does Money Make You Happy?
The old adage “money doesn’t buy happiness” has evolved in recent decades into the understanding that individual happiness increases with income.
Our collective understanding of the relationship between money and happiness has taken on a face in recent decades, as researchers increasingly uncover close links between individuals’ earnings and their day-to-day happiness.
In recent decades the old adage “money doesn’t buy happiness” has evolved into the understanding that individuals’ happiness increases with income — up to about $75,000 annually, thanks to a 2010 Princeton study. In 2021, new research from the University of Pennsylvania’s Wharton School revealed that there is no such plateau, changing public perception.
The research, led by Wharton School Senior Fellow Matthew Killingsworth, collected 1.7 million emotional snapshots across more than 33,000 participant days and found that all measures of well-being rose with income, regardless of the dollar amount.
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“There’s no critical level of income that really changes that relationship,” says Killingsworth. And while happiness is correlated with other life factors such as education and marital status, they say their findings suggest that the relationship between income and happiness is stronger.
However, the close connection between money and happiness may have more to do with a person’s desire for control than the desire for material possessions.
“Money gives people the autonomy and freedom to live the lives they want to live,” says Killingsworth. “It’s not necessarily because they’re buying fancier cars and having nicer meals, but because a lot of money allows them to exercise their intentions and desires as agents in the world. Through resources.”
Another study released this January by Harvard Business School assistant professor John M. Jakimowicz’s leadership, further confirms the many ways money can be used as a problem-solving tool that produces greater overall happiness.
In this study, 522 participants with incomes ranging from less than $10,000 to more than $150,000 tracked daily events and emotional responses in a diary for 30 days. Although there was no significant difference in the frequency of stressful events experienced by participants across income levels, the results showed that money was able to reduce the intensity of the emotional response to those events.
And overall, researchers determined that people with higher incomes report higher levels of life satisfaction.
“It’s not that the rich don’t have problems,” Jackimowicz told Harvard Business School’s Working Knowledge publication, “but money allows you to solve problems and solve them quickly.”
Today, as inflation continues to eat away at Americans’ purchasing power, the cost of happiness may also increase. U.S. High salaries have not kept pace with inflation, but principles revealed in recent research on happiness and money can help individuals make the most of what they have.
“It’s very easy to get the wrong message out of that work,” says Elizabeth Dunn, a professor at the University of British Columbia and chief science officer at Happy Money. “Money is important to happiness, that’s never in doubt. But it’s not true that more money automatically brings happiness.
Instead, he says, consumers should more closely evaluate how they’re spending their money.
“When inflation rises, you have fewer dollars in your wallet, so you have to make more careful choices about what to buy,” says Dunn. “People get more pleasure from buying experiences than buying physical things.”
Furthermore, Killingsworth’s research found that the more people defined their personal success in terms of money, the less happy they were. Therefore, they suggest that individuals take a holistic approach.
“Some people might say, ‘Matt’s study shows that I should make as much money as possible.’ I’d probably say more money is better, but it’s one of many factors that matter,” says Killingsworth. “Even though my real dollars are falling, especially in times of inflation, one way to think about it is that you can maintain a sense of control over your life in a way that’s not dependent on money.”