How Much Money Does it Take to Make You Happy?

At what income level are people most happy?

Posted Sep 16, 2010

The age-old question of whether money can make a person happy is the topic of a recent series of studies by Nobel-prize winning psychologist, Daniel Kahneman and his colleagues. Using a large Gallup survey, they conclude that happiness increases along with income - but only up to a point. Happiness rises up to an annual income of $75,000, but there is no further increase in beyond that point.  Satisfaction with life, however, continues to rise with income.

The researchers also explored both the "cognitive" (satisfaction with life) and the "emotional" side of happiness - a composite of reported happiness, enjoyment, and frequent smiling and laughter. Although emotional happiness rises up to the $75K mark (which is near the average annual income, but only 1/3 of US households make more than $75K), there are other factors that are better predictors of emotional happiness, such as being in good health, or not reporting loneliness.

On the flip side, the research explored feelings of worry and sadness (they called this "blue affect") and reported stress. The researchers comment that beyond an income of $75,000, "higher income is neither the road to experienced happiness nor the road to the relief of unhappiness or stress..."

I think the biggest takeaway from these research findings [and I think this gets lost in the reporting that focuses on the higher income effects] is the devastating impact of poverty on happiness and well being and its increase in emotional pain and stress. Although ill health and stress affect persons of all incomes (stress may be a reason that satisfaction doesn't rise for those with 6 and 7 figure incomes), life's misfortunes - illness, divorce, dependent care - have a much greater impact on the poor. As Kahneman, and his coauthor Angus Deaton, observe, "lack of money brings both emotional misery and low life evaluation."

Here are some other interesting findings from this and other related research:

People tend to get happier on the weekends, and weekends strongly reduce stress.

Being a college graduate is associated with greater life satisfaction, but more reported stress.

Older people have greater emotional well-being and a big reduction in the incidence of stress and negative emotions.

Smoking is a strong predictor of negative outcomes - low levels of well being and unhappiness.

You can read the report here:

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