Can Money Buy Happiness?

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Yes, it’s true: Endlessly chasing riches won’t make you happier. But research indicates that money can buy happiness -- insofar as it brings you food, shelter, clothes, medicine, education and basic security.

You can be happy and rich — or, to put it more accurately, happy and financially secure. While it’s true that no amount of money can “buy” you happiness, there’s plenty of evidence that enjoying a certain level financial security can make you happier overall.

Let’s take a look at the numbers …

Can Money Buy Happiness?

Psychologist Daniel Kahneman and economist Angus Deaton conducted a study in 2010 that found that money and happiness are correlated, up to the first $75,000 in income. For example, if a person earns $30,000 annually and they get a raise to $40,000, this extra $10,000 can measurably boost their happiness and lower their stress levels.

Of course, this benchmark is an average. An amount like $75,000 can yield different results based on factors like household size, geographic location and overall cost-of-living. $75,000 for a family of 6 living in Manhattan is vastly different than $75,000 for a single person or a couple living in Cincinnati.

The $75,000 number also represents different outcomes based on how much debt a person carries; earning $75,000 annually when you're debt-free will feel different than earning $75,000 annually if you carry $48,000 in student loans, $30,000 in credit card debt and another $15,000 in car loans, in addition to a $325,000 mortgage balance on a house.

Rather than looking at that $75,000 number as a precise figure, take it for the broader message: Income correlates to happiness insofar as it allows you to reduce the stress of your day-to-day life. The happiness doesn't come from "having more stuff," it comes from freedom from worry.

The researchers also note the difference between day-to-day happiness and life satisfaction.

While higher incomes don't necessarily correlate with greater day-to-day happiness, they found, getting a raise increases your sense of overall satisfaction, regardless of your income level. Raises are an indicator that you're doing a good job; the satisfaction is derived not from the money itself but from the message it sends.

“High incomes don’t bring you happiness, but they do bring you a life you think is better,” the researchers were quoted as saying.

Once you're already well-off, more wealth doesn't necessarily increase happiness (though it doesn't decrease it, either). In a study expected to be published in late 2015, according to sciencedaily.com, researchers at Harvard, Yale and the University of Mannheim found that people with a net worth of $1 million or more don't necessarily report a perfect "10" on the happiness scale, with most citing that they'd like to triple their income.

What Does This Mean for You?

Our society places too much emphasis on money and materialism. We’ll be the first to acknowledge that.

But that doesn't mean that money itself is inherently "evil" or causes unhappiness. On the contrary, financial security (having an emergency fund, being debt-free, saving for retirement and health costs) can improve your life, lower your stress and give you greater freedom.

 

Whatever your ideal standard of living, when you’ve reached a place where you’re debt-free, able to pay your bills and have a healthy savings account and retirement fund to fall back on, you will most likely find yourself more satisfied with your life in general.

You’ll be able to deal with adversities as they arise without seeing them as calamities, and you’ll feel peace in knowing you’re able to take care of yourself and your family, both now and in the future.