Why £33,864 buys you happiness

It’s fair to say money is not making us very happy right now.

Incomes are under threat, our investments have taken a beating, the fear of inflation is rising and the end of all those payment holidays loom.

More of us are facing struggles to pay the bills than we were last week, especially if we have families to feed and house, according to Comparethemarket.com, which found that just under 40 per cent of UK households say their finances have suffered since the beginning of lockdown.

To get ourselves back on an even keel, millions of us are making significant and permanent changes to the way we manage our finances and spending, ranging from setting more money aside in emergency savings to using less petrol.

It has become a depressingly familiar story. But there are a few chinks of light.

Concerns that the cost of living is set to rise are linked to prospects of an unexpectedly rapid economic recovery, for example.

And on the personal finance front, while we had been warned early on that the Covid-related money worries might not reach their peak until the Christmas of 2021, most households now believe they might be back on track within nine months.

If and when we reach the other side of all this, the road to personal and financial happiness may not require the huge income boost we might assume either.

For starters, we’re already happier than you might expect. Or at least the Office for National Statistics (ONS) thinks so.

As a nation it scores us a solid 7.3 out of 10, so we’re fairly satisfied with life. And these figures come from a study of hundreds of thousands of people all over the country over the last few months.

Those were arguably some of the most disconcerting and nerve-wrecking days of our lives as we watched the pandemic come barrelling over the horizon to fundamentally alter almost everything for a while there.

Believe it or not, our levels of happiness actually improved over the course of lockdown.

“Some of the measures put in place, such as furloughing and mortgage relief, as well as increased community support and clapping for the NHS, carers and other key workers may have stabilised and helped balance the impacts on anxiety and happiness levels during these times,” the latest ONS report notes.

Which all not only suggests that we are strangely content but, if you have faith in statistics, that sentiment is a remarkably robust one. As long as the emergency measures have kept the wolf from the door that is.

We know money matters and our mental health are deeply intertwined, with one undermining the other in an often exhausting, lifelong game of tug of war.

But is the opposite really true? That a financial safety net, however brief, can make all the difference? In other words, can money buy happiness after all?

A little number-crunching of this and other data from sources such as the Happy Planet Index of attitudes globally breaks the figures down by area and compares personal wellbeing with average local income or GDP levels and life expectancy.

It shows a predictable correlation between having a bit more financial wriggle room, better physical health, greater longevity and a lighter heart all round.

In fact UCL recently calculated that having a total household net worth of around £488,000, including the value of your home, savings, pension pots, other assets and belongings by the time you reach your 50s can add nine years of good health to your life.

But we know that money and happiness don’t increase in line with each other endlessly. Several big studies over the years have shown that personal contentment levels out surprisingly early. Even that UCL number looking just at physical health seems high at first glance, but quickly comes into focus as you tot up average values.

The amounts involved in this latest analysis don’t seem all that outlandish either.

The study, by savings comparison service Raisin UK, suggests that when the numbers are crunched, the happiest people in the UK are in Winchester where the life expectancy reaches a ripe old 83.5 years and the average salary is £35,346 – only a few thousand pounds higher than the national average of around £29,000.

That is quickly followed by Lichfield in the West Midlands, where the average income among residents is £33,360, and Chichester in the southeast, where the average salary is £31,894.

Across the UK, the top 10 happiest cities – from Perth to Bath - command an average salary of only £33,864.

So pocket the cash that would have bought the lottery ticket. It turns out you might not need that big win after all. Which is handy because that extra £2 might come in handy about now.