Can Money Buy Happiness? Actually, It Depends
Does having more money lead to greater happiness? Some people will say yes, and others will say no. The answer is actually more nuanced. The effect income has on happiness can vary greatly depending on factors such as how much money one already has, cultural attitudes, and individual priorities.
The Initial Boost in Happiness
For people at lower income levels, increasing income has a notable effect on overall happiness and life satisfaction. Research shows that money significantly boosts a sense of well-being when it helps people meet basic needs, including housing, clothing, food, and health care. After basic needs are met, additional income can help a person improve their leisure time or seek less stressful or more fulfilling employment.
The Happiness Plateau and Diminishing Returns
The idea of a “happiness plateau” has been widely discussed. Studies have found that after reaching a certain level of income, where basic needs and some additional comforts are covered, earning more money yields smaller and smaller increases in happiness.
For example, a person moving from $40,000 to $70,000 in annual income might experience a substantial boost in satisfaction, but someone going from $100,000 to $150,000 may feel only a small increase in overall happiness. A 2010 study concluded that a person’s feeling of happiness and emotional well-being begins to diminish above $75,000 (in 2010 dollars).
No True Upper Limit
In contrast to the 2010 study, a more recent study found there actually is no upper income level at which a person’s happiness and well-being plateaus or decreases. Even millionaires can realize increased levels of happiness with rises in their income. This is not to say that more money equals more happiness or overall well-being; it simply implies that, for some people, ever-increasing income can correlate with living a better life.
For about 80 percent of people, happiness continues to increase as their annual income increases beyond $75,000. But for people who are generally unhappy, their unhappiness tends to decrease as their annual income increases to about $100,000. Even after income increases beyond the $100,000 mark, the unhappy people are still unhappy, maybe just a little less unhappy than they were before. One of the researchers who conducted the recent study noted that more money won’t help a person who is rich and miserable.
Cultural and Individual Differences in the Money-Happiness Relationship
The connection between income and happiness can vary significantly across cultures. In countries with high income inequality or in cultures that emphasize material success, the pursuit of higher income might be associated with higher social pressures and stress, potentially offsetting the benefits to happiness. On the other hand, in societies that prioritize social relationships and community, people may place less value on income as a measure of success, which could weaken the link between income and happiness.
Individual personality traits also play a role. People who value material success may feel happier as their income rises, while those who prioritize relationships, personal growth, or other nonmaterial values may experience less satisfaction from increased earnings.
The Downsides of Prioritizing Income Over Happiness
Pursuing wealth for its own sake can sometimes lead to reduced happiness and well-being. Studies show that people who prioritize financial success over other life goals, such as meaningful relationships or personal growth, may experience higher levels of anxiety and lower levels of life satisfaction. The stress of maintaining a high-income lifestyle, balancing demanding work hours, or striving for a wealthier lifestyle can, paradoxically, detract from overall happiness.
Moreover, focusing too intensely on money can detract from the quality of relationships and personal well-being. Spending long hours at work to earn more can reduce time spent with family or friends, contributing to social isolation or relationship strains, which are significant factors in overall happiness.
Money as a Tool for Happiness, Not the Goal
Research suggests that though income can contribute to happiness, it is most effective when viewed as a means to an end rather than an end in itself. When people use income to build secure, fulfilling lives filled with relationships, growth, and meaningful experiences, they tend to experience higher life satisfaction than those who view income purely as a marker of success. Money, in this sense, is best seen as a tool to support happiness rather than the sole source of it.
Creating a Meaningful Legacy
Part of accruing wealth is managing it responsibly and using it to leave a meaningful legacy. By working with experts, such as a financial planner, an accountant, and an estate planning attorney, you can manage your wealth and get the most out of it. Learn how you can protect your wealth for your heirs or favorite charities by working with your estate planning attorney. They can help you protect your assets and plan for the future.
