Does debt make you happy?

Lately, there has been a lot of news on the rise in Finnish indebtedness , as both consumer loans and mortgages are being taken more than ever before. The increase in mortgage lending has aroused debate, and the Financial Supervisory Authority, for example, has expressed concern about the inefficiency of the mortgage loan ceiling and called for tightening of the loan ceiling legislation. On the other hand, there have also been speeches against the tightening of the loan ceiling, when the finance industry (formerly the Federation of Finnish Financial Services) rejected the proposal to tighten the loan ceiling completely.

Despite the increase in indebtedness, the indebtedness rate of Finns is quite moderate compared to the other Nordic countries, and it is well known that, for example, the indebted Danes and Norwegians are very happy people. So we decided to look at how leverage affects happiness. Does debt make you happy or anxious?


How were the calculations made?

debt problem

The analysis is based on the World Happiness Report and the OECD Household Debt Ratio .

The World Happiness Report is an annual survey published since 2012 that measures the happiness of citizens in over 150 countries. In the report, factors pertaining to happiness include GDP per capita, life expectancy, social support, freedom of choice in life, generosity and perception of the level of corruption in the country’s administration and economy.

The OECD report  indebtedness, in turn, collects information on household income levels and loan amounts. An indebtedness ratio is calculated for each country included in the statistics, which shows how much households have loans in relation to disposable income.


The relationship between debt and happiness is surprising

The relationship between debt and happiness is surprising

According to the happiness report, Finns are the fifth happiest people. Happily, only Norwegians, Danes, Icelanders and Swiss were gliding past Finland.

The top countries in the most indebted households are ranked by the same countries as the happiest countries. Namely, the Danish, Dutch, Icelandic, Norwegian and Swiss, who all have more than double the amount of disposable income, are among the six happiest countries. The exception to the gearing ratio of the happiest countries is Finns, as the gearing ratio of Finns is only 130% of disposable income.

The least fortunate nations according to the happiness comparison are the Portuguese, Greek, Hungarian and Turkish. On the other hand, Turkish, Hungarian, Latvian and Slovenian debt have the lowest debt-to-income ratio. The Hungarians and the Turks are thus capturing the tail-end investments in both happiness and debt.

Happiness and indebtedness
Rank, World Happiness Report Scoring (Happiness) Country Debt as a percentage of disposable income
1 7,537 Norway 222
2 7,522 Denmark 292
3 7 504 Iceland 227
4 7,494 Switzerland 211
5 7,469 Finnish 130
6 7,377 Netherlands 277
7 7,316 Canada 175
9 7,284 Australia 212
10 7,284 Swedish 183
13 7,006 Austria 94
14 6,993 United States 112
15 6,977 Ireland 178
16 6,951 Germany 93
17 6,891 Belgium 114
19 6,714 Great Britain 152
20 6,652 chile 62
23 6,609 The Czech Republic 69
31 6,442 France 108
34 6,403 Spain 122
40 6,098 Slovakia 68
46 5,973 Poland 64
48 5,964 Italy 89
51 5,920 Japan 131
54 5,850 Latvia 52
55 5,838 South Korea 170
62 5,758 slovenia 57
66 5,611 Estonia 82
69 5,500 Turkey 26
75 5,324 Hungary 51
87 5,227 Greece 119
89 5,195 Portugal 136

Hence, happiness and debt seem to correlate to some extent, albeit in a somewhat surprising way. Low indebtedness does not seem to guarantee happiness, as one might imagine, and correspondingly high indebtedness does not automatically lead to dissatisfaction. However, it is not worth drawing the conclusion that taking on debt automatically makes you happy. What is more, in stable and prosperous states, people dare to take on more debt than in more precarious states.

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