Can money make you happy?
For years, researchers have pondered this question, seeking the elusive sweet spot where people feel they have “enough.”
What’s Happiness Worth?
It turns out, “enough” has a price tag.
About a decade ago, a Princeton study discovered an annual household income of $75,000 made for financially happy families. That’s about $92,000 in today’s dollars.
The problem is, we humans are fickle. When we reach a financial milestone—whether it’s $92,000 or $9 million—we usually want more.
The Biology of “More”
The drive for more is true even for the wealthiest among us.
In 2008, Boston College conducted a study on wealth. Despite having an average net worth of $78 million, study participants felt they needed about 25 percent more wealth to feel secure.
You can chalk this up, at least in part, to biology. People are wired to want more because we’re afraid of loss. Our brains actually experience the pain of loss twice as intensely as the happiness of gain.
Paradoxically, this doesn’t mean we’ll experience abiding happiness with greater wealth. A 2016 Case Western study found that with each extra dollar earned, people experienced greater happiness—up to a point.
In this study, the emotional benefit of having more money began to wane once income reached about $70,000 per year—and this increased happiness disappeared altogether at $200,000 per year.
The Mirage of the Finish Line
A phenomenon known as “arrival fallacy”—the false assumption that once your reach a goal, you will experience enduring happiness—further dispels the belief that money equals happiness.
We’re often raised to believe money, a good job, and a nice house will make us happy, but when we achieve these things, we wonder why we’re not happier.
This is because material things—including money—have limited power to make us happy. We’ve seen this with lottery winners who, despite newfound wealth and the dissipation of financial woes, tend to be about as happy as they were before winning millions.
The Key to Happiness
To find real happiness in the financial arena, we need to look beyond net worth and earnings to understand how we spend our money—and how we want to spend our money.
Consciously channeling funds into experiences and charities can be much more soul-satisfying than buying material goods, since sharing and giving nurture life-enhancing relationships with friends, family, and community members.
So, this season, as you take stock and contemplate gift-giving, remember wealth may not buy happiness but it can present wonderful opportunities to connect with others. And it’s in these moments we discover a richer, more joyful life.
Daniel Kahneman and Agnus Deaton. “High income improves evaluation of life but not emotional well-being.” PNAS. September 7, 2010. High income improves evaluation of life but not emotional well-being | PNAS.
Graeme Wood. “Secret Fears of the Super Rich.” The Atlantic. April 2011. Secret Fears of the Super-Rich – The Atlantic.
Jennifer Risher. “We Need to Talk: A Memoir About Wealth.” Xeno Books. September 15, 2020.
Kevin Loria. “How winning the lottery affects happiness, according to psychology research.” Business Insider. August 24, 2017. Powerball: Are Lottery Winners Happier? (businessinsider.com).