Subjective Well-Being, Net Worth, and Savings Modalities
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Behavioral economics has found numerous factors outside of the traditional expected utility model that affect financial decisions. The bi-directional relationship between financial decisions and happiness (“subjective well-being”) is of particular interest to economics and society because of the centrality of happiness to the human condition. I investigate the relationship between net worth, its main components (risky assets, safe assets, homeownership, and retirement accounts), and three proxies for subjective well-being: optimism, cheerfulness, and life satisfaction. I find that net worth correlates positively with optimism, cheerfulness, and life satisfaction. Furthermore, optimism correlates with voluntary retirement contributions, cheerfulness and life satisfaction correlates with lack of safe investments, and life satisfaction correlates with homeownership. The magnitude of the effects confirms that financial decisions are heavily influenced by factors besides the traditional models based on rationality.