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Can Money Buy Happiness? Only About the First $75,000 Worth

States of mind

There’s no question that money can buy pleasure: if you have enough cash, you can get a hot date, the world’s best mojito, or even your very own Hawai’ian island. It can also help you believe you’re happy. For instance, in a 2010 study, two Princeton psychologists found that the richer you were, the better you were likely to say your life was.

The question is, how does having more money change how we feel from moment to moment? The answer, according to the same study, is that up to a certain point–an annual income of about $75,000, on average–having more money made it possible for people to experience more happiness and feel less stress. Past that point, the effect leveled off: someone who earns $75,000 a year has about the same chance to be happy as someone who earns $750,000 a year. Why is that?

The key to answering that question, I believe, has to do with a point I mention often here, that pleasure is not the same thing as happiness. Things like worrying about losing your home, not being able to afford good food, or living in a dangerous neighborhood can cause stress and interfere with happiness, but when we reach an income level where those problems don’t hold much sway, happiness then appears to have a lot more to do with how we think and what we do with our lives than on what kind of car we drive or how often we’re able to eat out.

There’s a confusing piece in here: richer people say their lives are better, but they don’t report being happier. How can you say your life is better if you’re not any happier? Well, one way is to evaluate your life based on how it might look to an outsider instead of on how it feels. People will guess you’re happier if you own a nicer car or have nicer clothes, and we often seem to evaluate ourselves the way we would expect other people to evaluate us. That may not apply to you, but to test it, consider this question: would you take a job where you earned a lot less money if you enjoyed the work more? If not, why not? If so, have you actually looked into it, or do you already love your job?

Oracle founder Larry Ellison is the 6th richest person in the world (according to Forbes’ Billionaire list), and he’s the one who’s buying that Hawai’ian island. He also owns one of the world’s most expensive yachts, a fighter jet, some of the most high-end cars a person can buy, and multiple mansions. Is he happy? I don’t know. It seems likely that he’s no more happy than a 25-year-old database administrator who makes a living working with Ellison’s Oracle software for about $75,000 a year. If he really is happy, why does he need to keep buying such expensive stuff? Unless the formula for happiness is to keep buying incredibly luxurious things so that there’s always something new to have fun with.

Most of us aren’t really in a position to try that approach, but we can take some comfort in knowing that research suggests it’s less effective than, say, meditating for 15 minutes a day and making friends with a few fun people–after earning that first $75,000 or so, of course. Meditation and good company can improve practically anyone’s outlook, but it’s true too that only about 12% of the U.S. population earns $75,000 or more per year, if we’re talking about personal income, and of course if we look at international incomes, the numbers are much lower (though the $75,000 figure is an average for Americans; the cut-off income level is likely to vary a lot by location and culture).

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