In 2010, Nobel Prize winners Daniel Kahneman and Angus Deaton found that happiness rose with income of about $75,000 per year*. After that, more income does not increase happiness. However, a 2023 study by Matthew Killingsworth found that happiness improves as earnings rise, up to about $500,000.
*Adjusted for inflation, approximately $100,000 per year in 2024.
Wow, there seems to be a huge discrepancy between the two studies. Most of us would like to think that money doesn’t matter much. It’s an attractive idea for ordinary people. The rich shouldn’t be happier than the rest of us. Bastards!
Last year, the authors of the two studies collaborated to find out what happened. It turns out that the first study actually measured unhappiness. If your income is less than $75,000, money can be a major source of stress. Once you make more than that, most people become less miserable. At that point, the scale reached its peak in Kahneman-Deaton’s original research.
Scale
Here are the three questions from the 2010 studies.
- Did you smile or laugh a lot yesterday?
- Did you feel very happy yesterday?
- How about enjoyment?
Many participants answered yes, yes, yes. This is the happiest you can be in this search. Higher earners may have been happier, but they couldn’t connect it with just three yes or no answers. If you give them a slider, they might point out that more income = more happiness. The scale reached yes, yes, yes.
Killingsworth’s research asked participants to report their happiness on a scale from very good to very bad. Using the slider, it turns out that more income generally means more happiness. High earners seem to be happier than the rest of us.
flaw?
However, I still see a major flaw in happiness research. Currently, I make a lot less money than I did when I was an engineer. But I’m happier than I was in 2012. I’m also richer than ever because of investment gains. I think they need to take net worth into account somehow. Retirees are some of the happiest people in the world and most of us don’t have that kind of income.
In general, I agree that more money = more happiness. However, money doesn’t fix everything. I was very unhappy when I was working full time. Even when I earned over $100,000, job dissatisfaction was a major source of unhappiness. It was overwhelming everything else. After taking early retirement, I was free to be myself again. Life is much better now. Money can increase happiness, but only a little. If you have problems that money can’t solve, it won’t help you much.
yesterday
What are your answers to the above questions? It was mine Yes, yes, yes.
Yesterday we visited Nisqually Wildlife Refuge And I had a great time. We hiked and learned many interesting things about the estuary, heard a lot of Star Wars trivia from RB40Jr, and enjoyed a delicious dinner at Olympia. It was a beautiful day. It doesn’t take a lot of money to have a happy day.
Well, gas and dinner cost about $150. I think happiness is not that cheap. We are wealthy enough to spend that amount every weekend if we wanted to. Many families are not so lucky.
My deduction is nerdy
This is my unscientific conclusion. Happiness looks like a Social Security curvature score chart. Let me explain.
Below is a chart of Social Security retirement benefits from my post – How Early Retirement Affects Social Security Benefits. There are two curved points in the Social Security benefit formula.
I think the happiness versus money graph will have a few inflection points as well. It probably looks something like this.
The income will help increase happiness sharply until it reaches about $100,000 per year. This is the point at which you have enough money to live in the United States. After that, money will still make you a little happier because you want to save for the future. Once you achieve financial independence, more money won’t make much of a difference. At this point, you don’t have to worry about money anymore. You will be free to pursue happiness.
What do you think? Does more money = more happiness? I don’t think more money will make much difference once you get past a certain threshold.
Story on NPR – Can money buy happiness?
Kahneman update on the study of well-being
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