How Much Money Do You Need To Be Happy? There’s A New Number And Its Risen By A Lot
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“Money can’t buy happiness” is a well-known adage that we’ve heard time and again.
Yet, deep down, most of us believe that a little more money could make us a little happier. But how much money do we really need to be happy?
How much money do you need to be happy?
For decades, researchers have been trying to find an answer to this elusive question. Previously, the number associated with money buying happiness was $75,000 a year.
That number was based on 2010 research by Nobel prize-winning economists Daniel Kahneman and Angus Deaton. It found that people tend to be happier as they make more money, but this trend levels off once they earn between $60,000 to $90,000 per year.
The thinking based on this study is similar to thinking about gasoline for your car. Without gasoline, your car won’t run. But once you have enough gas in the tank to get you where you need to go, having more gas won’t necessarily make the ride smoother or more enjoyable. In fact, carrying extra fuel can even slow you down and create more problems.
Similarly, having enough money to meet our basic needs and some discretionary spending can provide a foundation for happiness. A dream job and dream house might leave one more stressed, exhausted, and unhappy – especially if it comes with significant lifestyle creep.
The general takeaway of this study didn’t sit well with many. Given the weight society puts on financial success, how could more money really not correlate with overall happiness?
It could be summarized by the immortal words of the Notorious B.I.G.: “mo money, mo problems.”
How does money accelerate happiness?
A study in 2021 challenged this idea. The study, published in the Proceedings of the National Academy of Sciences (PNAS) journal, analyzed over one million real-time reports of experienced well-being from a large US sample and found that higher incomes may still improve people’s daily well-being, instead of having already reached a plateau.
Researchers used 1,725,994 experience-sampling reports from 33,391 employed US adults to show that both experienced and evaluative well-being increased linearly with log (income), with an equally steep slope for higher earners as for lower earners. In contrast to past research, happiness rose as income rose, suggesting that higher incomes are associated with feeling better day-to-day and being more satisfied with life overall.
What’s the new number for how much money you need to be happy?
New research published in March 2023 by Nobel Prize-winning economist Matthew Killingsworth, the author of the second study, attempts to reconcile some of the differences found in the previous two studies. The study found a “linear relationship between average experienced happiness and income which extended well beyond $200,000.”
In fact, the research found a correlation between income and “experienced well-being” that extends much further, beyond $500,000.
The new study, published in this month in the Proceedings of the National Academy of Sciences journal, draws some interesting conclusions about the relationship between money and happiness.
Specifically, the study found that people who are unhappy and financially well-off see a sharp rise in happiness up to $100,000 annually, and then plateaus, while those who are happier see the association accelerate above $100,000.
In an interview with Penn Today about the findings, Killingsworth sums up the findings: “In the simplest terms, this suggests that for most people larger incomes are associated with greater happiness,” says the Warton School professor. “The exception is people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help. For everyone else, more money was associated with higher happiness to somewhat varying degrees.”
In other words: Money doesn’t necessarily buy happiness. But it accelerates it if you’re already happy.
The late, great comedian Bill Hicks said it best: “Money can’t buy happiness but it can buy you a jet ski. Have you ever seen someone sad while riding a jet ski?”