Two Nobel laureates have found a price tag to it
How many yachts do you need to feel happy once and for all?
More money will buy you more happiness.
This is not to say that money = happiness.
It simply means that the more financial resources you have, the more joyful and satisfied you’ll feel with your life.
But there’s a fine print to it (there’s always an annoying catch, isn’t there?).
Money improves your happiness level until it reaches a certain amount. After that, no matter how much you earn, it won’t make any difference whatsoever.
You don’t have to scroll down to get the answer:
It’s $90,500 a year.
The short answer, that is. Let me take you through it.
How do we get to that amount?
What’s considered well-being anyway?
Two Noble laureates in economics, psychologist Daniel Kahneman and economist Angus Deaton wanted to find out what the influence of money on our subjective sense of happiness was.
They divided our notion of well-being into two categories:
- Emotional well-being: the frequency and intensity of 5 emotional states (joy, stress, sadness, anger, and affection) in our everyday experience.
- Life evaluation: the thoughts that arise when we think about our lives and how we assess them.
Their research colleagues would call people and ask them if they had experienced enjoyment, stress, or any of the abovementioned feelings the day before.
Just to get a little glimpse of your everyday emotional experience, what would you answer to “Did you smile or laugh a lot yesterday?”
Note: If you want to compare yourself with others, like you frequently do on Instagram, Facebook, or any other social platform, you’d want to know that 85% of people claim they experience positive emotions each day.
On top of the emotional well-being questions, they would also ask people to rate their lives from 0 to 10, 0 being the worst possible life for you, and 10 the best one.
Where would you place yourself today?
Note 2: Again, if you’re eager to know how others rate their lives, the average is 6,8. I hope curiosity doesn’t kill your well-being
The authors surveyed 450,000 US residents and hoped the collective wisdom would shed light on one of our main quests in life, the pursuit of happiness.
The role of money in our well-being
It’s intriguing to learn people’s feelings about their lives but it’s not enough. The point is to know how it relates to the amount of money they have.
All these survey questions were plotted against the family’s monthly income to try to answer a “simple” question:
Do people from low, medium, and high-income households have different emotional and life evaluation experiences?
- Fact 1: Lack of money brings misery.
- Fact 2: More money will significantly improve your everyday emotional experiences and life assessment. Up to a $90,500 threshold.
Emotional outcomes (positive or negative) and our life assessment have different thresholds. The researchers talk about “satiation levels”.
In other words, is there a correlation between people’s emotional experiences (positive or negative) and their earnings?
Once you hit the $7,500/month mark, increasing your income won’t alter the number of smiles, or the amount of joy and happiness you experience on a daily basis.
The same goes for sadness and worry. The markers won’t drop significantly after that threshold.
However, stress reaches its peak at a lower income level, $6,000 a month. It means that beyond that value, your stress levels won’t notably decrease with a higher income.
Interestingly, your outlook on life keeps changing even after earning $12,000 a month. To put it in another way,there’s no immediate threshold hampering you from perceiving life in a better fashion — your perception of life can continue to improve anyway.
In short, anything above the annual income gateway will just be a waste of your time. Don’t keep chasing for more money. It will neither help you feel more happiness nor will it ease your unhappiness and stress.
Where’s the limit to the power of money?
It seems that money is more capable of reducing pain than buying happiness.
When you aren’t able to fulfill your most basic needs, all you think about is reducing your suffering. But once you’ve acquired a certain standard of living, your needs are not based on things anymore.
Like Maslow’s hierarchy of needs states, once you fulfill your physiological needs (food, shelter, clothing) you turn your focus to more sophisticated ones (status, intimacy, freedom, and so on).
It seems money reaches a ceiling and can’t further influence our happiness levels. Spending time with your friends and family, avoiding pain, and enjoying your free time, among others, depends on things outside of the domain of money (after acquiring a certain wealth level).
You can’t completely avoid ailments (or critical illnesses like Alzheimer’s). They are beyond money’s or anyone’s control.
Another study suggests that wealthier people become more indifferent to the small pleasures of life. Money might undermine their ability to enjoy the little things, like savoring a bar of chocolate or walking barefoot on the grass.
They might lose perspective if they always have incomparable hyped and exclusive experiences around themselves. Everything is so bombastic that there’s no room for the small wonders of daily life.
Those tiny details are simply taken for granted.
Money doesn’t buy happiness, but there‘s an already studied indicator as to when to stop accumulating it. At least, when it comes to your state of well-being.
If you want to keep accumulating money with other goals in mind (not for filling an emotional void), then be my guest.
You don’t have to pull off a Jay Gatsby in your search for happiness. Social sciences are telling you already that you’ll hit a strong wall there.
Once you acquire a stable income of around $7,5000 per month, money won’t make a difference in your overall well-being.
That doesn’t mean you shouldn’t strive for more ambitious goals. It just means that the financial aspect won’t be the one giving you emotional fulfillment.
If money won’t make you truly happy, then focus your attention on finding better ways to spend it.
You don’t have to go to extreme measures, like Warren Buffet’s giving pledge. Just squeeze the best out of what you’ve got:
- Spend on experiences rather than material goods.
- Benefit others too, not just yourself.
- Give yourself more mini pleasures instead of always searching for the biggest ones.
- Don’t always gratify yourself instantly. Delayed pleasures can be the sweetest.
As I see it, of all the recommendations on how to be happy, Chris Gardner (from the movie Pursuit of Happyness) puts it best:
“The world is your oyster. It’s up to you to find your pearls”
By Pavle Marinkovic on April, 2021.
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