"All I ask is the chance to prove that money can't make me happy."
~ Spike Milligan
Are people who make more money happier? What about people who save more? Can people be happy with very little? And how do your spending habits impact our satisfaction?
In this article, we'll explore the relationship between wealth, income, and happiness. As you'll see, there are many insights we can glean from various studies on the topic, the relationship between money and happiness isn't necessarily simple.
The Price of Happiness (about $75k)
Economists Betsey Stevenson and Justin Wolfers of the University of Michigan examined World Bank data from more than 150 countries. Not surprisingly, they concluded that the more money you have, the happier you tend to be. However, money will only make you a little happier. According to 80000hours.org, "each doubling of your income correlated with a life satisfaction 0.5 points higher on a scale of 1 to 10." In other words, doubling your income may make you only about 5% happier than you are right now
Other studies indicate that an increase in one's income has a greater impact on happiness below a certain level. Research by Princeton University economist Angus Deaton indicates that in the U.S., $75k is a meaningful benchmark when it comes to money and happiness. Below that level, more money translates to a lot more happiness. Over $75k, increases in happiness begin to level off as income continues to climb.
Apparently, money matters more if you have very little of it, and it matters less when you have more of it.What is the significance of $75k, more or less? It is theorized that $75k approximates the amount at which basic needs can be easily met. As Abraham Maslow's hierarchy of needs suggests, when physical needs such as food, shelter, and healthcare are not met, other needs are less important in comparison.
It may be a case of preventing sadness more than buying happiness. Scholars at Michigan State University and the University of British Columbia concluded that above a certain level, there is "no trace of a relationship between income and happiness." So while it seems that money produces happiness, the truth is that poverty tends to make people unhappy at a level far deeper than merely the struggle to pay bills.©Prosperity Economics Movement