how does money buy happiness essay

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Does More Money Really Make Us More Happy?

• Elizabeth Dunn
• Chris Courtney

A big paycheck won’t necessarily bring you joy

Although some studies show that wealthier people tend to be happier, prioritizing money over time can actually have the opposite effect.

• But even having just a little bit of extra cash in your savings account ($500), can increase your life satisfaction. So how can you keep more cash on hand?
• Ask yourself: What do I buy that isn’t essential for my survival? Is the expense genuinely contributing to my happiness? If the answer to the second question is no, try taking a break from those expenses.
• Other research shows there are specific ways to spend your money to promote happiness, such as spending on experiences, buying time, and investing in others.
• Spending choices that promote happiness are also dependent on individual personalities, and future research may provide more individualized advice to help you get the most happiness from your money.

Where your work meets your life. See more from Ascend here .

How often have you willingly sacrificed your free time to make more money? You’re not alone. But new research suggests that prioritizing money over time may actually undermine our happiness.

• ED Elizabeth Dunn is a professor of psychology at the University of British Columbia and Chief Science Officer of Happy Money, a financial technology company with a mission to help borrowers become savers. She is also co-author of “ Happy Money: The Science of Happier Spending ” with Dr. Michael Norton. Her TED2019 talk on money and happiness was selected as one of the top 10 talks of the year by TED.
• CC Chris Courtney is the VP of Science at Happy Money. He utilizes his background in cognitive neuroscience, human-computer interaction, and machine learning to drive personalization and engagement in products designed to empower people to take control of their financial lives. His team is focused on creating innovative ways to provide more inclusionary financial services, while building tools to promote financial and psychological well-being and success.

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Happiness Economics: Can Money Buy Happiness?

It only costs a small amount, a slight risk, with the possibility of a substantial reward.

But will it make you happy? Will it give you long-lasting happiness?

Undoubtedly, there will be a temporary peak in happiness, but will all your troubles finally fade away?

That is what we will investigate today. We explore the economics of happiness and whether money can buy happiness. In this post, we will start by broadly exploring the topic and then look at theories and substantive research findings. We’ll even have a look at previous lottery winners.

For interested readers, we will list interesting books and podcasts for further enjoyment and share a few of our own happiness resources.

Ka-ching: Let’s get rolling!

Before you continue, we thought you might like to download our three Happiness & Subjective Wellbeing Exercises for free . These detailed, science-based exercises will help you or your clients identify sources of authentic happiness and strategies to boost wellbeing.

This Article Contains

What is happiness economics, theory of the economics of happiness, can money buy happiness 5 research findings, 6 fascinating books and podcasts on the topic, resources from positivepsychology.com, a take-home message.

Happiness economics is a field of economics that recognizes happiness and wellbeing as important outcome measures, alongside measures typically used, such as employment, education, and health care.

Economics emphasizes how specific economic/financial characteristics affect our wellbeing (Easterlin, 2004).

For example, does employment result in better health and longer lifespan, among other metrics? Do people in wealthier countries have access to better education and longer life spans?

In the last few decades, there has been a shift in economics, where researchers have recognized the importance of the subjective rating of happiness as a valuable and desirable outcome that is significantly correlated with other important outcomes, such as health (Steptoe, 2019) and productivity (DiMaria et al., 2020).

Broadly, happiness is a psychological state of being, typically researched and defined using psychological methods. We often measure it using self-report measures rather than objective measures that are less vulnerable to misinterpretation and error.

Including happiness in economics has opened up an entirely new avenue of research to explore the relationship between happiness and money.

Andrew Clark (2018) illustrates the variability in the term happiness economics with the following examples:

• Happiness can be a predictor variable, influencing our decisions and behaviors.
• Happiness might be the desired outcome, so understanding how and why some people are happier than others is essential.

However, the connection between our behavior and happiness must be better understood. Even though “being happy” is a desired outcome, people still make decisions that prevent them from becoming happier. For example, why do we choose to work more if our work does not make us happier? Why are we unhappy even if our basic needs are met?

An example of how happiness can influence decision-making

Sometimes, we might choose not to maximize a monetary or financial gain but place importance on other, more subjective outcomes.

To illustrate: If faced with two jobs — one that pays well but will bring no joy and another that pays less but will bring much joy — some people would prefer to maximize their happiness over financial gain.

If this decision were evaluated using a utility framework where the only valued outcomes were practical, then the decision would seem irrational. However, this scenario suggests that psychological outcomes, such as the experience of happiness, are as crucial as other socio-economic outcomes.

Economists recognize that subjective wellbeing , or happiness, is an essential characteristic and sometimes a desirable outcome that can motivate our decision-making.

In the last few decades, economics has shifted to include happiness as a measurable and vital part of general wellbeing (Graham, 2005).

The consequence is that typical economic questions now also look at the impact of employment, finances, and other economic metrics on the subjective rating and experience of happiness at individual and country levels.

Happiness is such a vital outcome in society and economic activity that it must be involved in policy making. The subjective measure of happiness is as important as other typical measures used in economics.

Many factors can contribute to happiness. In this post, we consider the role of money. The relationship between happiness, or subjective wellbeing, and money is assumed to be positive: More money means greater happiness.

However, the relationship between money and happiness is paradoxical: More money does not guarantee happiness (for an excellent review, see Graham, 2005).

Specifically, low levels of income are correlated with unhappiness. However, as our individual wealth increases and our basic needs are met, our needs change and differ in their importance.

Initially, our happiness is affected by absolute levels of income, but at a certain threshold, we place importance on relative levels of income. Knowing how we rank and compare to other people, in terms of wealth and material possession, influences our happiness.

The relationship between wealth and happiness continues to increase, but only to a certain point; at this stage, more wealth does not guarantee more happiness (Easterlin, 1974; Diener et al., 1993).

This may be at odds with our everyday lived experience. Most of us choose to work longer hours or multiple jobs so that we make more money. However, what is the point of doing this if money does not increase our happiness? Why do we seem to think that more money will make us happier?

History of the economics of happiness

The relationship between economics and happiness originated in the early 1970s. Brickman and Campbell (1971, as cited in Brickman et al., 1978) first argued that the typical outcomes of a successful life, such as wealth or income, had no impact on individual wellbeing.

Easterlin (1974) expanded these results and showed that although wealthier people tend to be happier than poor people in the same country, the average happiness levels within a country remained unchanged even as the country’s overall wealth increased.

The inconsistent relationship between happiness and income and its sensitivity to critical income thresholds make this topic so interesting.

There is some evidence that wealthier countries are happier than others, but only when comparing the wealthy with the poor (Easterlin, 1974; Graham, 2005).

As countries become wealthier, citizens report higher happiness, but this relationship is strongest when the starting point is poverty. Above a certain income threshold, happiness no longer increases (Diener et al., 1993).

Interestingly, people tend to agree on the amount of money needed to make them happy; but beyond a certain value, there is little increase in happiness (Haesevoets et al., 2022).

Measurement challenges

Measuring happiness accurately and reliably is challenging. Researchers disagree on what happiness means.

It is not the norm in economics to measure happiness by directly asking a participant how happy they are; instead, happiness is inferred through:

• Subjective wellbeing (Clark, 2018; Easterlin, 2004)
• A combination of happiness and life satisfaction (Bruni, 2007)

Furthermore, happiness can refer to an acute psychological state, such as feeling happy after a nice meal, or a lasting state similar to contentment (Nettle, 2005).

Researchers might use different definitions of happiness and ways to measure it, thus leading to contradictory results. For example, happiness might be used synonymously with subjective wellbeing and can refer to several things, including life satisfaction and financial satisfaction (Diener & Oishi, 2000).

It seems contradictory that wealthier nations are not happier overall than poorer nations and that increasing the wealth of poorer nations does not guarantee that their happiness will increase too. What could then be done to increase happiness?

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What is the relationship between income/wealth and happiness? To answer that question, we looked at studies to see where and how money improves happiness, but we’ll also consider the limitations to the positive effect of income.

Money buys access; jobs boost happiness

Overwhelming evidence shows that wealth is correlated with measures of wellbeing.

Wealthier people have access to better healthcare, education, and employment, which in turn results in higher life satisfaction (Helliwell et al., 2012). A certain amount of wealth is needed to meet basic needs, and satisfying these needs improves happiness (Veenhoven & Ehrhardt, 1995).

Increasing happiness through improved quality of life is highest for poor households, but this is explained by the starting point. Access to essential services improves the quality of life, and in turn, this improves measures of wellbeing.

Most people gain wealth through employment; however, it is not just wealth that improves happiness; instead, employment itself has an important association with happiness. Happiness and employment are also significantly correlated with each other (Helliwell et al., 2021).

Lockdown on happiness

The World Happiness Report (Helliwell et al., 2021) reports that unemployment increased during the COVID-19 pandemic, and this was accompanied by a marked decline in happiness and optimism.

The pandemic also changed how we evaluated certain aspects of our lives; for example, the relationship between income and happiness declined. After all, what is the use of money if you can’t spend it? In contrast, the association between happiness and having a partner increased (Helliwell et al., 2021).

Wealthier states smile more, but is it real?

If we took a snapshot of happiness and a country’s wealth, we would find that richer countries tend to have happier populations than poorer countries.

For example, based on the 2021 World Happiness Report, the top five happiest countries — which are also wealthy countries — are Finland, Iceland, Denmark, Switzerland, and the Netherlands (Helliwell et al., 2021).

In contrast, the unhappiest countries are those that tend to be emerging markets or have a lower gross domestic product (GDP), e.g., Zimbabwe, Tanzania, and India (Graham, 2005; Helliwell et al., 2021).

At face value, this makes sense: Poorer countries most likely have other factors associated with them, e.g., higher unemployment, more crime, and less political stability. So, based on this cross-sectional data, a country’s wealth and happiness levels appear to be correlated. However, over a more extended period, the relationship between happiness and GDP is nil (Easterlin, 2004).

That is, the subjective wellbeing of a population does not increase as a country becomes richer. Even though the wealth of various countries worldwide has increased over time, the overall happiness levels have not increased similarly or have remained static (Kahneman et al., 2006). This is known as a happiness–income paradox.

Easterlin (2004) posits four explanations for this finding:

• Societal and individual gains associated with increased wealth are concentrated among the extremely wealthy.
• Our degree of happiness is informed by how we compare to other people, and this relative comparison does not change as country-wide wealth increases.
• Happiness is not limited to only wealth and financial status, but is affected by other societal and political factors, such as crime, education, and trust in the government.
• Long-term satisfaction and contentment differ from short-term, acute happiness.

Kahneman et al. (2006) provide an alternative explanation centered on the method typically used by researchers. Specifically, they argue that the order of the questions asked to measure happiness and how these questions are worded have a focusing effect. Through the question, the participant’s attention to their happiness is sharpened — like a lens in a camera — and their happiness needs to be over- or underestimated.

Kahneman et al. (2006) also point out that job advancements like a raise or a promotion are often accompanied by an increase in salary and work hours. Consequently, high-paying jobs often result in less leisure time available to spend with family or on hobbies and can cause more unhappiness.

Not all that glitters is gold

Extensive research explored whether a sudden financial windfall was associated with a spike in happiness (e.g., Sherman et al., 2020). The findings were mixed. Sometimes, having more money is associated with increased life satisfaction and improved physical and mental health.

This boost in happiness, however, is not guaranteed, nor is it long. Sometimes, individuals even wish it had never happened (Brickman et al., 1978; Sherman et al., 2020).

Consider lottery winners. These people win sizable sums of money — typically more extensive than a salary increase — large enough to impact their lives significantly. Despite this, research has consistently shown that although lottery winners report higher immediate, short-term happiness, they do not experience higher long-term happiness (Sherman et al., 2020).

Here are some reasons for this:

• Previous everyday activities and experiences become less enjoyable when compared to a unique, unusual experience like winning the lottery.
• People habituate to their new lifestyle.
• A sudden increase in wealth can disrupt social relationships among friends and family members.
• Work and hobbies typically give us small nuggets of joy over a more extended period (Csikszentmihalyi et al., 2005). These activities can lose their meaning over a longer period, resulting in more unhappiness (Sherman et al., 2020; Brickman et al., 1978).

Sherman et al. (2020) further argue that lottery winners who decide to quit their job after winning, but do not fill this newly available time with some type of meaningful hobby or interest, are also more likely to become unhappy.

Passive activities do not provide the same happiness as work or hobbies. Instead, if lottery winners continue to take part in activities that give them meaning and require active engagement, then they can avoid further unhappiness.

Happiness: Is it temperature or climate?

Like most psychological research, part of the challenge is clearly defining the topic of investigation — a task made more daunting when the topic falls within two very different fields.

Nettle (2005) describes happiness as a three-tiered concept, ranging from short-lived but intense on one end of the spectrum to more abstract and deep on the other.

The first tier refers to transitory feelings of joy, like when one opens up a birthday present.

The second tier describes judgments about feelings, such as feeling satisfied with your job. The third tier is more complex and refers to life satisfaction.

Across research, different definitions are used: Participants are asked about feelings of (immediate) joy, overall life satisfaction, moments of happiness or satisfaction, and mental wellbeing . The concepts are similar but not identical, thus influencing the results.

Most books on happiness economics are textbooks. Although no doubt very interesting, they’re not the easy-reading books we prefer to recommend.

Instead, below you will find a range of books written by economists that explore happiness. These should provide a good springboard on the overall topic of happiness and what influences it, in case any of our readers want to pick up a more in-depth textbook afterward.

If you have a happiness book you would recommend, please let us know in the comments section.

1. Happiness: Lessons from a New Science – Richard Layard

Richard Layard, a lead economist based in London, explores in his book if and how money can affect happiness.

Layard does an excellent job of introducing topics from various fields and framing them appropriately for the reader.

The book is aimed at readers from varying academic and professional backgrounds, so no experience is needed to enjoy it.

Find the book on Amazon .

2. Happiness by Design: Change What You Do, Not How You Think – Paul Dolan

This book has a more practical spin. The author explains how we can use existing research and theories to make small changes to increase our happiness.

Paul Dolan’s primary thesis is that practical things will have a bigger effect than abstract methods, and we should change our behavior rather than our thinking.

The book is a quick read (airport-perfect!), and Daniel Kahneman penned the foreword.

3. The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness – Morgan Housel

This book is not necessarily about happiness economics, but it is close enough to the overall theme that it is worth mentioning.

Since most people are concerned with making more money, this book helps teach the reader why we make the decisions we do and how we make better decisions about our money.

This book is a worthwhile addition to any bookcase if you are interested in the relationship between finances and psychology in general.

4. Happiness: The Science Behind Your Smile – Daniel Nettle

If you are interested in happiness overall, then we recommend Happiness: The Science Behind Your Smile by Daniel Nettle, a professor of behavioral science at Newcastle University.

In this book, he takes a scientific approach to explaining happiness, starting with an in-depth exploration of the definition of happiness and some of its challenges.

The research that he presents comes from various fields, including social sciences, medicine, neurobiology, and economics.

