Does Money Really Buy Happiness?

By Janey Osterlind on 21 September 2010 (Updated 16 September 2011) 6 comments

"A large income is the best recipe for happiness I ever heard of," the novelist Jane Austen once said. And, as it turns out, Austen may have been right — to an extent. A recent study (via Reuters) indicates that increasing one's income up to about $75,000 per year lessens life's stresses. (See also: 5 Ways Money Can Buy Happiness)

In other words, more money up until that point allows one to buy things that increase emotional well-being. For example, if I increase my salary from $35,000 to $75,000 per year, I would be able to save for retirement, afford my medical prescriptions without a great deal of stress, and hire a cleaning lady so I could spend more time with my children. (This is all theoretical, of course. I have no children, so no great need for a cleaning lady — yet!)

Whether money makes you happier also depends on your income in comparison to your peer group, rather than your ability to buy more things. Researchers Firebaugh and Tach argued in their paper, Relative Income and Happiness: Are Americans on a Hedonic Treadmill?, that this results in a never-ending comparison game, because one's income tends to rise with age (as does the rest of the peer group). It also means that as first-world countries grow wealthier, their residents aren't likely to be any happier, on the whole. Firebaugh and Tach did find that the greatest predictors of happiness were physical health, income, education and marital status.

Firebaugh and Tach's argument that there is no single predictor of happiness was recently supported by the results of a recent Gallup World Poll (via Web MD). The poll, which surveyed 136,000 people in 132 countries, found that happiness is determined by numerous factors, including expectations and culture. In other words, the question of whether you are happy depends in large part on how you define "happiness." The survey also found that the United States had the highest income of all the countries surveyed, but ranked 16th in life satisfaction (related to factors like feeling respected, having autonomy and having job fulfillment) and 26th on positive feelings.

In addition to there being numerous predictors of happiness (rather than income alone), there is evidence that money does not make you more generous. In fact, US families making over $300,000 annually donate just 4% of their income to charity and numerous other studies have shown that lower-income families give more of their income to charity than do high-earners.

So what does all of this mean? Bottom line: having enough money will make you happy, but having more money won't necessarily. My view is that it's essential to define happiness for yourself and then allocate your money in ways that will make you happy. In my case, what would make me happiest is being able to save 10% for retirement (which I do), having six months of emergency funds (which I don't) and paying off my credit cards (which I'm in the process of doing). After that, I'll be free to allocate money toward travel, which is one of my great loves in life! What about you? How do you view the relationship between money and happiness? Share your thoughts!

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Guest's picture

No, absolutely not, Money Really can't Buy Happiness.....

Ya...But it may become the reason of happiness.

Guest's picture

I think that increasing your salary can impore your happiness, but only if you know how to handle all of this extra money.

If you don't, it will probably make your life even worse. Just check in with your local lottery winner who didn't know how to handle the winnings.

Better to get some sound financial habits in place and then concentrate on increasing your income.

Guest's picture
Samurai

My theory is the magic income number is $200,000. You'll see why from an article on my site. It makes perfect sense!

Guest's picture
Lenny K.

The problem is, people many times live up to their income, so it's a very real possibility that you'll find yourself i the same boat with higher bills and the same level of stress.

Guest's picture

I've been reading about various studies on this same subject. Some say $40,000, others $70,000 and so on...I think it's a very relative number. But the basic premise is that that initial sum of income should cover your basic necessities (food, shelter, clothing), after which individuals should be able to be less stressed and focus on whatever it is that contributes to their happiness. And that there's no direct correlation between increased income and increased happiness once you've reached that threshhold of covering your survival.

I believe higher income can contribute to things you enjoy doing, but it doesn't mean you'll be happier...being happy for one person could mean being able to spend time volunteering and not worrying about money, spending time on hobbies, having stress-free time with your family, etc...which don't cost anything extra.

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Ren

Money can never buy happiness.
Money can not buy happiness as it can not buy love, peace or life.
If anybody say "Yes, Money can buy me happiness," I really really want that person teach me HOW? And why money cannot buy happiness is because the whole reason for people are not happy is not because of lackness of money. I also suggest that under some certain situations, money can help. And that help could make a needy person be happier than without money. But if you say: money can buy happiness, that means Money is the only thing you need for giving you happiness. And the answer is obviously negative.