Can money buy happiness?

We’re on a “treadmill of consumption,” continually buying more and more stuff. Yet, even as our incomes rise, we don’t seem to get any happier. So, future tycoons, will having more money increase your happiness? Or are you simply speeding up the treadmill?

We’re gonna be rich! ~ Butthead

Across all socio-economic levels, people believe that wealth will solve all their problems. Young persons are especially swayed. A study by The Shullman Research Center (2014) found roughly five-in-ten (49%) of Gen NeXters want to “get rich” compared with only 6% for Gen-Xers and 14% for Boomers. This is a staggering difference. In reality, few NeXters will become wealthy (see: Bill Gates did it. So did Oprah Winfrey).

Money isn’t everything…

Analyzing data from more than 450,000 U.S. residents, Daniel Kahneman and Angus Deaton (2010) found that not having enough money results in emotional pain, lowered self-esteem, anger, and unhappiness (duh). Less intuitive, however, was the finding that as we earn more money, day-to-day happiness rises until our income reaches about $75,000. People making more than this amount of money did not feel they gained additional happiness, the research found.

Of course, this doesn’t imply that you wouldn’t be happy with a chunky raise from $80,000 to $100,000. Or that you would be indifferent to an equivalent drop in income. What it does suggest is that above a certain level of stable income, your emotional well-being is influenced by other factors in life than stressing about money for survival, safety, and pizza.

But it sure helps.

By contrast, research by economists Betsey Stevenson and Justin Wolfers (2013) found that the more money people have the happier they are, regardless if they are rich or poor. More affluent parents tend to provide better healthcare and higher quality education for their children. Higher income families are more likely to have a parent who doesn’t work full-time. And more disposable income buys convenience and time. Their study found zero unhappy millionaires.

So, what’s the take home message? The more dough you have, the more likely you’ll feel you have a better, more satisfying life. But a large bank account is not needed to achieve your maximum amount of emotional well-being. Money does have the ability to buy happiness, but what’s more important is how you spend it:

Buy experiences vs. things. Satisfaction with material purchases wears off fairly quickly. But experiences often become more valuable with time, particularly if shared with others. And paying for these ahead of time creates anticipation about wonderful possibilities!
Spend it right. Spending money to save time (e.g., on housekeeping, delivery, or car services) makes people happier than spending money on physical things (Buying Time Promotes Happiness – 2017). This applies to all income classes, except the very poor.
Look in the mirror. Researchers find that young persons who are focused on money, fame, and image tend to be less likeable and less empathetic towards other people. In addition, they are more likely to be depressed and unsatisfied with life.
Invest in social bonds. Cultivate and maintain intimate, reliable relationships—the trait most shared by happy people seems to be close connections with family and friends. Spending money on others boosts happiness more than spending it on numba one.

To achieve true well-being in our daily life, the prescription for happiness, regardless of personal economic station, is simple: have meaningful relationships, enjoy what you do, maintain good health, and have something to hope for. No, money isn’t everything. But it can make our misery a little more comfortable!