Recent data revisions from Statistics Canada showed that Canadians are even more in debt than previously estimated. The average household debt in Canada has reached more than 163 per cent of average income, an astronomical ratio that is higher than that seen in the U.S. and the U.K. before their housing markets crashed.

This has led to all sorts of hand-wringing among analysts, who worry Canadians have become very vulnerable to shifts in the economic climate because of their high debt levels. But BMO economist Doug Porter sees something to be happy about — maybe — in the numbers: An apparent link between levels of consumer debt and happiness.

debt happiness study

According to this chart from Porter, there is a correlation between the levels of debt in a country, and how happy its citizens claim to be.

There are at least six OECD countries that have higher household debt ratios than Canada,” Porter noted in an email to clients last week. “And, notably, the world champ on this front — Denmark — also happens to be the happiest country in the world, according to the 2012 UN World Happiness Report.”

He added: “In fact, all six countries that are more indebted than Canada rank in the top 10 of most happy countries.”

Canada ranked fifth in that study of happiness. (See slideshow below.)

Of course, this doesn’t mean taking on more debt will make you happier — but it does suggest that indebtedness doesn’t necessarily lead to misery.


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  • Striving For Happiness Can Make You Less Happy

    Yes you read that right. There is a tremendous amount of research that demonstrates the importance of happiness and its association with so many positive outcomes that I was surprised to discover the counterintuitive research conducted by Iris Mauss at the University of California Berkeley, who claims that happiness may not be beneficial in every context. Mauss has discovered that as people strive for happiness, they set higher expectations for happiness. When their expectations are not met, they find themselves disappointed. Also, the harder one tries to experience happiness, the more difficult it is to actually feel happy. We feel this tremendous amount of pressure to be happy all the time that we often hear people apologizing for their unhappy moods. For heaven's sake, if your dog dies, it's okay to be sad.

  • The Paradox of Choice

    I always thought that having more choices when making any decision would make me happier, but according to psychologist Barry Schwartz, endless choice can actually lead to lower levels of happiness. Here's how it works: the more choices you have, the more you have to give up. Having some choice is good, but when you have too many choices, having to forego many attractive features of things not chosen causes regret. We can liken this to buyer's remorse. Schwartz's suggestion is to employ a tactic called "satisficing/" Before you purchase, be clear about the features and options you require, make your choice based on those requirements and then stop searching. If you are prone to what Schwartz refers to as "maximizing"; exhaustively exploring every single option and feature before making any decision, satisficing can be liberating. What I have found is that when I need to make a major and significant decision I take the time to maximize. For everything else, satisficing is fine with me and I'm happier for it.

  • We Are Bad at Predicting What Will Make Us Happy

    For this, I turn to Dan Gilbert's TED Talk titled "The Surprising Science of Happiness." In this talk, Gilbert describes how humans are bad at predicting what will make us happy in the future. I thought that a bigger salary, a bigger house and a nicer car would make me lastingly happier, but what I didn't know about was the concept of hedonic adaptation. Research has shown that human beings are highly adaptable to both bad and good changes in their lives. After a period of adaptation, we typically revert back to our previous happiness range. This is not true for all life events, as some are more life changing than others, but true for most situations. So we find ourselves working hard for more and more things without realizing that we are really just on a hedonic treadmill.

  • Other People Matter More Than I Thought

    When I think about my happiest moments I think about time spent with family and friends but I didn't think that social relationships were that central to our survival, especially for some personality types. Science has proven the opposite. Neuroscientist Naomi Eisenberger designed an experiment where participants played a computer game called Cyberball while having their brains scanned by an fMRI machine. The Cyberball game begins with all three avatars happily tossing the ball to each other but soon, the study participant is excluded from the game. As soon as the participant is excluded, the fMRI shows activity in the same region in the brain that physical pain might cause. In other words, social exclusion is experienced as physical pain in the most primal part of our brains.

  • Exercise Improves Psychological Health

    Of course we're taught from an early age that exercise is an important contributor to our physical health but research now shows that physical exercise is also important to our psychological health. Whenever I mention this to people, they often refer to the boost of endorphins after exercise, but there is way more at work here. According to Dr. John Ratey in his ground-breaking book, Spark, exercise produces the feel-good bio-chemical serotonin. Daily physical activity actually increases the amount of serotonin in our brain improving mood and protecting us from depression. In one study with clinically depressed people, the group that was prescribed daily exercise in fact showed greater reductions in depressive symptoms than the group that was prescribed anti-depressants. Exercise also reduces the stress hormone cortisol which allows us to manage better in stressful times. The good news is that any physical activity counts - so just get moving every day.