Because of its small size, this book is perfect for a weekend away or to read on a plane.

5 & 6. Prefer to listen rather than read?

One of our favorite podcasts is Intelligence2, where leading experts in a particular field gather to debate a particular topic.

This show’s host, Dr. Laurie Santos, argues that we can increase our happiness by not hoarding our money for ourselves but by giving it to others instead. If you are interested in this episode , or any of the other episodes in the Happiness Lab podcast series, then head on over to their page.

There are several resources available at PositivePsychology.com for our readers to use in their professional and personal development.

In this section, you’ll find a few that should supplement any work on happiness and economics. Since the undercurrent of the topic is whether happiness can be improved through wealth, a few resources look at happiness overall.

Valued Living Masterclass

Although knowledge is power, knowing that money does not guarantee happiness does not mean that clients will suddenly feel fulfilled and satisfied with their lives.

For this reason, we recommend the Valued Living Masterclass , for professionals to help their clients find meaning in their lives. Rather than keeping up with the Joneses or chasing a high-paying job, professionals can help their clients connect with their inner meaning (i.e., their why ) as a way to find meaning and gain happiness.

Three free exercises

If you want to try it out before committing, look at the Meaning & Valued Living exercise pack , which includes three exercises for free.

Recommended reading

Read our post on Success Versus Happiness for further information on balancing happiness with success, in any domain . This topic is poignant for readers who conflate happiness and success, and will guide readers to better understand their relationship and how the two terms influence each other.

For readers who wonder about altruism , you would find it interesting that rather than hoarding, you can increase your happiness through volunteering and donating. In this post, the author, Dr. Jeremy Sutton, does a fabulous job of approaching altruism from various fields and provides excellent resources for further reading and real-life application.

Our last recommendation is for readers who want to know more about measuring subjective wellbeing and happiness . The post lists various tests and apps that can measure happiness and the overall history of how happiness was measured and defined. This is a good starting point for researchers or clinicians who want to explore happiness economics professionally.

17 Happines Exercises

If you’re looking for more science-based ways to help others develop strategies to boost their wellbeing, this collection contains 17 validated happiness and wellbeing exercises . Use them to help others pursue authentic happiness and work toward a  life filled with purpose and meaning

17 Exercises To Increase Happiness and Wellbeing

Add these 17 Happiness & Subjective Well-Being Exercises [PDF] to your toolkit and help others experience greater purpose, meaning, and positive emotions.

Created by Experts. 100% Science-based.

As you’ve seen in our article, the evidence overwhelmingly clarifies that money does not guarantee more happiness … well, long-term happiness.

Our happiness is relative since we compare ourselves to other people, and over time, as we become accustomed to our wealth, we lose all the happiness gains we made.

Money can ease financial and social difficulties; consequently, it can drastically improve people’s living conditions, life expectancy, and education.

Improvements in these outcomes have a knock-on effect on the overall experience of one’s life and the opportunities for one’s family and children. Nevertheless, better opportunities do not guarantee happiness.

Our intention with this post was to illustrate some complexities surrounding the relationship between money and happiness.

Knowing that money does not guarantee happiness, we recommend less expensive methods to improve one’s happiness:

• Spend time with friends.
• Cultivate hobbies and interests.
• Stay active and eat healthy.
• Try to live a meaningful life.
• Give some love (go smooch your partner or tickle your dog’s belly).

Diamonds might be a girl’s best friend, but money is a fair weather one, at best.

We hope you enjoyed reading this article. Don’t forget to download our three Happiness Exercises for free .

• Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative? Journal of Personality and Social Psychology , 36 (8), 917.
• Bruni, L. (2007). Handbook on the economics of happiness . Edward Elgar.
• Clark, A. E. (2018). Four decades of the economics of happiness: Where next? Review of Income and Wealth , 64 (2), 245–269.
• Csikszentmihalyi, M., Abuhamdeh, S., & Nakamura, J. (2005). Flow. In A. J. Elliot & C. S. Dweck (Eds.), Handbook of competence and motivation (pp. 598–608). Guilford Publications.
• Diener, E., Sandvik, E., Seidlitz, L., & Diener, M. (1993). The relationship between income and subjective well-being: Relative or absolute? Social Indicators Research , 28 , 195–223.
• Diener, E., & Oishi, S. (2000). Money and happiness: Income and subjective well-being across nations. Culture and Subjective Well-Being , 185 , 218.
• DiMaria, C. H., Peroni, C., & Sarracino, F. (2020). Happiness matters: Productivity gains from subjective well-being. Journal of Happiness Studies , 21 (1), 139–160.
• Easterlin, R. A. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramovitz (pp. 89–125). Academic Press.
• Easterlin, R. A. (2004). The economics of happiness. Daedalus , 133 (2), 26–33.
• Graham, C. (2005). The economics of happiness. World Economics , 6 (3), 41–55.
• Haesevoets, T., Dierckx, K., & Van Hiel, A. (2022). Do people believe that you can have too much money? The relationship between hypothetical lottery wins and expected happiness. Judgment and Decision Making , 17 (6), 1229–1254.
• Helliwell, J., Layard, R., & Sachs, J. (Eds.) (2012). World happiness report . The Earth Institute, Columbia University.
• Helliwell, J. F., Layard, R., Sachs, J. D., & Neve, J. E. D. (2021). World happiness report 2021 .
• Kahneman, D., Krueger, A. B., Schkade, D., Schwarz, N., & Stone, A. A. (2006). Would you be happier if you were richer? A focusing illusion. Science , 312 (5782), 1908–1910.
• Nettle, D. (2005). Happiness: The science behind your smile . Oxford University Press.
• Sherman, A., Shavit, T., & Barokas, G. (2020). A dynamic model on happiness and exogenous wealth shock: The case of lottery winners. Journal of Happiness Studies , 21 , 117–137.
• Steptoe, A. (2019). Happiness and health. Annual Review of Public Health , 40 , 339–359.
• Veenhoven, R., & Ehrhardt, J. (1995). The cross-national pattern of happiness: Test of predictions implied in three theories of happiness. Social Indicators Research , 34 , 33–68.

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More Proof That Money Can Buy Happiness (or a Life with Less Stress)

When we wonder whether money can buy happiness, we may consider the luxuries it provides, like expensive dinners and lavish vacations. But cash is key in another important way: It helps people avoid many of the day-to-day hassles that cause stress, new research shows.

Money can provide calm and control, allowing us to buy our way out of unforeseen bumps in the road, whether it’s a small nuisance, like dodging a rainstorm by ordering up an Uber, or a bigger worry, like handling an unexpected hospital bill, says Harvard Business School professor Jon Jachimowicz.

“If we only focus on the happiness that money can bring, I think we are missing something,” says Jachimowicz, an assistant professor of business administration in the Organizational Behavior Unit at HBS. “We also need to think about all of the worries that it can free us from.”

The idea that money can reduce stress in everyday life and make people happier impacts not only the poor, but also more affluent Americans living at the edge of their means in a bumpy economy. Indeed, in 2019, one in every four Americans faced financial scarcity, according to the Board of Governors of the Federal Reserve System. The findings are particularly important now, as inflation eats into the ability of many Americans to afford basic necessities like food and gas, and COVID-19 continues to disrupt the job market.

Buying less stress

The inspiration for researching how money alleviates hardships came from advice that Jachimowicz’s father gave him. After years of living as a struggling graduate student, Jachimowicz received his appointment at HBS and the financial stability that came with it.

“My father said to me, ‘You are going to have to learn how to spend money to fix problems.’” The idea stuck with Jachimowicz, causing him to think differently about even the everyday misfortunes that we all face.

To test the relationship between cash and life satisfaction, Jachimowicz and his colleagues from the University of Southern California, Groningen University, and Columbia Business School conducted a series of experiments, which are outlined in a forthcoming paper in the journal Social Psychological and Personality Science , The Sharp Spikes of Poverty: Financial Scarcity Is Related to Higher Levels of Distress Intensity in Daily Life .

Higher income amounts to lower stress

In one study, 522 participants kept a diary for 30 days, tracking daily events and their emotional responses to them. Participants’ incomes in the previous year ranged from less than $10,000 to $150,000 or more. They found:

• Money reduces intense stress: There was no significant difference in how often the participants experienced distressing events—no matter their income, they recorded a similar number of daily frustrations. But those with higher incomes experienced less negative intensity from those events.
• More money brings greater control : Those with higher incomes felt they had more control over negative events and that control reduced their stress. People with ample incomes felt more agency to deal with whatever hassles may arise.
• Higher incomes lead to higher life satisfaction: People with higher incomes were generally more satisfied with their lives.

“It’s not that rich people don’t have problems,” Jachimowicz says, “but having money allows you to fix problems and resolve them more quickly.”

Why cash matters

In another study, researchers presented about 400 participants with daily dilemmas, like finding time to cook meals, getting around in an area with poor public transportation, or working from home among children in tight spaces. They then asked how participants would solve the problem, either using cash to resolve it, or asking friends and family for assistance. The results showed:

• People lean on family and friends regardless of income: Jachimowicz and his colleagues found that there was no difference in how often people suggested turning to friends and family for help—for example, by asking a friend for a ride or asking a family member to help with childcare or dinner.
• Cash is the answer for people with money: The higher a person’s income, however, the more likely they were to suggest money as a solution to a hassle, for example, by calling an Uber or ordering takeout.

While such results might be expected, Jachimowicz says, people may not consider the extent to which the daily hassles we all face create more stress for cash-strapped individuals—or the way a lack of cash may tax social relationships if people are always asking family and friends for help, rather than using their own money to solve a problem.

“The question is, when problems come your way, to what extent do you feel like you can deal with them, that you can walk through life and know everything is going to be OK,” Jachimowicz says.

Breaking the ‘shame spiral’

In another recent paper , Jachimowicz and colleagues found that people experiencing financial difficulties experience shame, which leads them to avoid dealing with their problems and often makes them worse. Such “shame spirals” stem from a perception that people are to blame for their own lack of money, rather than external environmental and societal factors, the research team says.

“We have normalized this idea that when you are poor, it’s your fault and so you should be ashamed of it,” Jachimowicz says. “At the same time, we’ve structured society in a way that makes it really hard on people who are poor.”

For example, Jachimowicz says, public transportation is often inaccessible and expensive, which affects people who can’t afford cars, and tardy policies at work often penalize people on the lowest end of the pay scale. Changing those deeply-engrained structures—and the way many of us think about financial difficulties—is crucial.

After all, society as a whole may feel the ripple effects of the financial hardships some people face, since financial strain is linked with lower job performance, problems with long-term decision-making, and difficulty with meaningful relationships, the research says. Ultimately, Jachimowicz hopes his work can prompt thinking about systemic change.

“People who are poor should feel like they have some control over their lives, too. Why is that a luxury we only afford to rich people?” Jachimowicz says. “We have to structure organizations and institutions to empower everyone.”

[Image: iStockphoto/mihtiander]

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Does Money Buy Happiness? Here’s What the Research Says

March 28, 2023 • 5 min read.

Reconciling previously contradictory results, researchers from Wharton and Princeton find a steady association between larger incomes and greater happiness for most people but a rise and plateau for an unhappy minority.

• Finance & Accounting

The following article was originally published on Penn Today .

Does money buy happiness? Though it seems like a straightforward question, research had previously returned contradictory findings, leaving uncertainty about its answer.

Foundational work published in 2010 from Princeton University’s  Daniel Kahneman  and Angus Deaton had found that day-to-day happiness rose as annual income increased, but above $75,000 it leveled off and happiness plateaued. In contrast, work published in 2021 from the University of Pennsylvania’s  Matthew Killingsworth  found that happiness rose steadily with income well beyond $75,000, without evidence of a plateau.

To reconcile the differences, Kahneman and Killingsworth paired up in what’s known as an adversarial collaboration, joining forces with Penn Integrates Knowledge  University Professor  Barbara Mellers  as arbiter. In a new  Proceedings of the National Academy of Sciences  paper , the trio shows that, on average, larger incomes are associated with ever-increasing levels of happiness. Zoom in, however, and the relationship becomes more complex, revealing that within that overall trend, an unhappy cohort in each income group shows a sharp rise in happiness up to $100,000 annually and then plateaus.

“In the simplest terms, this suggests that for most people larger incomes are associated with greater happiness,” says Killingsworth, a senior fellow at Wharton and lead paper author. “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.”

Mellers digs into this last notion, noting that emotional well-being and income aren’t connected by a single relationship. “The function differs for people with different levels of emotional well-being,” she says. Specifically, for the least happy group, happiness rises with income until $100,000, then shows no further increase as income grows. For those in the middle range of emotional well-being, happiness increases linearly with income, and for the happiest group the association actually accelerates above $100,000.

Joining Forces to Ask: “Does Money Buy Happiness?”

The researchers began this combined effort recognizing that their previous work had drawn different conclusions. Kahneman’s 2010 study showed a flattening pattern where Killingsworth’s 2021 study did not. As its name suggests, an adversarial collaboration of this type — a notion originated by Kahneman — aims to solve scientific disputes or disagreements by bringing together the differing parties, along with a third-party mediator.

Killingsworth, Kahneman, and Mellers focused on a new hypothesis that both a happy majority and an unhappy minority exist. For the former, they surmised, happiness keeps rising as more money comes in; the latter’s happiness improves as income rises but only up to a certain income threshold, after which it progresses no further.

To test this new hypothesis, they looked for the flattening pattern in data from Killingworth’s study, which he had collected through an app he created called Track Your Happiness. Several times a day, the app pings participants at random moments, asking a variety of questions including how they feel on a scale from “very good” to “very bad.” Taking an average of the person’s happiness and income, Killingsworth draws conclusions about how the two variables are linked.

A breakthrough in the new partnership came early on when the researchers realized that the 2010 data, which had revealed the happiness plateau, had actually been measuring unhappiness in particular rather than happiness in general.

“It’s easiest to understand with an example,” Killingsworth says. Imagine a cognitive test for dementia that most healthy people pass easily. While such a test could detect the presence and severity of cognitive dysfunction, it wouldn’t reveal much about general intelligence since most healthy people would receive the same perfect score.

“In the same way, the 2010 data showing a plateau in happiness had mostly perfect scores, so it tells us about the trend in the unhappy end of the happiness distribution, rather than the trend of happiness in general. Once you recognize that, the two seemingly contradictory findings aren’t necessarily incompatible,” Killingsworth says. “And what we found bore out that possibility in an incredibly beautiful way. When we looked at the happiness trend for unhappy people in the 2021 data, we found exactly the same pattern as was found in 2010; happiness rises relatively steeply with income and then plateaus.”

“The two findings that seemed utterly contradictory actually result from data that are amazingly consistent,” he says.

Does It Matter Whether Money Can Buy Happiness?

Drawing these conclusions would have been challenging had the two research teams not come together, says Mellers, who suggests there’s no better way than adversarial collaborations to resolve scientific conflict.

“This kind of collaboration requires far greater self-discipline and precision in thought than the standard procedure,” she says. “Collaborating with an adversary — or even a non-adversary — is not easy, but both parties are likelier to recognize the limits of their claims.” Indeed, that’s what happened, leading to a better understanding of the relationship between money and happiness.

