In 2010, Nobel Prize winners Daniel Kahneman and Angus Deaton found that happiness increases with income of approximately $75,000 per year*. After that, more income does not increase happiness. However, a 2023 study by Matthew Killingsworth found that happiness improves with higher incomes, reaching around $500,000.
*Adjusted for inflation, that’s about $100,000/year in 2024.
Wow, there seems to be a big conflict between these two studies. Most of us would like to believe that money is not that important. It is an attractive idea for ordinary people. Rich people shouldn’t be happier than the rest of us. Bastards!
Last year, the authors of the two studies got together to find out what happened. It turned out that the first study was actually measuring unhappiness. If you make less than $75,000, money can be a major source of stress. Once you do more than that, most people are not that happy. At that time, the scale came out first in the original Kahneman-Deaton study.
Scale
Here are three questions from the 2010 study.
- Did you smile or laugh a lot yesterday?
- Did you feel very happy yesterday?
- What about happiness?
Many participants answered yes, yes, yes. That’s what you can enjoy most about this study. Maybe the high earners were happy, but couldn’t communicate it with 3 yes/no answers. If you gave them a slide, they would show that more income = more happiness. The scale came out yes, yes, yes.
The Killingsworth study had participants rate their happiness on a scale from very good to very bad. Through the slide, it turns out that more income usually means more happiness. It seems that high earners are happier than the rest of us.
A mistake?
However, I still see a big flaw with happiness research. Right now, I’m making a lot less money than when I was an engineer. But I’m happier than I was in 2012. And I’m richer than ever because of the benefits of investing. I think they need to consider its importance somehow. Retirees are some of the happiest people and most of us don’t have that much money.
Generally, I agree that more money = more happiness. However, money does not fix everything. I was very unhappy when I was working full time. Even when I was earning over $100,000, job dissatisfaction was a major source of unhappiness. It was more than anything else. After early retirement, I was free to be myself again. Life is much better now. Money can increase happiness, but only slightly. If you have problems money can’t fix, it won’t help much.
Yesterday
What were your answers to the above questions? Mine was yes, yes, yes.
Yesterday, we visited the Nisqually Wildlife Refuge and had a great time. We hiked, learned a lot of interesting things about the river port, listened to a bunch of Star Wars trivia from RB40Jr, and enjoyed a nice dinner at Olympia. It was a beautiful day. It doesn’t take a lot of money to have a fun day.
However, gas and dinner cost about $150. I guess happiness is not that cheap. We are rich enough to spend this much money every weekend if we want. Many families are not so lucky.
My sad end
Here is my unscientific conclusion. Happiness looks like a Social Security Scorecard. Let me explain.
Here is a Social Security Retirement Benefits chart from my post – How Early Retirement Affects Social Security Benefits. There are two inflection points in the Social Security Benefits formula.
I think the happiness vs. money chart could have a few more points. It probably looks like this.
The income will help increase the happiness until you reach about $100,000/year. This is the point where you have enough money to stay in the United States. After this, money will still increase happiness a little because you want to save for the future. Once you achieve financial independence, more money won’t make much of a difference. At that time, you don’t have to worry about money. You will be free to pursue happiness.
WHAT DO YOU THINK? Does more money = more happiness? I don’t think the extra money would make much of a difference once you’re over a certain threshold.
Story on NPR – Can money buy happiness?
Kahneman’s review of health education
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