The Money/Happiness Connection Revisited

It’s a timeless question: does more money translate into more happiness?  A new study by researchers at the Center for Health and Well-Being at Princeton University shows that happiness does increase with income – to a point.  At $75,000 per year, happiness levels off.

But the study was actually more nuanced than that.  The researchers looked at two types of happiness: people’s day-to-day mood (“emotional well-being”) and their deeper sense of satisfaction with how their life is going (“life evaluation”). It turns out that raising a person’s income beyond $75,000 does not impact daily mood but does give people an increased feeling of success. “High incomes don’t bring you happiness, but they do bring you a life you think is better,” the authors explained.  Hmm, I told you it was nuanced.

Explaining why day-to-day happiness does not increase when income rises above $75,000, the study noted: “Above a certain income level, people’s emotional well-being is constrained by other factors, such as temperament and life circumstances.”

Another recent happiness study confirmed that $75,000 seems to be the magic happiness income.  Keirsey Research, which studies the relationship between temperament and people’s preferences for everything from products to political opinions, looked at how a wide variety of factors impact happiness.  They looked at personality (extroverts are much happier than introverts), love (people who are engaged are the happiest; those who are separated but not divorced are the least happy), and education (For the most part, more schooling equals more happiness, but those with graduate degrees are no happier than those with bachelor’s degrees).

I found it especially interesting that the Princeton study noted the role of temperament on happiness.  I believe that understanding our temperament is an often overlooked but important key to understanding our financial tendencies and provides helpful, actionable insights into managing money more effectively, which impacts happiness. I devoted an entire chapter to the topic in my new book about money and marriage.

What’s your take on these happiness studies?

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  1. The Art and Challenge of Making Good Decisions - July 31, 2011

    […] that the more money you make the happier you will be.  However, research shows that there’s a certain point on the income scale where happiness tends to level […]

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