More money, more happiness: Do you think money can buy happiness?

This post is from staff writer Suba Iyer.

Money and its effect on happiness is one of those topics that has been discussed over and over again. Yet, the topic fascinates the academic community and the research continues — with contradicting results every few months. The latest finding in this genre of research comes from two economists at the University of Michigan, Betsey Stevenson and Justin Wolfers. Their new study, published in the May edition of American Economic Review, argues that more money does buy more happiness.

The study looked at “satiation” with respect to income. In other words, they questioned whether there is a saturation point, where you earned “enough” to be happy, beyond which you are not happier with the increased income. In previous studies, this saturation point has been anywhere from $50, 000 to $75, 000. This study argues that there is no such point where happiness starts to slope down while income increases.

(click to view larger image) Image source: The Economist

I am not entirely convinced by these studies. I feel any hypothesis can be proved right with the relevant subset of data. And it is almost impossible to account for every single variable like gender, age, cost of living, race, education level, location, confidence level, expenses and personal savings rate. Despite these weaknesses as a pure scientific experiment, these types of studies always make me stop and think about how I perceive money affecting happiness.

In my opinion,  money does buy happiness. I honestly cannot see why it wouldn’t. Yes, that is a bold statement but I stand by it.

Money does buy happiness

Money cultivates goodness: If you have more money than you need, you can give it away and make someone else’s day. There are too many people in this world that can use the help. Feed a starving child and the content smile on its face will fill you with happiness. What stops anyone from donating their excess to a cause they relate to? Use the money to make the world a better place. Compassion makes humans happy and that is experimentally proven.

Money buys security: With money to take care of your survival, you can think about other things, things that you really want to do with your life. You do not have to worry about whether you will ever be able to retire. You do not have to lose sleep worrying about how you are going to pay for your food and shelter tomorrow.

Money buys freedom: Money buys choices. People with money do have more choices than without. Many dream about early retirement. Most people who think about early retirement don’t really mean they want to quit doing everything and spend their entire day either in front of a TV or on a beach sipping margaritas. What they are really after is financial independence — the freedom to not depend on a paycheck, the freedom to not let anyone dictate what you can do with your day. Money buys this freedom.

Money buys time: How many of us want to spend more time with our spouse/parents/friends/kids but have to go to work to make ends meet? Don’t we wish we had more time to do everything we want to do? Take more vacations, go to the museum in the middle of the weekday with your kid or simply relax and read a book. When we have a job, we pay for money with our time. Why not use the money to buy us time to use it as we see fit?

Money buys experiences: There is a multitude of research that says people value experiences over stuff. Most of us remember a great vacation much more than an expensive toy. Why not use the money to travel the world, taste different cuisines, learn new languages, get immersed in different culture and learn new things every day? Do whatever makes you happy.

Money is a tool. As with any tool, it can only be as useful as we make it out to be. If we are spending it wrong, get obsessed about the tool itself instead of using the tool, compare our material possessions with others and get stuck in the over consumption cycle, yes, I can see money making people miserable. If you always judge someone based on how much money they make instead of what good they are doing with their lives, yes, money absolutely doesn’t bring happiness. If the only aim in life is to hoard money instead of doing good with it, yes, money starts to take control of your life. If money is spent in right ways, I do not see how it cannot increase happiness. The richer I get, the happier I am about it.

Do you disagree? How does money affect your happiness? If you feel money doesn’t buy happiness, why? What’s your take?

18 Responses to “More money, more happiness: Do you think money can buy happiness?”

  1. Anonymous

    True happiness comes from the mind, you can be happy with money or without money, seriously! you have the choice. I know so many miserable rich people and happy low income people. It’s all to do with the mind. Money can’t buy happiness if your seriously liberated with your mind.

  2. Anonymous

    Money can’t cure cancer but it can bring you some happiness. I’d rather be rich with cancer than poor with cancer. I agree with Shobir, money does buy freedom and you then have the choice to to good or bad which ultimately leads to happiness or sadness. Nice article, really got me thinking.

  3. Anonymous

    Money can buy time, with time you have freedom, with freedom comes the choice to be happy or unhappy. It’s how you use your time that makes you happy. Personally my goal is to become financially independent and then use my time effectively to learn, grow, and help other people. Money isn’t everything but it can help you and many other people.

  4. Anonymous

    Multiple studies which include higher paying individuals (the graph above only goes to $129k annual income) have demonstrated that there is a limit at which additional income doesn’t buy any more happiness.

    I tend to agree. After about $100k on annual income, pretty much all of your needs are going to be filled and your financial security will be assured. Anything above that is excessive spending which doesn’t directly translate into happiness.

  5. Anonymous

    Happiness can never be equated by any amount of money but literally somehow it is corelated. The very first problem most of us face is the lack of funds or money, so it is equally important to find ways on how to make money so you can avoid getting too serious on paying off your debt. The very first thing I could suggest is for you to check out trading binary options and see how it can help you with your happiness and money issues.

  6. Anonymous

    Countries in which people can get wealthier are likely to be countries in which life is better fro just about everyone. And within a country, those who are richer are more likely to be happier in that their personalities lead to greater wealth, while people who are highly dissatisfied, envious, depressed, or miserable for other reasons are less likely to make much money. So happiness is just as likely to bring money as the reverse–perhaps more so. And unhealthy people are unlikely to be wealthy–because it is hard for them to work–or happy–because they are sick.