And these findings have real-world implications, according to Killingsworth. For one, they could inform thinking about tax rates or how to compensate employees. And, of course, they matter to individuals as they navigate career choices or weigh a larger income against other priorities in life, Killingsworth says.

However, he adds that for emotional well-being money isn’t the be all end all. “Money is just one of the many determinants of happiness,” he says. “Money is not the secret to happiness, but it can probably help a bit.”

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Here’s How Money Really Can Buy You Happiness

The following story is excerpted from TIME’s special edition, The Science of Happiness , which is available at Amazon .

“Whoever said money can’t buy happiness isn’t spending it right.” You may remember those Lexus ads from years back, which hijacked this bumper-sticker-ready twist on the conventional wisdom to sell a car so fancy that no one would ever dream of affixing a bumper sticker to it.

What made the ads so intriguing, but also so infuriating, was that they seemed to offer a simple—if rather expensive—solution to a common question: How can you transform the money you work so hard to earn into something approaching the good life? You know that there must be some connection between money and happiness. If there weren’t, you’d be less likely to stay late at work (or even go in at all) or struggle to save money and invest it profitably. But then, why aren’t your lucrative promotion, five-bedroom house and fat 401(k) cheering you up? The relationship between money and happiness, it would appear, is more complicated than you can possibly imagine.

Fortunately, you don’t have to do the untangling yourself. Over the past quarter-century, economists and psychologists have banded together to sort out the hows, whys and why-nots of money and mood. Especially the why-nots. Why is it that the more money you have, the more you want? Why doesn’t buying the car, condo or cellphone of your dreams bring you more than momentary joy?

In attempting to answer these seemingly depressing questions, the new scholars of happiness have arrived at some insights that are, well, downright cheery. Money can help you find more happiness, so long as you know just what you can and can’t expect from it. And no, you don’t have to buy a Lexus to be happy. Much of the research suggests that seeking the good life at a store is an expensive exercise in futility. Before you can pursue happiness the right way, you need to recognize what you’ve been doing wrong.

Money misery

The new science of happiness starts with a simple insight: we’re never satisfied. “We always think if we just had a little bit more money, we’d be happier,” says Catherine Sanderson, a psychology professor at Amherst College, “but when we get there, we’re not.” Indeed, the more you make, the more you want. The more you have, the less effective it is at bringing you joy, and that seeming paradox has long bedeviled economists. “Once you get basic human needs met, a lot more money doesn’t make a lot more happiness,” notes Dan Gilbert, a psychology professor at Harvard University and the author of Stumbling on Happiness . Some research shows that going from earning less than $20,000 a year to making more than $50,000 makes you twice as likely to be happy, yet the payoff for then surpassing $90,000 is slight. And while the rich are happier than the poor, the enormous rise in living standards over the past 50 years hasn’t made Americans happier. Why? Three reasons:

You overestimate how much pleasure you’ll get from having more. Humans are adaptable creatures, which has been a plus during assorted ice ages, plagues and wars. But that’s also why you’re never all that satisfied for long when good fortune comes your way. While earning more makes you happy in the short term, you quickly adjust to your new wealth—and everything it buys you. Yes, you get a thrill at first from shiny new cars and TV screens the size of Picasso’s Guernica . But you soon get used to them, a state of running in place that economists call the “hedonic treadmill” or “hedonic adaptation.”

Even though stuff seldom brings you the satisfaction you expect, you keep returning to the mall and the car dealership in search of more. “When you imagine how much you’re going to enjoy a Porsche, what you’re imagining is the day you get it,” says Gilbert. When your new car loses its ability to make your heart go pitter-patter, he says, you tend to draw the wrong conclusions. Instead of questioning the notion that you can buy happiness on the car lot, you begin to question your choice of car. So you pin your hopes on a new BMW, only to be disappointed again.

More money can also lead to more stress. The big salary you pull in from your high-paying job may not buy you much in the way of happiness. But it can buy you a spacious house in the suburbs. Trouble is, that also means a long trip to and from work, and study after study confirms what you sense daily: even if you love your job, the little slice of everyday hell you call the commute can wear you down. You can adjust to most anything, but a stop-and-go drive or an overstuffed subway car will make you unhappy whether it’s your first day on the job or your last.

You endlessly compare yourself with the family next door. H.L. Mencken once quipped that the happy man is one who earns $100 more than his wife’s sister’s husband. He was right. Happiness scholars have found that how you stand relative to others makes a much bigger difference in your sense of well-being than how much you make in an absolute sense.

You may feel a touch of envy when you read about the glamorous lives of the absurdly wealthy, but the group you likely compare yourself with are folks Dartmouth economist Erzo Luttmer calls “similar others”—the people you work with, people you grew up with, old friends and old classmates. “You have to think, ‘I could have been that person,’ ” Luttmer says.

Matching census data on earnings with data on self-reported happiness from a national survey, Luttmer found that, sure enough, your happiness can depend a great deal on your neighbors’ paychecks. “If you compare two people with the same income, with one living in a richer area than the other,” Luttmer says, “the person in the richer area reports being less happy.”

Your penchant for comparing yourself with the guy next door, like your tendency to grow bored with the things that you acquire, seems to be a deeply rooted human trait. An inability to stay satisfied is arguably one of the key reasons prehistoric man moved out of his drafty cave and began building the civilization you now inhabit. But you’re not living in a cave, and you likely don’t have to worry about mere survival. You can afford to step off the hedonic treadmill. The question is, how do you do it?

Money bliss

If you want to know how to use the money you have to become happier, you need to understand just what it is that brings you happiness in the first place. And that’s where the newest happiness research comes in.

Friends and family are a mighty elixir. One secret of happiness? People. Innumerable studies suggest that having friends matters a great deal. Large-scale surveys by the University of Chicago’s National Opinion Research Center (NORC), for example, have found that those with five or more close friends are 50% more likely to describe themselves as “very happy” than those with smaller social circles. Compared with the happiness-increasing powers of human connection, the power of money looks feeble indeed. So throw a party, set up regular lunch dates—whatever it takes to invest in your friendships.

Even more important to your happiness is your relationship with your aptly named “significant other.” People in happy, stable, committed relationships tend to be far happier than those who aren’t. Among those surveyed by NORC from the 1970s through the 1990s, some 40% of married couples said they were “very happy”; among the never-married, only about a quarter were quite so exuberant. But there is good reason to choose wisely. Divorce brings misery to everyone involved, though those who stick it out in a terrible marriage are the unhappiest of all.

While a healthy marriage is a clear happiness booster, the kids who tend to follow are more of a mixed blessing. Studies of kids and happiness have come up with little more than a mess of conflicting data. “When you take moment-by-moment readouts of how people feel when they’re taking care of the kids, they actually aren’t very happy,” notes Cornell University psychologist Tom Gilovich. “But if you ask them, they say that having kids is one of the most enjoyable things they do with their lives.”

Doing things can bring us more joy than having things. Our preoccupation with stuff obscures an important truth: the things that don’t last create the most lasting happiness. That’s what Gilovich and Leaf Van Boven of the University of Colorado found when they asked students to compare the pleasure they got from the most recent things they bought with the experiences (a night out, a vacation) they spent money on.

One reason may be that experiences tend to blossom as you recall them, not diminish. “In your memory, you’re free to embellish and elaborate,” says Gilovich. Your trip to Mexico may have been an endless parade of hassles punctuated by a few exquisite moments. But looking back on it, your brain can edit out the surly cabdrivers, remembering only the glorious sunsets. So next time you think that arranging a vacation is more trouble than it’s worth—or a cost you’d rather not shoulder—factor in the delayed impact.

Of course, a lot of what you spend money on could be considered a thing, an experience or a bit of both. A book that sits unread on a bookshelf is a thing; a book you plunge into with gusto, savoring every plot twist, is an experience. Gilovich says that people define what is and isn’t an experience differently. Maybe that’s the key. He suspects that the people who are happiest are those who are best at wringing experiences out of everything they spend money on, whether it’s dancing lessons or hiking boots.

Applying yourself to something hard makes you happy. We’re addicted to challenges, and we’re often far happier while working toward a goal than after we reach it. Challenges help you attain what psychologist Mihaly Csikszentmihalyi calls a state of “flow”: total absorption in something that stretches you to the limits of your abilities, mental or physical. Buy the $1,000 golf clubs; pay for the $50-an-hour music lessons.

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Flow takes work.

After all, you have to learn to play scales on a guitar before you can lose yourself in a Van Halen–esque solo—but the satisfaction you get in the end is greater than what you can get out of more passive pursuits. When people are asked what makes them happy on a moment-to-moment basis, watching TV ranks pretty high. But people who watch a lot of TV tend to be less happy than those who don’t. Settling down on the couch with the remote can help you recharge, but to be truly happy, you need more in your life than passive pleasures.

You need to find activities that help you get into the state of flow. You can find flow at work if you have a job that interests and challenges you and that gives you ample control over your daily assignments. Indeed, one study by two University of British Columbia researchers suggests that workers would be happy to forgo as much as a 20% raise if it meant having a job with more variety.

Not long ago, most researchers thought you had a happiness set point that you were largely stuck with for life. One famous paper said that “trying to be happier” may be “as futile as trying to be taller.” The author of those words has since recanted, and experts are increasingly coming to view happiness as a talent, not an inborn trait. Exceptionally happy people seem to have a set of skills—ones that you too can learn.

Sonja Lyubomirsky, a psychology professor at the University of California, Riverside, has found that happy people don’t waste time dwelling on unpleasant things. They tend to interpret ambiguous events in positive ways. And perhaps most tellingly, they aren’t bothered by the successes of others. Lyubomirsky says that when she asked less-happy people whom they compared themselves with, “they went on and on.” She adds, “The happy people didn’t know what we were talking about.” They dare not to compare, thus short-circuiting invidious social comparisons.

That’s not the only way to get yourself to spend less and appreciate what you have more. Try counting your blessings. Literally. In a series of studies, psychologists Robert Emmons of the University of California, Davis, and Michael McCullough of the University of Miami found that those who did exercises to cultivate feelings of gratitude, such as keeping weekly journals, ended up feeling happier, healthier, more energetic and more optimistic than those who didn’t.

And if you can’t change how you think, you can at least learn to resist. The act of shopping unleashes primal hunter-gatherer urges. When you’re in that hot state, you tend to be an extremely poor judge of what you’ll think of a product when you cool down later. Before giving in to your lust, give yourself a time-out. Over the next month, keep track of how many times you tell yourself: I wish I had a camera! If in the course of your life you almost never find yourself wanting a camera, forget about it and move on, happily.

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One More Time, Does Money Buy Happiness?

• Published: 19 September 2023
• Volume 18 , pages 3089–3110, ( 2023 )

Cite this article

• James Fisher   ORCID: orcid.org/0000-0001-9201-4204 1 &
• Michael Frechette   ORCID: orcid.org/0000-0002-8193-6796 2  

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This paper integrates multiple positions on the relationship between money and well-being, commonly referred to as happiness. An aggregation of prior work appears to suggest that money does buy happiness, but not directly. Although many personal and situational characteristics do influence the relationship between money and happiness, most are moderating factors, which would not necessarily rule out a direct link. Here, we discuss the cognitive and affective elements within the formation of happiness, which we propose play a series of mediating roles, first cognition, then affect, between money and happiness. The paper concludes with a discussion about how this proposal influences academic research and society as a whole.

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“As far as I am aware, in every representative national survey ever done a significant positive bivariate relationship between happiness and income has been found.” (Easterlin 2001 , 468). Easterlin supports this assertion with references to Andrews 1996 , xi; Argyle 1999 , 356–57; and Diener 1984 , 553.

A simple correlation of 0.2 is an oft-cited benchmark (cf. Easterlin 2001 , who labels it “highly significant”). At the same time, many researchers qualify the relationship, saying that income ultimately explains relatively little of the variance in self-reports of happiness: e.g., Ahuvia ( 2017 , 18) generalizes that “typically studies in developed economies indicate that income explains only about 3% of the difference in happiness.” Some twenty years prior to Ahuvia’s assessment, Frank ( 1997 ) offered a similar conclusion: the relationship between income and happiness is closer at lower levels of income than for middle- or upper-income households, where "variations in income explain less than 2% of variations in reported satisfaction levels” (citing Diener and Diener 1995 on 1835). Diener and Biswas-Diener ( 2002 , 123) summarize over a dozen correlations between income and subjective well-being, most ranging between 0.15 and 0.25. Kahneman and Deaton ( 2010 ) recommend that efforts to estimate the relationship between that subjective well-being and income should rely on a logarithmic transformation of income, providing a rationale based on Weber’s Law, having to do with the perception of change reflecting the percentage change and not the absolute change.

This literature review reflects the authors’ point-of-view that in answering the question of “how” money buys happiness economists have offered the highest-level, abstract answer (i.e., through a process of utility-maximization); psychologists and researchers into subjective well-being have sought a more precise accounting of what money buys vis-à-vis individual dispositions (e.g., personality) and motivations (e.g., materialism) as well as cultural or national determinants (e.g., individualism versus collectivism); and marketers and consumer researchers have inquired in the most detailed way as to how money delivers particular experiences and effects throughout the continuum of pre-purchase processes, the experience of consumption and post-purchase satisfaction.

Happiness data are a relative late-comers to economic analyses of this sort: “[T]he approach departs from a long tradition in economics that shies away from using what people say about their feelings. Instead, economists have built their trade by analyzing what people do and, from these observations and some theoretical assumptions about the structure of welfare, deducing the implied changes in happiness” (Di Tella and MacCulloch 2006 , 43). Kahneman and Krueger ( 2006 , 3) express a similar opinion: “[E]conomists have had a long-standing preference for studying peoples’ revealed preferences; that is, looking at individuals’ actual choices and decisions rather than their stated intentions or subjective reports of likes and dislikes.”.

An assertion strenuously challenged by Diener and Oishi 2000 and more modestly objected to by Frank ( 1997 , 1820), who interprets the data to say that there “is only slight evidence … that greater economic prosperity leads to more well-being in a nation.”.

Cummins ( 2000 ), in his review of personal income and subjective well-being, constructs a couple of straw men that reflect his estimation of how researchers into quality of life may view income ambivalently. At the outset of the review article, his abstract announces, "Conventional wisdom holds that money has little relevance to happiness." Later in the same review article, he identifies a bias "that can quite commonly be found within the QOL literature" (p. 139) that the rich are not as satisfied with their lot as commonly imagined. Chambers ( 1997 ) provides him with a suitable proof text in which "the link between wealth and well-being is weak or even negative" and therefore, "amassing wealth does not assure well-being and may diminish it” (at 1728 in Chambers). Cummins himself disavows this disciplinary tendency, ultimately labeling it “fanciful.”.

