They say money can’t buy happiness, but we’d be lying if we said most of us wouldn’t start smiling after finding a Ben Franklin outside of our front door. I sure would! There’s always been some connection between money and happiness, even if the connection isn’t cookie-cutter for everyone. Today we’re diving into three of the most common theories around money and happiness to figure out what’s legit and what is just clickbait. Then, we’ll put it all together to share the largest studies on what really drives happiness and how money is tied into it all.
1. Happiness plateaus after $75,000.
You might be familiar with a decade-old study by Princeton University authors that looked into people’s salaries and how they correlated to their levels of happiness. What most people took from that study was that day-to-day happiness rose as annual income increased, but after about $75,000 per year, happiness plateaued and was around the same, no matter how much more you made.
By the way, if you have a bit of cash in the account and think someone may be interested in your wallet more than they are in your personality, check out another video we made called “11 Signs He’s Using You for Money.”
Okay, back to business. So, the peak level of human happiness is achieved when you earn that annual 75k paycheck, right? Well, not exactly.
Firstly, that study was published in 2010, so a $75k salary would now equal around $105,800. You sure don’t get as much bang for your buck with inflation nowadays.
Alright, so a little over 6-figures should get me on the happy train. Am I right? Eh, still not so much. To dive a little deeper, let’s debunk a second theory that birthed the idea of Keeping Up with the Joneses.
2. Happiness is correlated to how much you own.
Most of us have been conditioned to want shiny new things, even if it’s for fleeting moments. I mean, dang do I want the newest Tesla.
There’s nothing wrong with new things. I mean, we have all bought something at some point that we continuously use and continue to appreciate. In the Princeton study, they differentiated between two aspects of “happiness” – or, put in a better term, well-being – and those two aspects are emotional well-being and life evaluation. Emotional well-being is what it sounds like – your perceived emotional experiences that add to or take away from the pleasantness of your life. Life evaluation, on the other hand, is how you would describe your life when you think about it.
The study found that people’s life evaluations kept rising no matter how much they made. The more things they had and could afford, the more they would speak positively about their life. Emotional well-being, on the other hand, is what plateaued at $75k.
So, to summarize, more things could make your life better in theory. You know you have it made when you can go anywhere, anytime, anyway you want. But emotionally, on the inside, that’s a whole different ballgame which brings us to theory number three.
3. Happiness is correlated to status.
If you make a ton of money, your life on paper is good. Others likely see your cash displayed somehow and know you’ve got it made. You have something called status, which psychologically is defined as the level of respect and honor associated with a person’s position in society. I see a red flag right in that definition; you can’t buy my honor with cash. I’m sure we all know or have heard of some rich guy or girl who throws money away and seems to have quite the crappy personality. Sure, some people may still respect them because of their bank account, but honor is a tougher buy.
UPenn’s Matthew Killingsworth took the Princeton study and gave it a run for its money in 2021. UPenn took another 33,000 participants and got their in-the-moment input on their feelings during daily life by using a modern-day app. Killingsworth measured evaluative well-being, which is similar to life evaluation, but instead of emotional well-being, he measured experienced well-being, which focused on how people felt each moment they filled out the app’s survey. His study found that all forms of well-being rose with income – with no plateau.
Eureka! So, money does make us happier, as does status! Finally, a conclusion.
Almost… let’s put it all together and see what the final statement was once UPenn and Princeton decided to join forces.
4. Happiness is correlated to your sense of control over your life and your relationships.
In the name of science, the researchers from Princeton and UPenn came together to see what the real correlation was between money and happiness. Does money give us more joyful moments throughout the day or not? Is there a cap on how much joy cash can bring?
The conclusion of this collaboration was detailed and eye-opening. The researchers realized that each group of participants could be divided into two subgroups: a happy majority and an unhappy minority.
The happy majority are people who have higher emotional well-being. These people are more positive and have healthier relationships. They also feel that their money gives them a better sense of control over their day to day. The second, unhappy minority is the group whose happiness plateaus at a salary cap – even in the UPenn study.
So, here’s how money and happiness work together. Money can make you happier by providing more of your needs up until around $100k. Once you get there, though, happiness will only continue to increase if you have a healthy emotional well-being, which means you have a sense of resiliency, are physically healthy, and nurture positive relationships in your life. A million dollars won’t do much if you have a life-ending diagnosis or no one to love in your life. Once you have a healthy body, mind, and emotional well-being, you can then use your money to get more of what you want – like experiences with loved ones, not just another pair of shoes.
Check out: How to make money off of YouTube
Conclusion:
Happiness isn’t a one-ingredient meal. It takes effort, balance, cash to pay the bills, and surrounding ourselves with the right people, but we can all achieve it at our own pace and with our own perspective. What’s your magic number to reach peak happiness?