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Debt and Subjective Well-being: The Other Side of the Income-Happiness Coin

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Abstract

To spur research on the topic of debt and its consequences, we conducted a systematic review to integrate the different conceptualizations of debt and to develop a conceptual model explaining mechanisms through which debt influences subjective well-being (SWB). Our conceptual model weaves two common themes from the prior literature: (a) a bottom-up spillover perspective where debt affects SWB via the financial domain (and possibly other life domains that are negatively affected through spillover); and (b) a resource perspective wherein debt is a strain on financial resources which, in turn, lowers SWB. Further, we review past empirical studies assessing the linkage between debt and SWB. A majority of associations (90 %), from 20 studies, revealed at least one significant negative effect between debt and SWB. Further, a random effects meta-analysis of seven studies showed a small relationship between debt and SWB (r = −.07), although there also appear to be critical moderators such as levels of debt, source of debt, and overall financial resources. To test our conceptual model, we conduct a moderated mediation analysis of a large scale representative sample of college graduates with Internet access in the United States (N = 2781) to examine the effects of student loans on SWB. Debt and income accounted for 40 and 60 % of the predicted variance of life satisfaction, respectively. In addition, the bottom-up perspective and resource perspectives were supported. One critical limitation is that there are not many studies on debt and SWB. Future areas for research are discussed.

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Notes

  1. http://time.com/8740/federal-reserve-debt-bankrate-consumers-credit-card/.

  2. http://www.economist.com/blogs/freeexchange/2011/04/american_government_debt_7.

  3. http://www.forbes.com/sites/johngoodman/2015/02/17/krugman-dont-worry-about-debt-we-owe-it-to-ourselves/.

  4. Debt-related predictors and concepts. Apart from the objective debt and subjective debt, we note that there are also other debt-related constructs that are not included in our model but would be important to mention here. These include high-risk credit behaviors as predictors of debt such as such as differences in the tendencies to overspend on big-ticket purchases (Sussman and Alter 2012). There may also be individual differences in self-regulation as posited by some scholars who have found a positive relation between high-risk health behaviors and credit card debt (Adams and Moore 2007). Other related concepts or indirect measures of debt include the number of credit cards one possesses (e.g., Drentea 2000) and expected debt (e.g., Cooke et al. 2004). These measures do not directly assess debt per se but inform us about the likelihood of the debt based on lifestyle patterns or projections.

  5. Information: http://products.gallup.com/168857/gallup-purdue-index-inaugural-national-report.aspx; Methodology: http://www.gallup.com/174167/temp-methodology-gallup-purdue-index-methodology.aspx.

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Authors and Affiliations

  1. Department of Psychological Sciences, Purdue University, West Lafayette, IN, 47907, USA

    Louis Tay, Cassondra Batz & Scott Parrigon

  2. George Mason University, Fairfax, USA

    Lauren Kuykendall

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  1. Louis Tay
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  2. Cassondra Batz
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  3. Scott Parrigon
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  4. Lauren Kuykendall
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Correspondence to Louis Tay.

Appendix

Appendix

See Tables 6, 7, 8 and 9.

Table 6 Conceptualization and measurement of debt
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Table 7 Proposed mechanisms and related perspectives
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Table 8 Review of past studies on debt and SWB
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Table 9 Studies Assessing Effects of Debt on SWB Included in Meta-Analysis
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Tay, L., Batz, C., Parrigon, S. et al. Debt and Subjective Well-being: The Other Side of the Income-Happiness Coin. J Happiness Stud 18, 903–937 (2017). https://doi.org/10.1007/s10902-016-9758-5

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