When it comes to terms like subjective well-being, life satisfaction, and happiness, there is some variation in the precision of the terminology. Thus, Kahneman and Krueger ( 2006 ) use life satisfaction and happiness as roughly synonymous in discussing the measurement of well-being and in emphasizing the measurement of emotional states. On the other hand, Diener may commonly use the term happiness as a convenient and widely used construct but will employ more precision in measuring or analyzing "types of well-being.".

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Fisher, J., Frechette, M. One More Time, Does Money Buy Happiness?. Applied Research Quality Life 18 , 3089–3110 (2023). https://doi.org/10.1007/s11482-023-10221-9

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Research: Can Money Buy Happiness?

In his quarterly column, Francis J. Flynn looks at research that examines how to spend your way to a more satisfying life.

September 25, 2013

A boy looks at a toy train he received during an annual gift-giving event on Christmas Eve 2011. | Reuters/Jose Luis Gonzalez

What inspires people to act selflessly, help others, and make personal sacrifices? Each quarter, this column features one piece of scholarly research that provides insight on what motivates people to engage in what psychologists call “prosocial behavior” — things like making charitable contributions, buying gifts, volunteering one‘s time, and so forth. In short, it looks at the work of some of our finest researchers on what spurs people to do something on behalf of someone else.

In this column I explore the idea that many of the ways we spend money are prosocial acts — and prosocial expenditures may, in fact, make us happier than personal expenditures. Authors Elizabeth Dunn and Michael Norton discuss evidence for this in their new book, Happy Money: The Science of Smarter Spending . These behavioral scientists show that you can get more out of your money by following several principles — like spending money on others rather than yourself. Moreover, they demonstrate that these principles can be used not only by individuals, but also by companies seeking to create happier employees and more satisfying products.

According to Dunn and Norton, recent research on happiness suggests that the most satisfying way of using money is to invest in others. This can take a seemingly limitless variety of forms, from donating to a charity that helps strangers in a faraway country to buying lunch for a friend.

Witness Bill Gates and Warren Buffet, two of the wealthiest people in the world. On a March day in 2010, they sat in a diner in Carter Lake, Iowa, and hatched a scheme. They would ask America‘s billionaires to pledge the majority of their wealth to charity. Buffet decided to donate 99 percent of his, saying, “I couldn‘t be happier with that decision.”

And what about the rest of us? Dunn and Norton show how we all might learn from that example, regardless of the size of our bank accounts. Research demonstrating that people derive more satisfaction spending money on others than they do spending it on themselves spans poor and rich countries alike, as well as income levels. The authors show how this phenomenon extends over an extraordinary range of circumstances, from a Canadian college student purchasing a scarf for her mother to a Ugandan woman buying lifesaving malaria medication for a friend. Indeed, the benefits of giving emerge among children before the age of two.

Investing in others can make individuals feel healthier and wealthier, even if it means making yourself a little poorer to reap these benefits. One study shows that giving as little as $1 away can cause you to feel more flush.

Quote Investing in others can make you feel healthier and wealthier, even if it means making yourself a little poorer.

Dunn and Norton further discuss how businesses such as PepsiCo and Google and nonprofits such as DonorsChoose.org are harnessing these benefits by encouraging donors, customers, and employees to invest in others. When Pepsi punted advertising at the 2010 Superbowl and diverted funds to supporting grants that would allow people to “refresh” their communities, for example, more public votes were cast for projects than had been cast in the 2008 election. Pepsi got buzz, and the company‘s in-house competition also offering a seed grant boosted employee morale.

Could this altruistic happiness principle be applied to one of our most disputed spheres — paying taxes? As it turns out, countries with more equal distributions of income also tend to be happier. And people in countries with more progressive taxation (such as Sweden and Japan) are more content than those in countries where taxes are less progressive (such as Italy and Singapore). One study indicated that people would be happier about paying taxes if they had more choice as to where their money went. Dunn and Norton thus suggest that if taxes were made to feel more like charitable contributions, people might be less resentful having to pay them.

The researchers persuasively suggest that the proclivity to derive joy from investing in others may well be just a fundamental component of human nature. Thus the typical ratio we all tend to fall into of spending on self versus others — ten to one — may need a shift. Giving generously to charities, friends, and coworkers — and even your country — may well be a productive means of increasing well-being and improving our lives.

Research selected by Francis Flynn, Paul E. Holden Professor of Organizational Behavior at Stanford Graduate School of Business.

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How Does Valuing Money Affect Your Happiness?

It may seem that money is a sure path to prestige and happiness. After all, many of our most well-paid citizens are held up as role models of success, leading seemingly perfect, enviable lives. Still, some people embrace the opposite idea: Money can’t buy you happiness. So, which of these is right?

In recent studies, scientists have found that the connection between wealth and well-being is not clear-cut. While some studies seem to tie wealth to well-being, others show that, after a certain point, a higher income will not bring more happiness or life satisfaction.

Now two new studies shed further light on the relationship between wealth and happiness. Their findings suggest that money doesn’t fulfill basic psychological needs, like belonging and competence. That’s why making more of it will not increase your happiness, even if you value money above other things. In fact, it may do the opposite.

What money can and can’t do for you

In one study , University of Buffalo researcher Lora Park and her colleagues investigated what happens when people tie their self-worth to financial success, scoring high on the “Financial Contingency of Self-Worth” scale, or FCWS. The researchers found that doing so made people engage in more social comparisons, experience more stress and anxiety, and feel less autonomy than those who didn’t tie their self-worth to income, regardless of their actual economic status.

“People in this society are often focused on pursuing money, and they don’t think there is anything bad about that,” says Park. “But in terms of your psychological well-being, there are all kinds of negative consequences.”

It also might affect your problem-solving ability. Park and her colleagues randomly assigned participants to write about their dissatisfaction with either an aspect of their financial situation—like not having enough money to pay rent—or their academic performance, like getting a bad test grade. Afterwards, they reported on what coping strategies they would use in response to the situation.

Research assistants analyzed the essays and found that participants who scored high in FCSW used more emotionally negative words and reported more disengagement strategies—like giving up or avoiding solutions—when writing about a financial stressor versus an academic stressor than people scoring low in FCSW. None of the results were affected by the actual income of the students.

People who are facing a problem should, logically, be focused on figuring out ways to solve it, says Park. “But what we found is that high financial contingency of self-worth somehow blocks that response.”

Why would this be?

Park believes that when people feel their self-concept is threatened in some way, they will become more self-protective so as not to experience low self-esteem. So, if your self-esteem is tied to money, a financial stressor will cause a lot more stress than it would for someone who doesn’t feel that way. Some support for her argument comes from another part of her experiment, where having participants high in FCSW remind themselves of their character strengths—like their intelligence or sense of humor—seemed to negate these avoidance effects.

Affirming Important Values

When your self-image takes a hit, reflect on what matters

“When people take a step back and have a broader perspective on their sense of self, that’s often enough to take them out of the self-esteem rumination/narrow focus they otherwise have,” says Park.

As prior research suggests, it can also be the case that people simply want money to do something that it cannot. “Self-esteem, like happiness, is a byproduct of meeting psychological needs—like meaning or purpose, feeling competent, having close relationships, or having a sense of autonomy—and basing your self-worth on financial success actually detracts from fulfilling those needs,” says Park.

Why community beats money

Park’s findings mirror other recent findings from the University of San Francisco’s Matthew Monnot, who studied financial success and well-being in China.

In his study , Monnot notes that, as China’s economy has grown, its citizens seem to be facing some of the same issues that Americans have faced. A growing number of people equate individual success with making more money and valuing money—an extrinsic reward—over other, more intrinsic rewards, like relationships or community. To see how this trend has affected well-being, he conducted a series of studies involving thousands of participants from several cities in China.

In one experiment, Monnot showed that job satisfaction did not rise in tandem with income. In fact, as with prior studies, wealth beyond a certain point tended to make Chinese workers no more satisfied with their jobs or their incomes, suggesting that money has only so much power to increase our life satisfaction.

“Our findings are pretty aligned with prior research,” says Monnot. “The correlation between income and job satisfaction is really small, to the extent that it predicts about five percent of job satisfaction.”

More on Money & Happiness

Watch Sonja Lyubomirsky discuss whether money brings happiness .

Discover the economics of happiness .

Explore whether basic income would make people happier .

Learn six ways to get more happiness for your money .

To tease out why, Monnot looked at how individual values shape the relationship between money and income satisfaction. He asked participants to pick the five factors they thought were most important for well-being from a list of 25 possible choices—including income—and then measured how satisfied they were with their income as it rose. Though one might expect people valuing income to be happier as they made more money, Monnot found the opposite: People who picked income as an important value were significantly less satisfied, even at higher levels.

“If income is important to you, then income is actually less satisfying as income goes up than if income is not important to you,” he says.

Though this seems paradoxical, Monnot says it makes some sense, when you understand how intrinsic versus extrinsic values affect our happiness.

“Not all goals are equal in terms of producing well-being, productivity, job satisfaction, or life satisfaction,” says Monnot. “If you say income is something really important to you, because income is an extrinsic reward and not part of your intrinsic needs, if you focus on it, it won’t make you happy.”

In other words, look inside of yourself, not your wallet, for happiness.

Monnot was curious to see how living in different cities in China might affect the relationship between valuing income and well-being. After all, if the government is developing policies to increase income in certain areas of the country, it would be good to know the impact this is having on happiness.

Again, he had people pick out five things they valued; but this time he separated people into different groups depending on whether they placed high value on materialistic things, like income and status, and placed low value on relationships and community, or vice versa. When he compared these two groups, people who valued relationships or community versus materialistic things had greater job satisfaction and overall life satisfaction. This was true regardless of their city’s per-capita income.

“The big idea is that higher GDP or people having more money is all great—especially at a societal level. You want your economy to be more productive and to have more resources and money available,” says Monnot. “Well, maybe that’s not necessarily in and of itself something that’s going to produce a happier population.”

Both Monnot and Park hope that their research might lead people to think a bit differently about the supposed benefits of striving for more money. Though neither would deny that we need money to survive, valuing it too highly or tying it to your self-worth is clearly a mistake.

Monnot hopes his research might help individuals—and business leaders and policymakers—to realize that fulfilling psychological needs is more important to happiness than making a lot of money.


“Autonomy, developing a skill set to be good at what you do, being affiliative with others, having a sense of connection to your community—these are all things that we as researchers are fairly convinced are innate, evolved human tendencies that bring happiness,” he says.

“If you can get people to focus on fulfilling those needs, they’ll become happier. The research is strongly in favor of that.”

About the Author

Jill Suttie

Jill Suttie, Psy.D. , is Greater Good ’s former book review editor and now serves as a staff writer and contributing editor for the magazine. She received her doctorate of psychology from the University of San Francisco in 1998 and was a psychologist in private practice before coming to Greater Good .

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18 Does money buy happiness?

• Published: November 2005
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This chapter tackles the apparent paradox of wealth and happiness, which shows that average happiness levels change very little even as the average incomes of people have risen significantly over time. Subjective well-being has been traditionally measured through surveys and observable behaviour. Findings from research show that rich people are happier than poor people, that relative income affects happiness more than absolute income, and that the accumulation of more wealth would be a source of happiness provided it is spent in certain ways. Human beings' capacity for adaptation is also discussed and found to be more effective on certain stimuli than on others. Studies on the choices between conspicuous and inconspicuous consumption reveal that well-being can be significantly improved with the rational reallocation of our resources in certain ways. However, contextual differences between the two types of consumption cause seemingly irrational choices that people make regarding their well-being.

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clock This article was published more than  1 year ago

Can money buy happiness? Scientists say it can.

It’s a question that philosophers, economists and social scientists have grappled with for decades: Can money buy happiness?

For most people in the United States, the answer is, seemingly, yes.

Two prominent researchers, Daniel Kahneman and Matthew Killingsworth, came to this conclusion in a joint study published this month in the Proceedings of the National Academy of Sciences, overturning the dominant thinking that people are generally happier as they earn more, with their joy leveling out when their income hits $75,000.

This threshold was initially posited by Kahneman, a Nobel Prize-winning economist and psychologist, in a 2010 study that concluded that “emotional well-being [also] rises with log income, but there is no further progress beyond an annual income of $75,000.”

But in 2021, Killingsworth, a happiness researcher and senior fellow at the University of Pennsylvania’s Wharton School, found that happiness does not plateau after $75,000, and that “experienced well-being” can continue to rise with income well beyond $200,000.

Kahneman and Killingsworth said their latest study was an “adversarial collaboration” where they pitted their theories against each other with the help of an arbiter. The latest research adjusted for inflation, they said.

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In their study, Kahneman and Killingsworth surveyed 33,391 adults aged between 18 and 65 who live in the United States, are employed and report a household income of least $10,000 a year. The authors said they lacked substantial data for those earning over $500,000.

To measure their happiness, participants were asked to report on their feelings at random intervals in the day via a smartphone app developed by Killingsworth called Track Your Happiness . Killingsworth said in an email that the data came from “repeatedly pinging people at randomly-timed moments during daily life, and asking about their happiness at that moment in real-time.” Specifically, they were asked “How do you feel right now?” on a scale ranging from “very bad” to “very good,” he said.

The study reached two big conclusions: First, that “happiness continues to rise with income even in the high range of incomes” for the majority of people, showing that for many of us, on average having more money can make us increasingly happier.

But the study also found that there was an “unhappy minority,” about 20 percent of participants, “whose unhappiness diminishes with rising income up to a threshold, then shows no further progress.”

These people tend to experience negative “miseries” that typically cannot be alleviated by earning more money; the report cites examples such as heartbreak, bereavement or clinical depression. For them, their “suffering” may diminish as their income rises to about $100,000 but “very little beyond that,” the study said.

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“In the simplest terms, this suggests that for most people larger incomes are associated with greater happiness,” Killingsworth said in a statement about the study.

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“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.”

The study acknowledges that happiness or emotional well-being is a changing daily scale for many people and that “happy people are not all equally happy” but argues that there are “degrees of happiness” and often a “ceiling” for happiness.

The study also found that money can affect happiness differently, depending on income. Among lower earners, “unhappy people gain more from increased income than happier people do,” it said. “In other words, the bottom of the happiness distribution rises much faster than the top in that range of incomes.”

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In his statement, Killingsowrth made clear that money isn’t everything — “just one of the many determinants of happiness.” He added: “Money is not the secret to happiness, but it can probably help a bit.”

The study also made its way to social media Wednesday, with one Twitter user joking : “Anyone who says money doesn’t buy happiness just doesn’t know where to go for shopping.”

Another teased : “Money won’t make you happy, but it’s nicer to cry in a Ferrari.”

Connection Between Money and Happiness Essay

Introduction, money and happiness, personal life’s experiences, life’s experiences of others.

Does money buy happiness? If you ask anyone this question, the obvious answer will be yes. There is an intricate relationship between money and happiness, which confounds literal observation that money is happiness. Critical analysis of money-happiness relationship shows that socioeconomic factors determine the happiness of an individual; therefore, it is quite unsatisfactory to attribute money as the only factor and determinant of happiness.

