The relationship between money and happiness seems destined for lively debate in perpetuity. There are as many recipes for happiness as people to ask, with some economists even regarding happiness as the best indicator of the health of a society.
This is exemplified by Bhutan—the only country in the world that measures its national health annually with the Gross National Happiness Index.[1]
Regardless of one’s views about the importance of happiness, just about everyone would likely prefer to spend more of their time feeling happy. But the question remains, how much does money have to do with it? Science is finally providing some answers.
A new British study[2] examined the relationship between life satisfaction and income changes among more than 18,000 adults over a nine-year period. Researchers found that changes in income do not affect most people’s happiness—most of the time. Income increases do not affect life satisfaction, but income losses do, and these effects are far greater for those with “highly conscientious” personality types.
How much income is required for happiness? According to a 2010 study[3] at Princeton, happiness correlates with annual incomes of about $75,000, although some variation is seen based on geography and cost of living. But above that threshold, no increase in happiness was found.[4]
The reason for this is really no mystery. Our income buys the peace of mind that our most basic needs will be met. Low income often comes with feelings of financial insecurity related to the anticipation of not being able to handle life’s unexpected twists and turns—medical emergencies, sudden job changes, etc. However, once you reach a certain threshold, this financial insecurity generally disappears.
Another study[5] confirms that a six-figure salary is not necessarily your ticket to happiness. Life satisfaction ratings were gathered for 260 occupations, and several lower-paying professions boasted happiness rankings substantially above expectations. Case in point: fitness instructors rated happier than lawyers, despite the fact that they typically earn one-seventh of a lawyer’s salary.
In spite of the fact that wealth doesn’t guarantee happiness, research shows happiness is influenced by how we spend our money. In other words, money can buy happiness if we spend it the right way