Why You’re Better Off Not Borrowing
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Does having more money make you happier? Most Americans think so, yet economists continue to debate the question. A 2010 paper by two Nobel laureates concluded yes—but only for those earning up to about $75,000 a year. In 2021, an economist revisited the issue and found that well-being may go on increasing for much higher income levels as well.
My own work argues that what matters is not how much you have, but what you do with it: Happiness doesn’t rise when you buy stuff, but rather when you use your money to pay for memorable experiences or time with people you love, or when you give it away to causes you care about.
All that aside, there is one thing you can dohappiness: Borrow it without clear resources to repay it. Benjamin Franklin was onto something when he in 1757, “Sleep without Supping, and you’ll rise without owing for it”—in other words, being a little hungry from time to time is better than cadging money to buy dinner. The research shows that Franklin was almost completely right: As tempting and as easy as it is to borrow money “on credit” to fund your unsecured consumption, this type of indebtedness almost always lowers your well-being.
