Some say that wealth increases happiness because it provides greater security and greater access to resources
. Economist Richard Easterlin conducted studies on income and happiness in the 1970s and found that richer people are usually happier than poor, but only to a certain income level.
At some point, the amount of money people made compared to their peers became more important in determining their happiness, Easterlin found. There also are other factors influcencing happiness.
You’ve heard cliches about money’s inability to buy happiness and seen caricatures of miserable rich people, but the truth may be, unsurprisingly, somewhere in between.
“Most people think of money as some kind of unmitigated good. But some recent research suggests that this may not actually be the case,” said Paul Piff, PhD, of the University of California, Irvine.
Piff is lead author on new research published in the journal Emotion, which finds that rich people and poor people both experience plenty of happiness, but are likely to experience it in different ways.
You don’t want to be rich—you want to be happy. Although the mass media has convinced many Americans that wealth leads to happiness, that’s not always the case.
Money can certainly help you achieve your goals, provide for your future, and make life more enjoyable, but merely having the stuff doesn’t guarantee fulfillment.
This book will show you how to make the most of your money, but before we dive into the details, it’s important to explore why you should care.
It doesn’t do much good to learn about compound interest or high-yield savings accounts if you don’t know how money affects your well-being.
If personal finance were as simple as understanding math, this book wouldn’t be necessary; people would never overspend, get into debt, or make foolish financial decisions.
But research shows that our choices are based on more than just arithmetic—they’re also influenced by a complex web of psychological and emotional factors.
This chapter gives you a quick overview of the relationship between money and happiness.
You’ll also learn techniques for escaping the mental traps that make it hard to be content with what you have. As you’ll see, you don’t need a million bucks to be happy.
The big question is, “Can money buy happiness?” There’s no simple answer.
“It seems natural to assume that rich people will be happier than others,” write psychologists Ed Diener and Robert Biswas-Diener in Happiness (Blackwell Publishing, 2008).
But money is only one part of psychological wealth, so the picture is complicated.”
There is a strong correlation between wealth and happiness, the authors say: “Rich people and nations are happier than their poor counterparts; don’t let anyone tell you differently.”
But they note that money’s impact on happiness isn’t as large as you might think. If you have clothes to wear, food to eat, and a roof over your head, increased disposable income has just a small influence on your sense of well-being.
To put it another way, if you’re living below the poverty line ($22,050 annual income for a family of four in 2009), an extra $5,000 a year can make a huge difference in your happiness.
On the other hand, if your family earns $70,000 a year, $5,000 may be a welcome bonus, but it won’t radically change your life.
So, yes, money can buy some happiness, but as you’ll see, it’s just one piece of the puzzle. And there’s a real danger that increased income can actually make you miserable—if your desire to spend grows with it. But that’s not to say you have to live like a monk. The key is finding a balance between having too little and having too much—and that’s no easy task.
He and his colleagues surveyed 1,519 people, asking them for their household income and questions designed to determine how often they experience seven emotions tied to “the core of happiness:” amusement, awe, compassion, contentment, enthusiasm, love and pride.
Generally, richer people reported experiencing more positive emotions focused on themselves like contentment and pride, while poorer people experienced more outward directed emotions like compassion and love.
“These findings indicate that wealth is not unequivocally associated with happiness,” said Piff. “While wealthier individuals may find greater positivity in their accomplishments, status and individual achievements, less wealthy individuals seem to find more positivity and happiness in their relationships, their ability to care for and connect with others.”
A simple explanation may be that wealth provides more self-sufficiency while bonding with others can be an important part of surviving life and coping for lower income people.
“Poverty heightens people’s risks for a slew of negative life outcomes, including worsened health,” Piff explains. “Wealth doesn’t guarantee you happiness, but it may predispose you to experiencing different forms of it — for example, whether you delight in yourself versus in your friends and relationships. These findings suggest that lower-income individuals have devised ways to cope, to find meaning, joy and happiness in their lives despite their relatively less favorable circumstances.”
Other studies have found that levels of happiness generally go up as income rises, but not past a certain point (often cited as around a $75,000 annual income). Makes you wonder if the key to ultimate happiness is having enough to be self-sufficient, but not so much that you never have to lean on a friend now and then.