One of the ultimate questions of life: Can money buy happiness? Ask two different people, and you’re likely to get conflicting answers. Some would argue that money buys them the things that make them happy, and others would note how happiness is a relative and intrinsic. Regardless of your stance, I’m going to break down what we know about money and its relationship with happiness.
You may be surprised by the results.
The Ideal Income
Believe it or not, researchers have studied the correlation between income and satisfaction — and in more than one study. One of the most recent ones was conducted by Purdue University in 2018. By using data from the Gallup World Poll and controlling different demographics, researchers were able to pinpoint the ideal income amount for both life satisfaction and emotional wellbeing.
It was found that the worldwide ideal income for life satisfaction capped at $95,000. After that, there was found to be a decline in happiness. For emotional well-being, the ideal income had a range of $60,000-$70,000 worldwide. Through the ages, one thing has remained consistent: People need a certain amount of money to reach ideal happiness, and it’s right around the median income amount.
The median income amount allows you all the basic and most necessary needs, like a roof over your head, food on the table, and adequate healthcare.
The Problem with More Money
Because we live in a society that loves to compare, and you tend to compare yourself to those closest to you, it’s hard not to do the same thing when money is involved. You’re more likely to get wrapped up in the idea that you need a bigger house or the same designer clothes as your neighbor or a state-of-the-art theater room like your best friend.
This is the danger when it comes to more money. It’s actually proven that we see a decline in happiness when we can’t get on the same status as the people in our community.
Sonja Lyubomirsky, a professor of psychology at the University of California who interviewed with CNBC Make It, says that “every time we experience kind of a rise in income, our aspirations and expectations rise a little bit.”
Deepak Chopra, Personal Capital’s newest Financial Hero, explains the low point of his financial wellness journey: “I was spending money that I hadn’t earned to buy things that I didn’t want or need to impress people that I didn’t care about. This is the kind of stress mindset that leads to disaster.”
This is exactly what happens in the race to acquire more in order to “beat out” those around us. But those fleeting moments of happiness are just that — fleeting.
Here’s What Will Bring You More Happiness
While there is a correlation between the amount you earn and how happy you are, and that amount eventually starts to level off and decline, there are a few ways to spend your money that have been found to increase happiness levels.
- Take a job that gives you a clear-cut mission and purpose.
This is particularly true for Millennials, who are more concerned with being part of something greater than themselves than constantly trying to bring in more money. Their purpose is no longer how high they can get their salary, but how fulfilled they are with the type of work that they do.
- Give to loved ones or causes you believe in.
Granted, there is a certain level of wealth needed to be able to give to charity or take care of a loved one. When that level is reached, donating to a cause you care about or paying for something as big as a family vacation or as small as a birthday cake can go a long way for your happiness levels.
- Purchase services that grant you more time.
For someone who does have the financial means necessary, freeing up time by hiring someone to do household chores, running errands, or looking after small children can boost happiness and life satisfaction. You can also find ways to automate or outsource tasks with technology.
- Invest in experiences.
Remember that commonly used mandate muttered by some wise, anonymous person? “Collect experiences, not things.” Turns out, it’s true. Using your money to make memories rather than gather material items can lead to a happier life.
Deepak says that fulfillment and happiness come “when you use money for joy, for pleasure, for experiences that you’ve never had before, for helping others, and for creating financial confidence.”
Next Steps for You
The relationship between money and happiness? It’s complicated. However, it’s easy to get a handle on your finances with free, online financial tools. I use Personal Capital to better understand how I’m spending and saving my money, how my investments are working for me, and how I can better utilize what I’ve earned.
As someone who is privileged enough to have certain financial opportunities that others haven’t, I believe in the importance of using our money for good — to uplift, support, elevate others, and give back to those who need it most. As Deepak put it: “The fastest way to be happy is to make someone else happy.” And I have to agree with him.
Personal Capital compensates Tori Dunlap (“Author”) for providing the content contained in this blog post. Additionally, in a separate referral arrangement between Author and Personal Capital Corporation (“PCC”), Author is paid $70 and $150 for each person who uses Author’s webpage (www.HerFirst100k.com) to register with Personal Capital and links at least $100,000 in investable assets to Personal Capital’s Free Financial Dashboard. As a result of these arrangements, Author may financially benefit from referring potential clients to Personal Capital and/or be incentivized to present blog content that is favorable to PCC. No fees or other amounts will be charged to investors by Author or Personal Capital as a result of the Referral Arrangement. Investors that are referred to PCC and subsequently subscribe for investment advisory services provided by PCC’s affiliated adviser, Personal Capital Advisors Corporation (“PCAC”) will not pay increased management fees or other similar compensation to Author, PCC or PCAC as a result of this arrangement. Additional information about PCAC is contained in Form ADV Part 2A available here.