There is a linear relationship between money and happiness; nevertheless, to some extent money has no effect to the happiness of an individual. “According to rank hypothesis, income and utility are therefore not directly linked: Increasing an individual’s income will only increase their utility if ranked position also increases and will necessarily reduce the utility of others who will lose rank” (Boyce, Brown, & Moore, 2008, p. 1).

If one has the highest-ranking income in a given social group or workplace, one tends to be much happier than the other one with the lowest-ranking income. Money facilitates things that bring happiness but itself does not bring happiness.

Since the general perception of money is that it is the ultimate source of happiness, many people work tirelessly day and night to ensure that they earn more money to satisfy their needs.

This belief is quite evident in the way people devote most of their time and energies in work places rather than spending time in pleasure by relaxing with family members and friends. Akin, Norton and Dunn (2008), observe that, “the amount of time the average American spends at work has grown steadily over the past several decades, despite the fact that this apparent investment comes at the cost of family and leisure time” (p. 4).

Although money brings happiness and satisfaction in life through spending to satisfy needs, people also derive pleasure in getting money. Life becomes happier if one is working extra to get more income. Otherwise, working overtime without commensurate income results into loss of happiness and morale of working amongst workers. Hence, money is a motivating factor in the work place and source of pleasure in satisfying needs of the family, and thus there is a linear relationship between money and happiness.

The relationship between money and happiness is very complex since money is not only a factor that determines happiness. The state of happiness results from diverse socioeconomic factors that make it hard to attribute to economic factors only.

Due to existence of the complex relationship, money can have direct relationship with the happiness, but up to a certain level of satiation where money has no effect on happiness. Easterlin paradox reveals that, “since the Second World War, despite getting richer, many countries have not shown improvement in average levels of happiness” (Albor, 2009, p. 38).

Easterlin paradox explains that social and economic factors do not have positive correlation yet they are the factors that influence the state of happiness in an individual, family, community and the entire nation. Improvement in economic factors in terms of increase in income levels does not mean that there is concomitant improvement in social welfare, which reflects happiness in the society.

According to Albor (2009), happiness is composed of seven factors namely, “family relationship, community, social affiliation, financial institution, work, personal freedom and personal values” (p. 44). Thus, money is not the only source of happiness.

My psychological understanding of the fact that money alone cannot buy happiness has helped me in coping with life’s great challenges because the world perceives money as the sole source of happiness. Earlier, I thought that money was everything in life, and that I could even buy happiness with it when deprived of the same.

My dream in life was to achieve great knowledge for the sole purpose of earning huge income that would make my life better and happier. “… priming individuals with the concept of money or wealth appears to increase their feelings of self-sufficiency,” (Quoidbach, Dunn, Petrides, & Mikolajczak, 2010, p. 2). I was so happy nurturing and fantasizing about money, wealth and happiness for I did not know the complexity of happiness because to me, money and happiness were equal.

I longed for the time when I would own as much money and property as I could to surpass everybody in everything including happiness, because money translated into happiness. Not until I gained psychological insight on happiness, only to realize that money was not the core factor in felicity realization.

Having gained psychological perception and understanding of what constitutes happiness, I now perceive life quite differently. I now understand that money is one of the factors that determine happiness, but not the only means to happiness.

Easterlin in explanation of his paradox argues that, “economic growth is a carrier of a material culture of its own that ensures that humankind is forever ensnared in the pursuit of more and more economic goods” (Albor, 2009, p. 47). From this argument, I understand that without psychological perception of what really constitutes happiness, the pursuit of money and wealth will enslave me.

On contrary, people amass money and wealth to have financial freedom, which means abundant happiness, but in real sense, they attain financial slavery. The business of managing and gaining more money is very hectic and weary as an individual spends many hours doing it than having pleasure. I have realized that for money to bring happiness in life there should be a balance between work and pleasure, otherwise overindulgence in money making will lead to enslavement.

I have experienced that the more money one owns, the more he/she walks deeper into this enslavement. Owning a lot of money and wealth is quite challenging because it demand immense psychological attention, which overwhelms the happiness derived from them. At some instances when I have a lot of money, I find myself quite unstable, for I am busy running up and down spending it to attain satisfaction; regrettably, the very goods I buy do not satisfy my thirst for happiness.

Research study by Akin, Norton, & Dunn, (2008), demonstrates that, “…adult Americans erroneously believe that earning less than the median household income is associated with severely diminished happiness- a false belief that may lead many people to chase opportunities for increased wealth” (p. 11). With changed psychological perception, I cannot pursue happiness by indefinitely striving to hoard money and wealth since I will be striving after the wind, and that is vanity.

Many people poorly understand the relationship between money and happiness. They think that the only means to attain happiness is through the satisfaction of human needs that literally money can buy. However, money cannot buy everything that determines happiness, for instance, good friends, friendly community, and personal values amongst other key factors that define happiness.

Due to lack of psychological understanding of real meaning and source of happiness, many people grope in economic circles thinking that happiness lies there. False perception of happiness has made many people to struggle endlessly in pursuit of financial happiness, which never materializes. People think that solutions of many problems they encounter in life lies in money, because money pays education, rent, food, healthcare and many others needs.

Smith (2008) cautions this form of thinking for people assume that they “…might work longer hours to make more money, but then face heightened anxieties regarding childcare cost, comminuting, diminished leisure, physical and mental costs that accrue for the well-being of the families” (Smith, 2008, p. 20). In the course of achieving happiness through financial means, the process is tedious and very demanding making people to lose happiness instead of gaining more.

As aforementioned, money alone cannot have overwhelming influence on happiness since there are other factors that influence the status of happiness. These factors are personal values, personal freedom, family, community, work and social affiliation.

These factors constitute happiness; unfortunately, due to poor psychological understanding, many people neglect them and focus on the financial aspect of happiness only. Below poverty level, money is the overriding factor of happiness and as the financial status changes above the poverty level, others factors gradually become dominant.

International comparison of average levels of happiness shows that, “…among poorer countries, gains in income are accompanied by dramatic increases in happiness, but among richer countries, higher income do not buy more happiness” (Albor, 2009, p. 39). This confirms that, at the level of satiation, money no longer determines happiness but other factors begin to have significant influence. Thus, achievement of the greatest felicity requires consideration of all factors that constitutes happiness.

All the factors, which constitute happiness, are in two broad categories, social and economic factors. Economic factors partially influence happiness because the perception and the source of happiness lie in the social context of life, as happiness is not quantifiable in terms of money. According to Albor, “happiness is a universal feeling that all human beings have the potential to experience” (2009, p. 40).

Happiness is a contagious feeling, which makes everybody happy in the family, community, workplace and the whole world. I have noticed that, people think that money is everything in life, for out of their abundant riches; they afford to live in seclusion where they get satisfaction of their wealth and money while the surrounding people are struggling in abject poverty. Only the sight of the poor people makes them lose happiness.

Moreover, they live in great fear of robbery attacks and property loss, wishing to have their own continent, free from the eyesore status of the poor. All these happen because they have poor psychological understanding of happiness. If they could embrace social factors, they could derive ample happiness from their environment by relating to and assisting the poor.

In pursuit of happiness, young people do not have the right perception of what constitutes happiness. Given the choice between the money and schooling, they would prefer money, because they do not understand that money gives short-lived happiness. Regardless of virtues, and values we instill in children, they still perceive that money equals happiness.

Smith (2008) argues that, “… rather than setting off to follow their deepest passions, many of our most talented and driven graduates just need to get a job, whatever job that best allows them to begin their a life of paying off debt,” (p. 23). Young people have abandoned personal development, which is another source of happiness and are busy pursuing financial pleasures that give short-lived happiness.

In youths, there are many pleasures money can buy, hence, money has blinded their life’s priorities due to false satisfaction of needs that brings happiness. A rich person without personal development is as a fool is a sea of knowledge who wants to satisfy psychological needs out of folly. For one to achieve lasting happiness it requires understanding of the factors that significantly contribute to happiness and not mere stereotyping that money is equal to happiness.

Money and happiness have linear relationship but up to a certain level of satiation where other factors of happiness such as work, family, community, social affiliation, personal values and freedom, come into effect. Poor psychological understanding of happiness has led many people to believe erroneously that, money is the only source of happiness.

It is true that money brings happiness but the misunderstanding arises in the cumulative source of happiness. People derive happiness from both economic and social aspects of life, but rarely do people consider the social aspects. Social aspects demand psychological understanding of happiness; however, many people fail to realize its importance as source of happiness in the family, community and the entire society.

Therefore, people should be wary in attributing money as the only source of happiness for they will pursue happiness in vain, unless they come to the realization that social aspects are also integral part of happiness. Thus, happiness and money have partial relationship; whereby, money facilitates things that bring happiness but in itself, money lacks the capacity to bring happiness.

Akin, L., Norton, M., & Dunn, E. (2008). From Wealth to Well-Being? Money Matters, but Less People Think. Journal of Psychology University of British Columbia, 2(5), 1-20.

Albor, C. (2009). How Much Can Money Buy Happiness? Is the Debate Over for the Easterlin Paradox? Radical Statistics, 1(98), 38-48.

Boyce, C., Brown, G., & Moore, S. (2008). Money Happiness: Rank of Income, not Income, Affects Life Satisfaction. University of Warwick Psychology Journal, 1-16.

Quoidbach, J., Dunn, E., Petrides, K., & Mikolajczak, M. (2010). Money Giveth, Money Taketh Away: the Dual Effect of Wealth on Happiness. Association for Psychological Science, 20(5), 1-5.

Smith, N. (2008). Poverty, Money, and Happiness. A University Dialogue on Poverty and Opportunity Journal, 20-25.

• Money, Happiness and Satisfaction With Life
• Epicurus’ Perception of Pleasure and Justice
• Aristotle’s Account of Pleasure
• Prescribing of Medication by Psychologists: For and Against
• If Every Person in the World Understood Basic Principles of Psychology, the World Would Be A Better Place
• Analysis of Impact of Culture Shock on Individual Psychology
• Aspects of Rhetoric and Stereotype Image
• Perspectives Chemical Dependency
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1. IvyPanda . "Connection Between Money and Happiness." July 30, 2018. https://ivypanda.com/essays/relationship-between-money-and-happiness/.

Bibliography

IvyPanda . "Connection Between Money and Happiness." July 30, 2018. https://ivypanda.com/essays/relationship-between-money-and-happiness/.

How to Buy Happiness

The joys of money are nothing without other people.

“ How to Build a Life ” is a weekly column by Arthur Brooks, tackling questions of meaning and happiness.

I n 2010 , two Nobel laureates in economics published a paper that created a tidal wave of interest both inside and outside academia. With careful data analysis, the researchers showed that people believe the quality of their lives will increase as they earn more, and their feelings do improve with additional money at low income levels. But the well-being they experience flattens out at around $75,000 in annual income (about $92,000 in today’s dollars). The news materially affected people’s lives—especially the part about happiness rising up to about $75,000: In the most high-profile example, the CEO of a Seattle-based credit-card-payment company raised his employees’ minimum salary to $70,000 (and lowered his own salary to that level) after reading the paper.

This January, another economist published a new paper on the subject that found that even beyond that income level, well-being continues to rise. That’s not to imply (as much of the popular press did) that money can buy happiness off into infinity. The new study simply suggests that the drop-off occurs, on average, at higher income levels. I graphed the raw income data from the study and found that happiness flattens significantly after $100,000; at even higher levels there is very little extra well-being to be had with more income.

Read: What you gain when you give things up

The lesson remains the same as it was a decade ago: At low levels, money improves well-being. Once you earn a solid living, however, a billionaire is not likely to be any happier than you are. Yet for the most part, this truth remains hard for people to grasp. Americans work and earn and act as if becoming richer will automatically raise our happiness, no matter how rich we might get. When it comes to money and happiness, there is a glitch in our psychological code.

Understanding this can help us build happier lives. Even further, it uncovers strategies for using income at all levels to raise well-being. Just because most people generally don’t get happier as they get richer beyond a certain point doesn’t mean that they can’t . In fact, no matter where we sit on the income scale, with a little knowledge and practice any of us can use money to bring more happiness.

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B elow a certain degree of financial prosperity, seeking more money is a sensible way to pursue happiness. As economists have repeatedly shown , well-being rises with income at low socioeconomic levels because it alleviates the problems of poverty. People can erase calorie deficits, educate their kids, and go to the doctor—in other words, they can lower their un happiness. Even if you live above the poverty line in a rich country, you might have experienced this sort of transition in early adulthood. When I could finally afford to see a dentist at age 25 after ignoring my cavities for six years, it was a huge relief. (My lack of dental care might also have been partly due to misplaced spending priorities, however—I don’t recall ever being without cigarettes during those lean years.)

Read: Some material goods can make you happy

Raising positive emotions and lowering negative ones involve independent neurological processes , but few of us recognize the difference. All we know is that we didn’t have enough money, then we got more, and then we felt better. The (incorrect) lesson that money buys happiness, especially programmed into us early in life or when we are vulnerable, can be hard to shake. Over the rest of our lives, like Pavlov’s dogs, we figuratively salivate in anticipation of good feelings when the bell of money rings.

But after a while, the good feelings don’t come, because there’s no more material deprivation to relieve. For the most part, remediating the small size of your TV screen or the low horsepower of your car has no effect on your unhappiness whatsoever. This is not to say that people who make more than six digits should stop working hard— earning success through work has been shown to bring happiness at all financial levels. But beyond a certain income, working harder simply to have more money to buy things is pointless, since we find that none of life’s biggest problems—which typically involve our relationships—are solved. Quite the contrary, as spending more time fruitlessly chasing well-being up the income curve often means spending less time on love.

Y ou might be tempted to throw up your hands in exasperation at these findings. It’s easy to be discouraged by the fact that we are driven instinctively toward a goal that doesn’t actually satisfy us.

Luckily, there is a loophole. Research shows that how the wealthier among us spend their money makes all the difference for their well-being. Specifically, spending money to have experiences, buying time, and giving money away to help others all reliably raise happiness. Thus, if you have a little excess income, it’s best to use it on those three things.

Read: Who actually feels satisfied about money?

The key factor connecting all those approaches is other people . If you buy an experience, whether it be a vacation or just a dinner out, you can raise your happiness if you share it with someone you love. Friends and family are two key ingredients in well-being, and fun experiences with these people give us sweet memories we can enjoy for the rest of our lives—unlike the designer shoes that will wear out or go out of style.

Likewise, if you pay someone to do something time-consuming that you don’t like to do (for example, cutting your yard), and don’t waste the time you gain on unpleasant things like doom-scrolling on social media, you can get a happiness boost by spending those extra hours with others. As an added bonus, you might be able to convert your excess capital into earned income for someone who is still climbing the well-being curve.

And if you use your money to charitably support a person or a worthy cause, your brain will respond with boosts in dopamine, serotonin, and oxytocin, elevating your mood. Charitable giving is also linked to higher earnings, which you can then spend on relationships, experiences, and charity.

