Money well spent? Putting wellbeing at the heart of spending decisions

By Deborah Hardoon, Evidence Lead at The What Works Centre for Wellbeing

If you found £10, what would you do with it? You might choose to buy yourself some lunch. You might choose to buy 10 lottery tickets. You might pass on the £10 to someone who you know would otherwise struggle more than you to eat that day. So how do you decide how to spend that money and how will you know if it is money well spent?

The What Works Centre for Wellbeing believes that spending decisions, by individuals, policy makers and charities can be made in a way that seeks to maximise wellbeing outcomes.

Our new guide for charities, developed in partnership with Pro Bono Economics, takes you step by step through how to use evidence on what works to improve wellbeing in a methodical and transparent way, to inform and substantiate spending decisions. The guide describes how to compare the costs of a project against its likely impact on wellbeing, to help determine whether or not it is worth doing.

This is based on a logic model, which presents clearly where you expect to see financial costs (and savings) and wellbeing impacts (both positive and negative).

This is not an exact science. Wellbeing is complex, it is as much about the external conditions, environmental factors and experiences that affect our lives (drivers), as it is about our personal capacity and response in terms of resources, feelings and emotions (psychological wellbeing). The collective and shared wellbeing of communities (social capital, sustainability) is also about more than the simple sum of the wellbeing of an  individual within a given community. Taking all of this into account in a logic model, in a way that also accounts for individual differences, trade offs between individuals over time as well as spill over effects and unintended consequences is difficult. Costs can only be forecasted, and impacts can only be estimated based on existing studies and evidence of similar projects, policies or changes, until you are able to conduct an evaluation of how the specific intervention performs in practice.

But despite these challenges, wellbeing science has come a long way, which not only means developing a wellbeing cost effectiveness analysis is possible, particularly  for charities seeking to understand and quantify the difference they makes to lives and communities. It also demonstrates the value of identifying wellbeing as the ultimate criteria of success that cuts across policy areas, geographies and individuals, and recognises the interplay between different factors in people’s lives that need to be considered for any project to be effective.

The guide is based on:

• Identifying the common currency of wellbeing as a measure of success, the wellbeing adjusted life year or WELBY (1 unit of life satisfaction, on a scale of 0-10, for 1 year)
• Drawing on existing evidence that quantifies the impact of changes (e.g a move from unemployment to employment) on units of life satisfaction
• Fully accounting for all predicted costs and wellbeing impacts, direct and indirect, on all aspects of life, now and in the future.

So what would this guide tell you to do with that £10? Using such an approach, you would probably conclude that the best way to improve net wellbeing, is to pass on that £10 to someone who is struggling, even better if that was also the person you think might have lost it in the first place. (hint: wellbeing evidence tells us that money has a bigger impact on wellbeing the less you have of it, but also a loss in income has a higher negative impact on wellbeing than a gain would have of the same amount.)

The impact of charities’ decisions being made on the basis of wellbeing has the potential to be transformative; putting money, time and investments where it can demonstrably do the most good for the most people - now and in the future.