence points to the fact that material circumstances are related to a person's happiness.

If you are anything at all like Ilene, you too have worried about recent economic trends. It makes sense to fret over the kids' college funds or your retirement account precisely because these things are important. It is equally sensible to, like Ilene, examine all areas of your life and not get hung up only with financial setbacks. Remember to take stock of your health, friendships, spirituality and goals. Finally, when it comes time to spend money, especially discretionary funds—even in small amounts—it makes sense to purchase gifts, experiences and opportunities to interact with others.

5 ways to get happiness dividends from your dollars

Dr. Ed Diener and Robert Biswas-Diener are the authors of Happiness: Unlocking the Mysteries of Psychological Wealth, which won the 2008 PROSE award for best book in psychology. The father-and-son team has published, collectively, nearly 300 scholarly articles on happiness.


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