Read: A counterintuitive way to cheer up when you’re down

Left to our urges and natural desires, we can get stuck in a cycle of dissatisfaction, in which we work, earn, buy, and hope to finally get happier. But we don’t have to play that futile game. Anyone who acquires money can use it to buy some happiness, and do a little self-improvement in the process. If we don’t have much, we can spend any extra cash on removing some of the stressors in our daily lives. When we have enough to meet our basic needs, we can fight our materialistic impulses and spend time enjoying the people around us. And if we are lucky enough to have extra income, we can make it into a source of happiness, by transforming it into a means to share, and to love others better.

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Money Does Not Always Buy Happiness, but Are Richer People Less Happy in Their Daily Lives? It Depends on How You Analyze Income

Laura kudrna.

1 Institute of Applied Health Research, University of Birmingham, Birmingham, United Kingdom

Kostadin Kushlev

2 Department of Psychology, Georgetown University, Washington, DC, United States

Associated Data

Publicly available datasets were analyzed in this study. These data can be found at: https://www.atusdata.org (The ATUS extract builder was used to create the ATUS dataset, see Hofferth et al., 2017 ). GSOEP data were requested from https://www.diw.de/en/diw_02.c.222516.en/data.html , see Richter and Schupp, 2015 .

Do people who have more money feel happier during their daily activities? Some prior research has found no relationship between income and daily happiness when treating income as a continuous variable in OLS regressions, although results differ between studies. We re-analyzed existing data from the United States and Germany, treating household income as a categorical variable and using lowess and spline regressions to explore nonlinearities. Our analyses reveal that these methodological decisions change the results and conclusions about the relationship between income and happiness. In American and German diary data from 2010 to 2015, results for the continuous treatment of income showed a null relationship with happiness, whereas the categorization of income showed that some of those with higher incomes reported feeling less happy than some of those with lower incomes. Lowess and spline regressions suggested null results overall, and there was no evidence of a relationship between income and happiness in Experience Sampling Methodology (ESM) data. Not all analytic approaches generate the same results, which may contribute to explaining discrepant results in existing studies about the correlates of happiness. Future research should be explicit about their approaches to measuring and analyzing income when studying its relationship with subjective well-being, ideally testing different approaches, and making conclusions based on the pattern of results across approaches.

Introduction

Does having more money make someone feel happier? The answer to this longstanding question has implications for how individuals live their lives and societies are structured. It is often assumed that more income brings more happiness (with happiness broadly defined herein as hedonic feelings, while recognizing closely related constructs, including satisfaction and eudaimonia; Tiberius, 2006 ; Angner, 2010 ; Dolan and Kudrna, 2016 ; Sunstein, 2021 ). In many aspects of policy, upward income mobility is encouraged, and poverty can result in exclusion, stigmatization, and discrimination by institutions and members of the public. More income provides people with opportunities and, sometimes, capabilities to consume more and thus satisfy more of their preferences, meet their desires and obtain more of what they want and need ( Harsanyi, 1997 ; Sen, 1999 ; Nussbaum, 2008 ). These are all reasons to assume that higher income will bring greater happiness—or, at least, that low income will bring low happiness.

Some research challenges the assumption that earning more should lead to greater happiness. First, because people expect that more money should make them happier, people may feel less happy when their high expectations are not met ( Graham and Pettinato, 2002 ; Nickerson et al., 2003 ) and they may adapt more quickly to more income than they expect ( Aknin et al., 2009 ; Di Tella et al., 2010 ). Second, since the 1980s in many developed countries, the well-educated have had less leisure time than those who are not ( Aguiar and Hurst, 2007 ) and people living in high-earning and well-educated households report feeling more time stress and dissatisfaction with their leisure time ( Hamermesh and Lee, 2007 ; Nikolaev, 2018 ). The quantity of leisure time is not linearly related to happiness, with both too much and too little having a negative association ( Sharif et al., 2021 ). Evidence also shows that people with higher incomes spend more time alone ( Bianchi and Vohs, 2016 ). The lower quality and quantity of leisure and social time of people with higher incomes may, in turn, negatively impact their happiness, especially given there are strong links between social capital or “relational goods” and well-being ( Helliwell and Putnam, 2004 ; Becchetti et al., 2008 ).

At the same time, some—but not all—evidence suggests that working class individuals tend to be more generous and empathetic than more affluent individuals ( Kraus et al., 2010 ; Piff et al., 2010 ; Balakrishnan et al., 2017 ; Macchia and Whillans, 2022 ), and such kindness toward others has been associated with higher well-being ( Dunn et al., 2008 ; Aknin et al., 2012 ). Relatedly, psychological research suggests that people with lower socioeconomic status have a more interdependent sense of self ( Snibbe and Markus, 2005 ; Stephens et al., 2007 ). It is, therefore, possible that people high in income have lower well-being because they experience less of the internal “warm glow” ( Andreoni, 1990 ) benefit that comes along with valuing social relationships and group membership. In theory, therefore, there are reasons to suppose that high income has both benefits and costs for well-being, and empirical evidence can inform the debate about when and whether these different perspectives are supported.

Empirical Evidence on Income and Happiness

The standard finding in existing literature is that higher income predicts greater happiness, but with a declining marginal utility ( Dolan et al., 2008 ; Layard et al., 2008 ): that is, higher income is most closely associated with happiness among those with the least income and is least closely associated with happiness for those with the most income. Recently, this finding has been qualified by studies showing that the relationship between income and happiness depends on how happiness is conceptualized and measured: as an overall evaluation of one’s life or as daily emotional states ( Kahneman and Deaton, 2010 ; Killingsworth, 2021 ). In this vein, authors Kushlev et al. (2015) found no relationship between income and daily happiness in the American Time Use Survey (ATUS), which has recently been found for other happiness measures, too ( Casinillo et al., 2020 , 2021 ) The finding from Kushlev et al. (2015) was replicated in the German Socioeconomic Panel Survey (GSEOP) by Hudson et al. (2016) , and in another analysis of the ATUS by Stone et al. (2018) .

Some research has focused specifically on the effect of high income on happiness. Kahneman and Deaton (2010) conducted regression analyses using a Gallup sample of United States residents, finding that annual income beyond ~$75K was not associated with any higher daily emotional well-being. Income beyond ~$75K, however, predicted better life evaluations. Using a self-selecting sample of experiential data in the United States, Killingsworth (2021) conducted piecewise regressions and found no evidence of satiation or turning points. Jebb et al. (2018) fit regression spline models to global Gallup data, showing that the satiation point in daily experiences found by Kahneman and Deaton (2010) was also apparent in other countries. Unlike Kahneman and Deaton (2010) , however, Jebb et al. (2018) also found evidence of satiation in people’s life evaluations, and even some evidence for “turning points”—whereby richer people evaluated their lives as worse than some of those with lower incomes. A satiation point in life evaluations was also found in European countries at around €28K annually ( Muresan et al., 2020 ).

This pattern of findings could partly depend on the choice of analytic strategy. In analyses of the same dataset as Jebb et al. (2018) but using lowess regression, researchers found no evidence of satiation or turning points in the relationship between income and people’s life evaluations ( Sacks et al., 2012 ; Stevenson and Wolfers, 2012 ). These conflicting results suggest that the effect of analytic strategy on results deserves a closer examination.

The Research Gap

While there has been much research on income and happiness, including according to how happiness is defined and measured, we are not away of any studies that have compared the relationship between income and happiness according to how income is defined and measured. We propose that the relationship between income and happiness may depend not only on how happiness is measured, but also on how income is measured and analyzed. To improve our knowledge of the relationship between income and happiness, this paper, we focus on nonlinearities in the relationship between income and happiness and re-analyze the ATUS data used by Kushlev et al. (2015) and Stone et al. (2018) , as well as the GSOEP data used by Hudson et al. (2016) . Specifically, while Kushlev et al. (2015) analyzed income as a continuous variable in the ATUS, we treat income the way it was measured: as a categorical variable. We compare these results to GSOEP data where we re-code the original continuous measure of income into categorical quantiles. To further explore nonlinearities in the relationship between income and happiness, we also conduct local linear “lowess” and spline regression analyses.

We chose to re-analyze these data to address the question of differences in the relationship between income and happiness according to the measurement and analysis of income because the ATUS and GSOEP provide nationally representative data on people’s feelings as experienced during specific “episodes” of the day after asking them to reconstruct what they did during the entire day. Thus, compared to data from Gallup, which measures affect “yesterday,” measurements in the ATUS are more grounded in specific experiences, and therefore, less subject to recall bias ( Kahneman et al., 2004 ). And unlike Gallup, which uses more crude, dichotomous (“yes-no”) response scales, ATUS measures happiness along a standard seven-point Likert-type scale. In the GSOEP, we were also able to analyze data from the Experience Sampling Methodology (ESM), which asks people how they are feeling during specific episodes during the day and, as such, is even more grounded in specific experiences.

Measuring and Analyzing Income

The original ATUS income variable—family income—contains 16 uneven categories (see Table 1 ). For example, Category 11 has a range of ~$10K, whereas Category 14 has a range of ~$25K. The increasingly larger categories are designed to reflect declining marginal utility as an innate quality of income. Based on this, Kushlev et al. (2015) analyzed income as a continuous variable using the original uneven categories. Continuous scales, however, assume equal intervals between scale points—a strong assumption to make for the relatively arbitrary rate of change in the category ranges. Is increasing one’s income from $20,000 to $25,000 really equidistant to increasing it from $35,000 to $40,000 ( Table 1 )? And can we really assume, for example, that adding $5,000 of additional income to $35,000 is the same as adding $10,000 of additional income to $40,000? Recognizing this issue, income researchers have adopted alternative strategies. For example, Stone et al. (2018) took the midpoints of each category of income, and then log-transformed it. Thus, they transformed the categorical measure of income into a continuous measure. This approach produced results for happiness consistent with the findings of Kushlev et al. (2015) .

The original categories of income in the ATUS family income measure with number of individuals in each income category in the ATUS 2010, 2012, and 2013 well-being modules.

Complete cases only for all variables analyzed.

Both the increasing ranges of the income scale itself and its log-transformations reflect an assumed declining marginal utility of income: They treat a given amount of income increase at the higher end of the income distribution as having less utility than the same amount at the lower end of the distribution. But by subsuming income’s declining utility in its very measurement (or transformation thereof), it becomes difficult to interpret a null relationship with happiness. In other words, we might not be seeing a declining marginal utility of income reflected on happiness because the income variable itself reflects its declining utility.

Even when the income variable itself does not reflect its declining utility, a null relationship between income and daily experiences of happiness has been observed. Hudson et al. (2016) used GSOEP, which contains a measure of income that is continuous in its original form. Whether analyzing this income measure in its raw original form or in transformed log and quadratic forms, a null relationship with happiness was observed. This approach, however, does not consider whether there might be nonlinear/log/quadratic turning or satiation points at higher levels of income—an issue also applicable to previous analyses of ATUS ( Kushlev et al., 2015 ; Stone et al., 2018 ). This is important because there are theoretically both benefits and costs to achieving higher levels of income that could occur at various levels of income; however, this possibility has not yet been fully explored in ATUS or GSOEP data.

In sum, past research using ATUS has treated categorically measured income as a continuous variable, either assuming equidistance between scale points or attempting to create equidistance through statistical transformations. By doing so, however, researchers may have statistically accounted for the very utility of income for happiness that they are trying to test. In both ATUS and GSOEP, the question of whether there might be satiation and/or turning points at higher levels of income has not been fully considered. The present research explores whether treating income as a categorical variable in both ATUS and GSOEP would replicate past findings or reveal novel insights, focusing on possible nonlinearities in the relationship between income and happiness.

Materials and Methods

We used data from ATUS well-being modules in 2010, 2012, and 2013. To facilitate future replications of this research, the ATUS extract builder was used to create the dataset ( Hofferth et al., 2017 ). 1 The ATUS is a repeated cross-sectional survey and is nationally representative of United States household residents aged 15 years and older. Its sampling frame is the Current Population Survey (CPS), which was conducted 2–5 months prior to the ATUS. Some items in the ATUS come from the CPS, including the household income item that we analyze.

Data from the GSOEP come from the Innovation Sample (IS), which is a subsample of the larger main GSOEP ( Richter and Schupp, 2015 ). The main GSOEP and the IS are designed to be nationally representative. The IS contains information on household residents aged 17 years of age and older. We used two modules from these data: the 2012–2015 DRM module, which is a longitudinal survey, and the 2014–2015 ESM module.

Outcome Measures

In ATUS, participants were called on the phone and asked how they spent their time yesterday: what activities they were doing, for how long, who they spent time with and where they were located. This information was used to create their time use diary. A random selection of three activities were taken from these diaries and participants were asked how they felt during them. The feelings items were tired, sad, stressed, pain, and happy. Participants were also asked how meaningful what they were doing felt.

In GSOEP, participants were interviewed face to face for the DRM questions and through smartphones for the ESM questions. In the DRM, as in the ATUS, they were asked how they spent their time yesterday and, for a random selection of three activities, they were asked further details about how they felt. In the ESM, participants were randomly notified on mobile phones at seven random points during the day for around 1 week. As in the DRM, they were asked how they were spending their time at the point of notification, as well as how they felt. Participants in both ESM and DRM samples were asked about whether they were feeling happy, as well as other emotions such as sadness, stress, and boredom.

The focus of this research is on the happiness items from both the ATUS and GSOEP to highlight differences according to the treatment of the independent measure of income rather than differences according to the dependent outcome of emotional well-being.

Data were analyzed in STATA 15 and jamovi. The Supplementary Material S1 file contains the STATA command file for the main commands written to analyze the data. In both ATUS and GSOEP, OLS regressions were conducted with happiness as the outcome measure and income as the explanatory measure. Following Kushlev et al. (2015) and Hudson et al. (2016) , the average happiness across all activities each day was taken to create an individual-level measure. Because the GSOEP DRM sample contained multiple observations across years, the SEs were clustered at the individual level for models using this dataset.

The treatment of income differed according to the dataset because income was collected differently in each dataset. In the ATUS, income was first analyzed in continuous, log, and quadratic forms in OLS regressions, as in other research ( Kushlev et al., 2015 ; Hudson et al., 2016 ). Next, it was analyzed as a categorical variable with 16 categories, preserving the identical format that it was originally collected in from the CPS questionnaire.

In GSOEP, the income variable in the dataset is provided in continuous form because participants reported their monthly income as an integer. To compare to the ATUS results, 16 quantiles of income were created and analyzed in GSOEP DRMs (see Table 2 - note that there were insufficient observations to conduct these analyses with GSOEP ESMs). This income variable was also analyzed in continuous, log, and quadratic forms.

The range and number of person-year observations of the GSOEP Income 4 variable divided into 16 quantiles.

Omnibus F -tests and effect sizes ( n 2 ) are also reported to compare the categorical, continuous, log, and quadratic approaches.

We conducted lowess and spline regressions to further investigate possible nonlinearities in the relationship between income and happiness. For the lowess regressions, the smoothing parameter was set at of 0.08. For the regression splines, we fitted knots at four quartiles and five quantiles of income. We also used the results of OLS regressions treating income as a categorical variable, as well as the results of the lowess regression treating income as continuous, to fit knots at pre-specified values of income (where these analyses suggested there could be turning and/or satiation points).

