The claim that “money doesn’t buy happiness” has always been contested, and for good reason: If you don’t have the money to meet your basic needs, then it’s lack will certainly cause misery. The relationship between money and happiness has become more tenuous across academics as well, with a number of studies coming to very different conclusions.
The link between money and happiness isn’t well understood
In a study published in 2010, researchers found that making more than $75,000 a year didn’t lead to increased life satisfaction—a number that has invited a fair amount of criticism, with many pointing out that the amount stretches farther in some areas than others, and that adults with dependents need more than single adults. In a later study published in 2021, researchers found that making more money did result in increased happiness, leading to a wide amount of confusion about just exactly what money can buy, and at what amounts.
In a recent study, the researchers from the two different studies teamed up to conduct what is known as an adversarial collaboration—science’s version of a cage match—in which two opinionated teams of researchers with directly opposing views fight it out under the watchful eye of a neutral referee, until they either come to a mutually agreeable consensus, or one team taps out, admitting once and for all that they were wrong.
For most people, more money does mean more happiness
In this case, the research they carried out discovered there’s an overlap between the two opposing ideas that money will only buy happiness up until a certain point, and the idea that the more money you have, the happier you’ll be. As it turns out, for most people, money does lead to increased happiness—up to a threshold of about $500,000 a year, which likely has to do with the fact that having money can help ease stress, while also freeing up time to do preferred activities. Given that the average American worker makes $51,480 a year, most of us fall under that threshold.
“As you move up from having your basic needs met and are able to provide for yourself in terms of the basics, the next layer is what I call financial health, when you are able to meet all of your obligations comfortably, and you are able to enjoy life today, while preparing for any uncertainties in the future,” said Manisha Thakor, a financial well-being consultant and the author of the book MoneyZen: The Secret to Finding Your “Enough.” “The third layer is when you are able to use money to make your life easier.”
But “rich and miserable” people still exist
For a smaller group of people, money in excess of $100,000 a year didn’t lead to increased happiness. This group of people, which the researchers called the “rich and miserable,” didn’t see increased life satisfaction above a base level of financial security. The subset of “rich and miserable” worked out to about 15 percent of people, which is a small-but-significant portion.
Once people get past a base level of security where their physical needs are taken care of and they have a financial safety net, “that’s where it gets tricky,” Thakor said. “You have to define happiness.”
For some people, they may have adverse life circumstances, such as major health challenges or the death of a loved one, for which even a lot of money can’t fully alleviate their unhappiness. Other people may not know what it is that they want, in which case no amount of money can make up for that lack of knowledge.
Thakor often describes this in terms of “emotional wealth,” which she considers to be the next level of wealth that comes after a person’s physical and financial health. “What I’m referring to is not just clarity about what matters to you, but the ability to act on it, have time to enjoy it, and not feel stressed when you’re there,” Thakor said.
For example, a high earner may have the luxury of a secure home and money in the bank, but may feel too stressed by the demands of their job to enjoy time with others or to do the activities that they enjoy. “No amount of money in the world is going to make up for the clearly limited resource of time,” Thakor said.
In Thakor’s own experience, which has included decades of working in wealth management, she considers financial health and emotional wealth to be the two main factors that drive the link between money and happiness. With financial health, it’s about getting to a point where the lack of money is not causing stress in your life, which includes being able to handle emergencies. With emotional wealth, it’s about identifying what makes you happy, and how to find a way to work that into your life. “We would be in much better shape if we used a new equation to drive our lives,” Thakor said.
