Money Actually CAN Buy Happiness – But Only Up To A Point

September 4, 2017

When it comes to happiness, is money overrated, or underrated?

If you grew up without much money, like I did, I’m willing to bet that you spend a lot of time thinking about money.

It’s one of those things that, the less you have of it, the more space it takes up in your consciousness. They say money can’t buy happiness, but I’ve always suspected that people who truly believe this have never spent a sleepless night in a cold sweat, wondering how they’re going to pay their rent, or had to charge groceries to a nearly maxed-out credit card they knew they couldn’t pay off.

In 2010, a study came out that validated my long-held feelings about money: it found that yes, money can buy happiness – but only up to a point. The study, done by Daniel Kahneman and Angus Deaton at Princeton University, placed that happiness threshold at $75,000 US dollars per year. People who make far less than that tend to be fairly unhappy; the closer their income comes to that benchmark, the happier they are. But here’s the interesting thing: once they reach that $75,000 per year amount, more income has no further effect on their happiness.

(It’s worth noting that a more recent study updated that $75,000 USD amount to reflect cost of living. For example, in Hawaii, you don’t hit the happiness ceiling until you rake in $122,175 USD annually, while folks in Mississippi only need $65,850 a year to max out their money = happiness potential.)

This begs the question: what exactly is happiness, anyway? Our culture is obsessed with it, but our grasp of what it means, and how to achieve it, is pretty poor. And what role does money play in our feelings about our lives and assessments of our own happiness?

Two ways of looking at happiness

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In the Princeton study, researchers looked at two types of happiness: emotional well-being and what they called “life evaluation.” Emotional well-being is how you feel on a day-to-day basis: how often you experience joy, sadness, anger, anxiety, or feelings of love and contentment. Basically, all the feels. This is what, in general, makes people feel that life is good, bad, or somewhere in between.

Life evaluation, however, refers to how you feel about your life when you really stop and think about it objectively. If you’ve ever felt inexplicably sad when everything in your life seems to be humming along just fine, or conversely, if you’ve felt joyful in the midst of extremely shitty circumstances, then you understand the distinction.

Researchers found that while income and education levels correlated closely with life evaluation (those with more money and education said their lives were better), they didn’t necessarily have the same effect on emotional well-being. It was emotional well-being, not life evaluation, that stopped improving once people hit a certain income ceiling. The things that affected emotional well-being, even after people broke the $75,000 barrier, were things like health and loneliness – not money and education. This makes a lot of sense when you think about it. After all, money might be able to make people happy up to a certain point, but it can’t make them healthy, and everyone knows it can’t buy you love.

The price of happiness

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So, why does money make us happier up to a certain point, and then stop making us happier? It’s not that complicated, really. It takes a certain amount of money to secure the things we all need to have in order to live: shelter, food, clothing, and the newest iPhone. (Okay, maybe not the iPhone. But a reliable wi-fi connection, definitely.)

Think about Maslow’s hierarchy of needs. In 1943, psychologist Abraham Maslow came up with a theory of human development that’s illustrated by a pyramid. On the bottom, you have physiological needs (air, water, food, shelter, sex). Next you have the need for safety – this means having not only a place to live, but a safe place to live, having a job that provides financial security, health insurance, and the like. The third layer up is the need for social belonging – friends, family, co-workers, etc. After that you have the need to be respected and valued, to have a solid sense of self-esteem. And at the very top, you’ve got self-actualization: this is the point where you’ve become the best version of yourself that you possibly can, and fulfilled your true potential as a human.

Now think about which of these needs can be met by having enough money. You can climb a couple of steps up the pyramid with cash, and maybe get a boost on the third step, but that’s about it. So it makes sense that money stops being helpful to our state of emotional well-being at a certain point. A certain level of happiness has a price – but you can’t buy the highest levels of happiness.

How to be happy (even if you don’t have any money)

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Here’s the million-dollar question: can you still be happy, even if you’re flat broke? Sure. The key is finding a way to satisfy those bottom levels of Maslow’s pyramid, while focusing on the top ones – which are free to everyone. That means working on your relationships to make sure they are strong, honest, and loving, and working on yourself, too. It means learning to ride the waves and embrace change when the going gets rough, and not letting fear get the best of you.

Some of the most unhappy people I’ve ever met are also the wealthiest people I know. When I’m between apartments because I can’t afford rent, it’s tempting to want to trade places with these folks. It makes me angry sometimes, when I think about their giant bank accounts, and how miserable they are. It frustrates me that they don’t seem to appreciate what they have. But while I might readily trade checking account balances with them, I know I’d never trade lives with them.

Full disclosure: I’ve never made even close to $75,000 a year. Ever. In spite of that, I’m pretty happy most of the time. Some of the best moments of my life have been right smack in the midst of financially-induced stress and uncertainty. I can only imagine how happy I’d be if I made $75,000 a year…or wait – make that $99,150 a year.

I live in New York; happiness is more expensive here.

Images via tumblr.com, signwithrobert.com, reddit.com.

Comment: What do you think is the relationship between money and happiness? Does money make you happy?

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