Complete case analyses were conducted with 33,976 individuals in ATUS, 6,766 individuals in German DRMs, and 249 individuals in German ESMs. There was item-missing data in some samples (ATUS, 1.7% missing; GSOEP DRMs, 8.2% missing; GSOEP ESMs data, and 6.0% missing). We make analytical and not population inferences and therefore do not use survey weights ( Pfeffermann, 1996 ).

Results are presented without and with controls for demographic and diary characteristics. Following Kushlev et al. (2015) , Hudson et al. (2016) , and Stone et al. (2018) , these controls were age, gender, marital status, ethnic background, 2 health, 3 employment status, children, 4 and whether the day was a weekend. We also control for the year of the survey in ATUS DRM data to address the issue that our results are not due to new data but rather how we treat the income variable.

The list of variables we use in analyses are in Table 3 .

List of variables used in analyses in ATUS and GSOEP.

In both ATUS and GSOEP, daily happiness was analyzed using a 0–6 scale (in GSOEP scale points 1–7 were recoded to 0–6 to match ATUS). The ATUS mean happiness was 4.38 (SD = 1.33). The GSOEP DRM mean happiness was 2.91 (SD = 1.46), and the GSOEP ESM mean happiness was 2.65 (SD = 1.03).

The magnitude of our results can be considered in the context of effect sizes from other research on demographic characteristics and daily happiness ( Kahneman et al., 2004 ; Stone et al., 2010 ; Luhmann et al., 2012 ; Hudson et al., 2019 ). For example, the effect size for the relationship between age and daily experiences of happiness was 0.16 in Stone et al. (2010) . Our effect sizes range from 0.06 to 0.37. Throughout, we focus on coefficients, their 95% CIs, and visualizations of these coefficients and CIs, rather than on their statistical significance ( Lakens, 2021 ). The purpose of this is to highlight how analytic treatments of income affect the magnitude and precision of the relationship between income and happiness.

When treating the 16-category family income variable as continuous in OLS regressions, there was no substantive relationship between income and happiness as in other prior research ( Kushlev et al., 2015 ; Hudson et al., 2016 ; Stone et al., 2018 ). Out of the linear, squared, and log coefficients without and with controls, the largest and most precise coefficients were with controls; for linear income it was ( b  = −0.006, 95% CI = −0.01, −0.002), squared income ( b  = −0.0001, 95% CI = 0.0003, 0.00006), and log income ( b  = −0.03, 95% CI = −0.05, 0.001). The omnibus F -test (without controls) for linear income was F  = 0.28, n 2  = 0.000008 (95% CI = 0.00, 0.0002), for income squared was F  = 1.60, n 2  = 0.00005 (95% CI = 0.00, 0.0003), and for log income was F  = 0.23, n 2  = 0.000006 (95% CI = 0.00,0.0002).

The categorization of income focused attention on those with incomes of $35–40K, who appeared substantively happier than some of those with higher incomes (and lower incomes; see Figure 1 ). For example, with controls, those with incomes of $35–40K appeared happier relative to those with incomes of $150K+ ( b  = 0.16, 95% CI: 0.08, 0.24) and $100–150K ( b  = 0.14, 95% CI: 0.07, 0.221). The omnibus test for categorical income was F  = 1.61, n 2  = 0.007 (95% CI = 0.00, 0.0009).

Predicted values of average individual happiness in the American Time Use Survey (ATUS) at the 16 values of the family income variable without and with controls. Covariates at means. 95% CI.

Results from regression splines and a lowess regression suggested null results overall (see Figure 2 ). Further details of the analyses are in Supplementary Material S2 .

Line graph of predicted values from lowess regressions explaining variance in happiness from income treated as a continuous variable in ATUS.

When treating the continuous household income variable as continuous (in €10,000s) in OLS regressions, there was no substantive relationship between income and happiness as in other prior research ( Kushlev et al., 2015 ; Hudson et al., 2016 ; Stone et al., 2018 ). The association with the largest magnitude and most precision was for log income with controls ( b  = −0.08, 95% CI = −0.18, 0.01). 5

As in ATUS, treating the variable as categorical suggested some relationships between income and happiness. These results drew attention to those third quantile (~€14–18K), who seemed happier than those both higher and lower in income (see Figure 3 ). For example, with controls, they were happier than those in quantiles 13 (€42.6–48K, b  = 0.46, 95% CI = 0.25, 0.67), seven (~€24–27K, b  = 0.34, 95% CI = 0.13, 0.56), and one (€2.40–11,520K, b  = 0.28, 95% CI = 0.05, 0.51). The omnibus test for categorical income was F  = 4.00, n 2  = 0.009 (95% CI = 0.003, 0.01), whereas the omnibus test for linear income was F  = 0.09, n 2  = 0.00001 (95% CI = 0.00, 0.0007). The omnibus for log income was F  = 1.42, n 2  = 0.0002 (95% CI = 0.00, 0.0001) and for income squared it was F  = 0.96, n 2  = 0.0001 (95% CI = 0.00, 0.001).

Predicted values of average person-year happiness from GSOEP DRMs at 16 quantiles of income (Income 4) without and with controls. Covariates at means. 95% CI.

The lowess and spline regressions suggested null results overall, as the coefficients were small in magnitude (see Figure 4 ). Further details of the analyses are in Supplementary Material S3 .

Line graph of predicted values from lowess regressions explaining variance in happiness from income treated as a continuous variable in GSOEP DRMs at 16 quantiles of income.

There was no evidence to suggest any substantive association between income and happiness in ESM data for linear income, income squared, log income, in the lowess regressions, or regression splines. A visualization of the lowess results are in Figure 5 and further details of the analyses are in Supplementary Material S4 .

Results of local linear “lowess” regression from GSOEP Experience Sampling Methodology (ESM) data with happiness as the outcome and continuous annual income as the explanatory variable.

The omnibus F -test for linear income was F  = 0.53, n 2  = 0.002 (95%CI = −0.00, 0.03), and for log income it was F  = 0.12, n 2  = 0.0005, 95%CI = 0.00, 0.02. For income squared it was F  = 0.63, n 2  = 0.003, 95%CI = 0.00 0.03.

Is income creating a signal in these data on daily experiences of happiness, or is it all simply noise? The present results suggest that whether income can be concluded as being associated with daily experiences of happiness may depend on how income is analyzed. When income in ATUS is analyzed in its original, categorical form, there is some evidence that some people with higher incomes feel somewhat less happy than some of those with lower incomes. When the continuous income variable in GSOEP is split into categories, a similar pattern is observed. This is not inconsistent with the findings of Kushlev et al. (2015) , Hudson et al. (2016) , and Stone et al. (2018) , who found no relationship between income and daily feelings of happiness in the same data when income was analyzed as a continuous variable. It simply illustrates that a relationship between income and happiness could be interpreted when treating income categorically rather than continuously.

There are at least three possible interpretations to our overall results. One interpretation tends toward conservative. We conducted multiple comparisons of many transformations of income, which might inspire some to question whether we should have accounted for this in some way by adjusting for multiple comparisons. Although we found some evidence of differences in happiness according to income, such an adjustment might lead to an overall null conclusion when characterizing the relationship between income on happiness. A second interpretation is more generous. Within this perspective, one might emphasize the fact that because our income measures were correlated, no correction for multiple comparisons was required. It could then be argued that because we found some evidence for the relationship between income on happiness, there is good evidence that the overall effect is not null. A more moderate perspective, and the one adopted in this paper, is that because the overall pattern of our results showed mixed null and nonnull results, we can make an overall conclusion of some differences in happiness according to income. We also noticed that equivalizing income in the German data strengthened the relationship of income and happiness, further supporting the conclusion of some differences—and that the analytic treatment of income matters.

Based on the moderate perspective, we conclude that there is very little evidence of any relationship between income and daily experiences of happiness—and any relationship that does exist would suggest higher income could be associated with less happiness. The results do not support the results of Sacks et al. (2012) or Killingsworth (2021) , where a greater income was associated with greater happiness, and there were no satiation or turning points (see also Stevenson and Wolfers, 2012 ). These results are more aligned with Kahneman and Deaton (2010) , who found a satiation point in the relationship between income daily experiences of happiness, researchers finding no association between income and happiness ( Kushlev et al., 2015 ; Jebb et al., 2018 ; Casinillo et al., 2020 , 2021 ), who found that higher income can be associated with worse evaluations of life. We suggest the analytic strategy for income could contribute to explaining discrepant results in existing literature, and researchers should be clear about the approaches they have tested, although we acknowledge that sampling differences could play a role, too.

Overall, the results were broadly consistent between countries because there was no substantive relationship between income and happiness when income was treated continuously but there appeared to be relationships when treating income categorically. Despite a similar overall pattern in the income results, there were other difference between countries. German residents rated their happiness as lower than United States residents (a difference of ~1.5 scale points out of seven). This could be because of different interpretations of the word “happiness” in Germany and the United States. The word for happiness in German used in the survey— glück —can mean something more akin to lucky or optimistic—which is different from the meaning of word “happy” in the United States. Despite this linguistic difference, those with higher incomes were still less happy than some of those with lower incomes in both samples.

Limitations

One limitation to our results is the representativeness of the income distribution. Household surveys like those that we used do not tend to capture the “tails” of the income distribution very well: People in institutions and without addresses are excluded from these sample populations, which omits populations such as those living in nursing homes and prisons, as well as the homeless. Moreover, people do not always self-report their income accurately due to issues such as social desirability bias ( Angel et al., 2019 ). Existing studies that have focused on those with very low incomes do tend to find that low income is associated with low happiness ( Diener and Biswas-Diener, 2002 ; Clark et al., 2016 ; Adesanya et al., 2017 ). In ATUS, the highest household income value available was $150K, whereas in GSOEP it was €360K. Thus, it is not always clear whether the very affluent, such as millionaires, are represented in these samples ( Smeets et al., 2020 ). Overall, our results cannot be taken as representative of people who are very poor or rich and should not be interpreted as such.

Another limitation is that the present results cannot be interpreted casually because there has been no manipulation of income in these data nor exploration of mechanisms and there was no longitudinal data in ATUS. As discussed by Kushlev et al. (2015) , there are issues such as reverse causality. Here, however, some of our results potentially suggest an alternative reverse causality pathway, whereby less happy people may select into earning more income. Because the counterfactual is not apparent—we do not know how happy people with high incomes would be without their higher income—it could also be that those with high incomes would be even less happy than they currently are if they had not attained their current level of income. In other words, people with high incomes may have started out as less happy in the first place and be even less happy if they did not have high incomes.

A further limitation is the time period of the data, especially that they were collected prior to the COVID-19 pandemic. This could be an issue because it is possible that the relationship between income and daily experiences of happiness has changed, such as due to the exacerbation of health inequalities and restrictions on freedom of movement due to nationwide lockdowns. Our study does not provide any information on the longer-term and health and well-being consequences of both COVID-19 itself and the policy response to COVID-19 ( Aknin et al., 2022 ). As one example, access to green space, which has health and well-being benefits, is lower among those with low income, and this mechanism between income and happiness may have become more salient during COVID-19 ( Geary et al., 2021 ). Overall, it is important to consider the regional, political, and socioeconomic contexts in which income is attained to understand its relationship with well-being, including levels of income in reference groups such as neighbors, friends, and colleagues ( Luttmer, 2005 ; De Neve and Sachs, 2020 ). It would be important to replicate the results in this research with more recent data to address the limitation that the data we used are not recent, considering our broader point that the measurement and analysis of income should be considered as carefully as the measurement and analysis of happiness.

Future Directions

This research points to several directions for future research. One direction relates to data and measures: Nonlinearities in the relationship between income and happiness could be examined using time use data from other countries, considered between countries and/or within countries over time ( Deaton et al., 2008 ; De Neve et al., 2018 ), and investigated for measures of emotional states other than happiness ( Piff and Moskowitz, 2018 ). In general, our results suggest that researchers should pay attention to how income is measured and analyzed when considering how it is related to happiness, which complements findings from other research that the way happiness is measured and analyzed is important ( Kahneman and Deaton, 2010 ; Jebb et al., 2018 ).

Future research could also explore mechanisms that may explain our findings. In addition to those mentioned in the Introduction—expectations ( Graham and Pettinato, 2002 ; Nickerson et al., 2003 ), time use ( Aguiar and Hurst, 2007 ; Hamermesh and Lee, 2007 ; Bianchi and Vohs, 2016 ; Nikolaev, 2018 ; Sharif et al., 2021 ); generosity ( Dunn et al., 2008 ; Kraus et al., 2010 ; Piff et al., 2010 ; Aknin et al., 2012 ; Balakrishnan et al., 2017 ; Macchia and Whillans, 2022 ), and sense of self ( Snibbe and Markus, 2005 ; Stephens et al., 2007 )—another is the identity-related effect of transitioning between socioeconomic groups. Though one might expect upward mobility to be associated with greater happiness, research suggests that some working class people do not wish to become upwardly mobile because it could lead to a loss of identity and change in community ( Akerlof, 1997 ; Friedman, 2014 ). Indeed, upward intergenerational mobility is associated with worse life evaluations in the United Kingdom—though not in Switzerland ( Hadjar and Samuel, 2015 ), although recent findings show substantial negative effects of downward mobility, too ( Dolan and Lordan, 2021 ). Over time, therefore, the degree of mobility in a population could influence the relationship between income and happiness in both positive and negative directions.

Additionally, social comparisons could drive the effects of higher income on happiness. Higher income might not benefit happiness if one’s reference group—that is, the people to whom we compare or have knowledge of in some form ( Hyman, 1942 ; Shibutani, 1955 ; Runciman, 1966 )—changes with higher socioeconomic status. As income increases, people might compare themselves to others who are also doing similarly or better to them, and then not feel or think that they are doing any better by comparison—or even feel worse ( Cheung and Lucas, 2016 ). This is one of the explanations for the well-known “Easterlin Paradox” ( Easterlin, 1974 ), which suggests that as national income rises people do not become happier because they compare their achievements to others. The paradox is debated ( Sacks et al., 2012 ). Additionally, some research shows that it is possible to view others’ greater success as one’s own future opportunity and for upward social comparisons to then positively impact upon well-being ( Senik, 2004 ; Davis and Wu, 2014 ; Ifcher et al., 2018 ). As with the role of mobility in the relationship between income and happiness, it is unclear whether the role of social comparisons would create a positive or negative impact over time and future research could explore this.

Final Remarks

Overall, our results provide some evidence that individual attainment in terms of income may not equate to the attainment of individual happiness—and could even be associated with less daily happiness, depending upon how income is measured and analyzed. These results suggest that how income is associated with happiness depends on how income is measured and analyzed. They provide some support to the idea that financial achievement can have both costs and benefits, potentially informing normative discussions about the optimal distribution of income in society.

Data Availability Statement

Ethics statement.

Ethical review and approval was not required for the study on human participants in accordance with the local legislation and institutional requirements. Written informed consent from the participants’ legal guardian/next of kin was not required to participate in this study in accordance with the national legislation and the institutional requirements.

