Can Money Buy You Happiness? Yes, It Can. However…
Having a higher income doesn't mean you also have enough of the other things that make you feel truly happy and wealthy (relationships, hobbies, time).
The age-old question of whether money can buy happiness has perplexed philosophers and economists for centuries. While conventional wisdom states that money, beyond basic needs, cannot purchase a person’s search for happiness, the research paints a more nuanced picture.
I grew up frequently hearing the biblical phrase, "The love of money is the root of all evil." This warns that prioritizing money above all else corrodes the soul because money becomes one’s god. However, now that I’m in my 60s, after raising five boys and accumulating 15 grandchildren, I believe the greater danger lies in worshipping money by surrendering your autonomy to its lure and becoming enslaved to the growth of money over the pursuit of wealth (happiness).
In this context, “money” is an object or commodity, something to be controlled, whereas “wealth” is having enough: enough love, friends, hobbies, time and money. Therefore, money is a subset of wealth, not the other way around.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Happiness plateaus at $75,000?
Foundational research in 2010 by economist Angus Deaton and psychologist Daniel Kahneman discovered that, up to a point, higher incomes correlate with greater day-to-day contentment. But this effect disappears at an annual salary of about $75,000. Beyond that level, more money does not seem to move the needle on happiness.
This research supported the paradigm of my early years. The scoop from high school and university educators was that money buys happiness to the point that basic needs are met. Think Maslow’s hierarchy of needs. After that point, increased revenue has diminishing returns. Therefore, the initial research was a rule of thumb in philosophical conversations regarding the theme of happiness and money.
Matthew Killingsworth from the Wharton School at the University of Pennsylvania recently presented findings that challenge the plateau theory. His research reveals that there is no monetary threshold at which money's capacity to improve well-being diminishes. On the contrary, its positive impact appears to persist and even increase across all income levels.
One explanation for this lies in perceived control. Money enables choices and freedoms that are hard to attain otherwise. As income grows, so do available options for how to live. This expanded autonomy and opportunity, in turn, boost well-being.
Money and subjective well-being
A collaborative analysis by scholars from the University of Pennsylvania and Princeton University unveils a complex relationship between money and subjective well-being. Their research delineates how increased earnings relate to enhanced day-to-day mood for most individuals while also identifying a subset for whom higher incomes fail to boost happiness.
Three key findings merit consideration. First, there's the notion that beyond a certain threshold, additional money ceases to significantly impact well-being. Second, an opposing perspective suggests that there is no discernible limit, with money consistently enhancing quality of life as income grows, affording greater autonomy and opportunities. Last, researchers have identified a segment for whom the level of income appears to have little bearing on happiness, regardless of how much they earn.
A constructive collaboration
Seeking to reconcile their contradictory findings, the researchers collaborated with the addition of Professor Barbara Mellers as an impartial, third-party arbitrator. Their adversarial collaboration integrated rigorous statistical analysis of previous data on both earnings and happiness levels.
Additionally, their investigative approach encouraged the direct questioning of underlying assumptions between the two camps. Through this constructive back-and-forth engagement, powered by substantial data review and a debate of ideas amongst the whole team, the aim was to reach an elevated synthesis.
So, which is it? Does the money-happiness connection fade out or keep strengthening? Killingsworth summarized it.
"For most people, larger incomes are associated with greater happiness. The exception is people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help. But for everyone else, we found increased income related to feeling happier across income levels, even into wealth.”
This aligns closely with my own findings about prioritizing money over purpose and people. When we view money as the scorecard of success or when we sacrifice too much to pursue it, our joy quickly crumbles. As Killingsworth notes, “Those equating money and success ended up unhappier despite higher pay.”
The bottom line
Surrendering one’s soul or sanity chasing dollars and glory doesn’t work. True prosperity fuses financial stability with meaning, relationships and service. If money leaves you feeling empty inside, no amount will ever fill that void.
There are currently 58 million Americans age 65 and older, and about 10,000 individuals are joining them daily. Despite this trend of more people retiring from the accumulation phase, precious little is being done to address their transition into a new lifestyle. Financial planners and their clients would benefit from shifting focus away from rates of return and concentrating on developing strategies for utilizing the accumulated money to secure a fulfilling lifestyle called wealth.
Related Content
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Dr. Richard Himmer is a seasoned professional with expertise in Emotional Intelligence (EI), Clinical Hypnotherapy and Workplace Bullying prevention. He holds an MBA, a master’s degree in psychology and a PhD in Industrial and Organizational Psychology. He combines academic knowledge with practical experience. His doctoral dissertation focused on the Impact of Emotional Intelligence on Workplace Bullying, showcasing his commitment to understanding and addressing complex workplace dynamics. Dr. Himmer leverages the subconscious (EI) to facilitate internal healing, fostering healthy interpersonal relationships built on trust and respect.
-
How to Help Your Kids Without Ruining Your Retirement
Here are some general considerations to ensure the gift of assets to your kids will not negatively affect your financial future.
By Mario Hernandez Published
-
AI to Power the Next Generation of Robots
The Kiplinger Letter There's increasing buzz that the tech behind ChatGPT will make future industrial and humanoid robots far more capable.
By John Miley Published
-
How Annuities Can Help You Retire Early and Delay Social Security
Waiting until 70 to claim Social Security benefits can pay off, so how do you bridge the gap between giving up your paycheck and filing for benefits?
By Ken Nuss Published
-
How to Get Your Kids to Step Off the Gravy Train
A surprising number of young adults live with their parents. Setting some financial ground rules could get the kids out on their own faster.
By Neale Godfrey, Financial Literacy Expert Published
-
Spring Is a Good Time to Clean Up Your Finances, Too
While you’re decluttering your home for spring, consider also taking a crack at cleaning up your finances and old paperwork.
By Tony Drake, CFP®, Investment Advisor Representative Published
-
Is Your Retirement Solution Hiding in Plain Sight?
Here’s how to use your home equity in combination with an annuity contract to produce late-in-life income.
By Jerry Golden, Investment Adviser Representative Published
-
How to Choose Your Trustee or Executor of Your Will
Above all, you should choose someone you trust, keeping in mind that acting as a trustee or executor can be a complex, thankless and sometimes long-term job.
By John M. Goralka Published
-
Three Steps for Women to Take Control of Their Finances
These strategies are especially for women who are new to managing their money because of divorce or the death of a spouse.
By Emily Glassman Published
-
How AI Can Help Take the Emotion Out of Investor Decisions
AI-driven recommendations can complement human judgment, leading to more rational choices that aren’t as influenced by biases and blind spots.
By Francis Geeseok Oh Published
-
Can You 1031 Exchange into a REIT?
No, you can't, but two other REIT-like alternatives let you defer capital gains taxes while giving you exposure to institutional-quality real estate assets.
By Daniel Goodwin Published