Author Contributions

LK and KK contributed to conception and design of the study. LK organized the data, performed the statistical analysis in STATA, and wrote the first draft of the manuscript. KK performed additional statistical analysis in jamovi and wrote sections of the manuscript. All authors contributed to the article and approved the submitted version.

LK was supported by a London School of Economics PhD scholarship during early work and later by the National Institute for Health Research (NIHR) Applied Research Collaboration (ARC) West Midlands. The views expressed are those of the author(s) and not necessarily those of the NIHR or the Department of Health and Social Care.

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

Acknowledgments

LK thanks Professor Paul Dolan and Dr Georgios Kavetsos for their support early on in conducting this research, as well as Professor Richard Lilford for insights about multiple comparisons.

1 https://www.atusdata.org

2 In the ATUS this was Hispanic and Black, in GSOEP this was German origin.

3 In the ATUS this was whether the respondent had any physical or cognitive difficulty (yes/no), in GSOEP this was self-rated general health (bad, poor, satisfactory, good, and very good).

4 In the ATUS this was presence of children <18 years in the household, in GSOEP this was number of children.

5 This association was stronger and more precise when equivalizing income (dividing by the square root of household size), b  = −0.16, 95%CI = −0.06, −0.27, underscoring the importance of transparency in the treatment of income.

Supplementary Material

The Supplementary Material for this article can be found online at: https://www.frontiersin.org/articles/10.3389/fpsyg.2022.883137/full#supplementary-material

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Money can buy happiness: Here's how much you need and how to spend it, according to a financial therapist

• Money can buy happiness up to a point — studies indicate emotional well-being rises with income up to about $75,000.
• Researchers have also found that experiences make people happier because they enhance social relationships and are a bigger part of one's identity.
• Spending money on experiences or items that align with your values can increase your potential for happiness.
• This article was  medically reviewed  by  Alisa Ruby Bash , PsyD, LMFT, in Malibu, California. 

You know the phrase: money can't buy happiness. It turns out, that's not entirely true. Money can buy a certain degree of life satisfaction, depending on how much wealth you have and how you spend it. 

Research shows that emotional well-being rises along with income, up to a point. A 2010 study looked at surveys of 450,000 Americans and found that participants with higher incomes reported higher emotional well-being, up to an annual income of $75,000. After that, it drops off. 

Beyond simply having money, here's why being able to meet your basic needs, enjoying life experiences, and having social ties are also important factors for satisfaction and happiness in life.

Basic Needs

Lindsay Bryan-Podvin, LMSW , a financial therapist and author of "The Financial Anxiety Solution" says an annual income of $75,000 may not be the threshold for everyone. Being able to meet basic needs like food, housing, and healthcare are top priorities.  Then, the amount of satisfaction derived from income varies depending on factors like the cost of living in your area and your personal interests.

"The data is pretty clear that when we can financially take care of ourselves, our mental health is better," says Bryan-Podvin. "It's stressful to be on the grind all the time."

In fact, according to the CDC , adults living below the poverty level were three to four times more likely to have depression than adults living at or above the poverty level. 

The ability to meet basic needs without working multiple jobs also means you are more likely to have time for your friends and family, which is important for happiness. A Harvard study , which started in 1938 and tracked hundreds of men for nearly 80 years, collected data on both physical and mental well-being. The researchers found that close relationships, more than money or fame, keep people happy throughout their lives. 

Experience vs materials

Once you cover basic needs, whether money buys happiness may depend on what you spend it on, says Bryan-Podvin. 

There is a common theory that spending money on experiences will make you happier than spending money on material objects. Some studies back this up. A 2014 review found that experiences make people happier because they enhance social relationships, are a bigger part of one's identity, and are less likely to be compared to other people's experiences. 

A poll of more than 2,000 millennials in 2014 found that 78% prefer spending money on experiences or events compared to a material object. It's not just millennials. The same poll found that consumer spending on experience and events is up 70% since 1987. 

For some people, though, it may be buying a tangible item that brings the most happiness. "What research shows is if we have a very strong affinity for something, then we do get a lot of happiness out of buying that thing," says Bryan-Podvin, who gives the example of someone passionate about cars. 

When money doesn't buy happiness

One reason more money doesn't always equal more happiness is a tendency for what Bryan-Podvin calls "lifestyle creep." Meaning that when you are making more money, your expenses often go up.

For instance, you may end up spending money on things like a country club membership or dinners at more expensive restaurants. If this is happening, you may not feel like you don't have enough money even though you are making a substantial salary.  

Happiness also depends on how much you have to work to make that money. "You might be pulling in $300,000, which sounds great in theory, but if you are working 80 hours a week and can't enjoy the money you are earning, then what is the point?" says Bryan-Podvin. 

Bottom line

How much money a person needs to be happy varies. Happiness may depend on how much money is required to cover your own basic needs and what brings you joy personally.

For one person, that might be season tickets to the Yankees. For someone else, it might be a massage once a month or a new pair of running shoes. 

Ultimately, money can increase the potential for life satisfaction, depending on how you spend it. If you spend money on experiences or items that align with your values, you will increase your happiness, says Bryan-Podvin.

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• Main content

Greater Good Science Center • Magazine • In Action • In Education

Can Money Buy Happiness? It Depends on Why You’re Spending It

Imagine that someone gives you a cash gift and tells you that, instead of saving or investing it, you need to spend it right now. What should you put your money toward if you want to make yourself happiest?

According to past research , we’ll be happier if we spend money on an experience than if we buy a material object—like traveling or going out for a meal instead of buying the latest product we see on social media. For example, people report more gratitude when they spend on experiences rather than possessions.

On the other hand, we can all probably think of times when we’ve spent money on an experience that ended up not being worth it. Maybe you bought pricey event tickets to avoid missing out, only to realize on the day of the event that you’d much prefer a cozy night at home. Or perhaps you went out to dinner with a friend at a fancy restaurant, only to find that your friend was more focused on posting the meal to Instagram than having a deep conversation.

It turns out that there might be another factor at play beyond whether we spend money on an experience or a material item: According to a new study published in the British Journal of Social Psychology , it may also matter how our purchases align with our goals.

In the study, researchers asked 452 participants in an online survey to describe a recent purchase. They were asked to write about something they had spent money on in the last three months (ranging from about $60 to $1,200), excluding everyday expenses such as bills and groceries. After describing it, people were asked to indicate the extent to which the purchase helped to fulfill different goals. They also noted how much they felt the purchase contributed to their happiness and life satisfaction.

According to self-determination theory , goals reflect our intrinsic and extrinsic motivations. Extrinsic goals are things that other people expect for us: for example, working hard at a job not because you’re passionate about the work, but because you need the money or want a high-status job to impress others. Intrinsic goals, on the other hand, are ones that we have a strong internal motivation to pursue. In the survey, extrinsic goals included gaining wealth or social status, whereas intrinsic ones included cultivating relationships, helping other people, and contributing to growth, learning, and development.

The researchers found that, the more a purchase reflected people’s intrinsic goals, the more they thought it improved their well-being. In other words, the greatest well-being occurred when people spent money on something that was personally important to them.

To compare this finding with past research, the current study also asked participants to indicate to what extent their purchase was an experience or a material item. As in past research, participants did report higher well-being from experiences. However, when the researchers looked at both factors together, they found that how much a purchase reflected intrinsic goals explained more of the differences in well-being than whether something was material or experiential.

So, what does this research mean for our spending habits? Olaya Moldes Andrés, lecturer at Cardiff University and the study’s author, points out that we’re under a lot of pressure to spend money these days; just think about the number of targeted ads you see each time you open social media. However, this pressure to spend has a downside: In past research , Moldes Andrés has found that people who are exposed to more materialistic messages have lower well-being.

Before purchasing something, she recommends pausing to think about the reason for our purchase, and what use we will get out of it. If we’re spending money on trying to impress people or project a certain image (in other words, extrinsic goals), the purchase may not actually be worth it.

So, next time you’re planning to buy something, take a moment to think about whether it’s something you’re buying because you feel it’s what’s expected of you—or whether it’s truly something that you want.

About the Author

Elizabeth Hopper

Elizabeth Hopper, Ph.D. , received her Ph.D. in psychology from UC Santa Barbara and currently works as a freelance science writer specializing in psychology and mental health.

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The relationship between wealth and happiness – exploring the impact of money on life satisfaction.

Money and happiness have long been subjects of debate and speculation. Many people believe that money can buy happiness, while others argue that true happiness comes from within. But what is the real relationship between money and happiness?

Recent studies have shown that there is indeed a correlation between income and happiness, up to a certain point. Having enough money to meet basic needs and live comfortably can contribute to an individual’s overall happiness and wellbeing.

However, once a person’s basic needs are met, the relationship between money and happiness becomes more complex. Factors such as personal relationships, health, and a sense of purpose play a significant role in determining a person’s happiness levels.

So, while money can contribute to happiness to a certain extent, it is not the sole determinant of one’s overall well-being. Finding a balance between financial stability and other sources of happiness is key to leading a fulfilling and content life.

The Relationship Between Money and Happiness

Money and happiness have long been linked together, sparking debates and discussions on whether money truly buys happiness. While it is true that money can provide a sense of security and comfort, studies have shown that beyond a certain income level, the correlation between money and happiness diminishes.

Quality of Life: Research suggests that money can improve quality of life up to a certain point where basic needs are met. Ensuring access to necessities such as food, shelter, and healthcare can contribute to overall happiness.

Fulfillment: Money can also provide opportunities for personal growth and fulfillment. Investing in experiences, hobbies, or education can lead to a sense of accomplishment and satisfaction.

Social Connections: While money can enable social interactions and connections, it is the quality of relationships rather than the quantity that plays a crucial role in happiness. Spending time with loved ones and forming meaningful relationships, regardless of financial status, can be a key factor in overall well-being.

In conclusion, while money can contribute to happiness, it is not the sole determinant. True happiness stems from a balance of financial stability, personal fulfillment, and meaningful relationships.

Exploring the Question

Does money buy happiness.

The relationship between money and happiness is a complex and controversial topic that has long intrigued researchers and philosophers alike. While many believe that financial wealth can lead to greater happiness and overall well-being, others argue that true happiness stems from non-material factors such as relationships, experiences, and personal fulfillment.

Studies have shown that there is a correlation between income and happiness up to a certain point, beyond which the impact of money on happiness diminishes. While having enough money to meet basic needs and have a comfortable lifestyle is crucial for happiness, extravagant wealth may not guarantee lasting fulfillment.

Furthermore, research suggests that spending money on experiences rather than material possessions can lead to greater happiness. Experiences like travel, cultural activities, and time spent with loved ones have been shown to contribute more to overall well-being than the accumulation of material goods.

In conclusion, while money can certainly contribute to happiness to a certain extent, it is not the sole determinant of one’s emotional well-being. Exploring the question of whether money buys happiness involves considering the complex interplay between financial resources, personal values, and the pursuit of meaningful experiences in life.

When it comes to the age-old question of whether money can buy happiness, the answer is not as straightforward as one might think. While money can certainly provide comfort and security, its ability to bring long-lasting happiness is debatable. Research has shown that once basic needs are met, additional wealth does not necessarily lead to increased levels of happiness. In fact, studies have found that the correlation between money and happiness tends to diminish beyond a certain income threshold.

One reason for this phenomenon is the concept of adaptation. People have a tendency to adapt to their circumstances, including their income level, which means that a sudden increase in wealth may provide a temporary boost in happiness, but that boost is likely to fade over time as individuals get accustomed to their new financial status.

Furthermore, the pursuit of money can sometimes come at the expense of other aspects of life that are more closely tied to happiness, such as meaningful relationships, personal growth, and work satisfaction. In this sense, the relationship between money and happiness is complex and multifaceted, with various factors contributing to an individual’s overall sense of well-being.

While money can certainly contribute to happiness by meeting basic needs and providing a sense of security, its ability to buy lasting happiness is limited. Ultimately, true happiness may be found not in material wealth, but in the intangible aspects of life that bring fulfillment and meaning.

Impact of Income on Well-Being

Research suggests that income can have a significant impact on an individual’s sense of well-being. While money alone may not buy happiness, it can provide access to resources and opportunities that contribute to overall well-being.

Higher income levels are often associated with better health outcomes, improved access to education and healthcare, and a higher standard of living. This can lead to reduced stress levels and a greater sense of security and stability in life.

However, the relationship between income and well-being is complex and multifaceted. Factors such as individual values, social connections, and personal fulfillment also play a crucial role in determining one’s overall happiness and satisfaction with life.

It is important to recognize that while money can certainly impact well-being, it is not the sole determinant of happiness. Ultimately, a balanced approach that takes into account various aspects of life, including relationships, personal growth, and community involvement, is essential for achieving true well-being and fulfillment.

Psychological Aspects of Wealth

Understanding the psychological aspects of wealth is crucial when exploring the relationship between money and happiness. Studies have shown that the pursuit of wealth can have both positive and negative effects on an individual’s well-being.

On one hand, having financial security can alleviate stress and provide a sense of stability, leading to increased happiness. However, the relentless pursuit of wealth at the expense of other aspects of life, such as relationships and personal growth, can lead to feelings of emptiness and dissatisfaction.

It is important to strike a balance between financial success and overall well-being, recognizing that true happiness comes from a combination of financial security, fulfilling relationships, personal growth, and a sense of purpose.

Material Possessions vs Experiences

When it comes to finding happiness, many people often debate whether material possessions or experiences contribute more to one’s overall well-being.

While material possessions such as a new car, a designer bag, or the latest smartphone can bring temporary joy, studies have shown that experiences tend to have a more lasting impact on our happiness.

Experiences like traveling to new places, trying new activities, or spending quality time with loved ones create lasting memories that can bring us joy and fulfillment long after the moment has passed.

These experiences are unique to us and contribute to our sense of identity and personal growth, enhancing our overall well-being in the long run.

So, while material possessions may provide instant gratification, it is often the experiences we have and the memories we create that truly enrich our lives and bring us lasting happiness.

Strategies for Finding Balance

1. Prioritize experiences over possessions: Instead of focusing on acquiring more money and material things, prioritize experiences that bring joy and fulfillment. Engaging in activities that create lasting memories and meaningful connections with loved ones can contribute more to your overall happiness than material possessions.

2. Practice gratitude: Cultivate a sense of gratitude for the things you already have in your life. By appreciating the simple pleasures and blessings, you can find contentment and satisfaction without constantly chasing after more wealth.

3. Set boundaries with work: Strive to create a balance between work and personal life by setting clear boundaries. Make time for activities that recharge you and bring you joy, and avoid letting work consume all your time and energy.

4. Focus on personal growth: Invest in your own personal development and growth, as true happiness often comes from a sense of progress and accomplishment. Pursue hobbies, interests, and goals that bring you fulfillment and help you grow as an individual.

5. Practice mindfulness: Stay present in the moment and focus on the here and now, rather than getting caught up in worries about the future or regrets about the past. Mindfulness can help you appreciate the present moment and find inner peace and contentment.

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