    At the same time, different cultures rate “happiness” different ways and ascribe different values to it. Among traditional Chinese families, there is quite a bit of contempt put on the idea of “fun” unless it also has a financial, moral, or cultural value, and even then, it should be the right amount of fun pursued in a sober way. Even a change of language distorts meaning. If you’re going to Spanish, even, feliz and contento both mean “happy,” yet they mean completely different things! You’ll find systematic distortion in the answers to any questions about life satisfaction because of this and many other things.

    Anyhow, the correlation is unsurprising, but what it means is much more difficult to tease out.

  7. Anonymous

    I would say no.

    Although money gives us security it can not fix people and magically change difficulties.

    Some billionaires would trade all their money to resurrect a lost child, or to cure disease.

    The trick if to find peace within yourself without having to depend on anyone else.

  8. Anonymous

    This is a tricky one.

    But Is have to say money can NOT buy happiness.

    Whenever I try to decide if I am happy in my life, I try to compare the worst thing in my life to the best thing in my life.

    Is the worst aspect of my life worth suffering over if it means I get to keep the best? The answer is yes. I could have millions of dollars to make me feel but to lose the best thing in my life, I could not be happy.

    What I’m trying to say is the security, the time, and the experiences would never surpass the best things in life.

    I hope this makes sense.

  9. Anonymous

    Money doesn’t buy happiness. There’s no question more money can make some things easier (bill payments, avoiding debt, saving for XYZ, etc.). But there are too many things it cannot buy that I suggest influence happiness more, such as friendships, loyalty, love and trust.

    OK, I’m presenting anecdotal evidence here, but it’s also a nugget of history repeating itself. Look at Amanda Bynes. She’s reportedly worth $4 million or so. Clearly, she’s not happy. In fact, she’s falling apart. Think back to a host of other celebrities who had plenty of money, but nothing else.

    I also feel as though having more money puts a target on your back. People would bombard you with cries for help because you have the resources to help them.

    And what about Maslow’s Hierarchy of Needs? There only so many needs to satisfy after which we’re just filling our lives with luxury. I’d rather be rich in friends and love than money.

    -Christian L. @ Smart Military Money

  10. Anonymous

    If I made enough money to not have to worry about buying food, paying the utilities and/or emergencies that come up it would buy me piece of mind. The happiness would come later when I would be able to stay calm, cool and collective during financial problems in the future.

  11. Anonymous

    Just to clarify my comment, I meant to say that the graph flattens out exactly as you’d expect if there is a saturation point, which was what the graph is supposed to disprove.

  12. Anonymous

    I saw this graph posted somewhere else too, and as I pointed out there, they’re pulling some math tricks to get their result. You can see that the x-axis, representing money, is a logarithmic scale. What this graph really shows is that whatever happiness the first $1,000 brings you, you need another $2,000 to match it again. Then another $4,000. Then another $8,000, etc. At the high end of the graph, you require an additional $64,000 to get the same additional happiness that that first $1,000 got you. Plotted over a linear axis, the graph flattens out exactly as you’d expect.

  13. Anonymous

    IMHO the question of whether money can bring happiness totally depends on HOW the money is used. Karen, in comment #2, stated it best.

    When buying all manner of materialistic goods for oneself, and even family, the satisfaction won’t be there. I truly believe that if the money is directed towards doing good for those in need (my area of specificity is kids and animal causes in the community)reaching that point of happiness is easier to reach.

  14. Anonymous

    I’m not sure money can buy happiness, but the lack of stress a secure financial situation provides would, I imagine, help you to more clearly determine what makes you happy.

  15. Anonymous

    Hmm, I don’t know how I feel about this. I think money possibly could buy happiness, but I don’t think it always does. I think you can be very unhappy no matter what amount of money you have. Likewise, you can be very happy despite living frugally on a small salary.

    My thoughts are influenced by anecdotal evidence, which I know is very weak. Still, I can’t help thinking of my aunt and uncle. My uncle is an executive in an energy company, and he makes A LOT of money. I don’t know how much, but he’s been with them for decades and he’s worked really hard, and he makes six figures, probably close to half a million a year.

    Growing up, I was always jealous of their lifestyle. They live in a massive three-story house. They drive new cars every six months, trading them in. They go on several vacations every year–trips to Italy and Niagara Falls, two-week cruises. For Christmas, my uncle gave my aunt new granite countertops in the kitchen, for $10,000. Their kids participate in every sport, take friends on all their trips, and also get brand new cars (the younger just turned 16, the older is 20. He’s wrecked two brand new cars drinking, but got a third brand new one for Christmas.) They always had the latest game systems, pool tables, a hot tub, everything.

    And yet, that is one unhappy family. My aunt is incredibly depressed. The house is pretty, but she doesn’t care for it–it’s cluttered, dusty, full of unused junk. My uncle cheats on her. The kids are spoiled, lazy, and rude; the older one has problems drinking and is struggling in college. I used to be so jealous of them, wanting their life style, Now that I’ve grown, I see them for what they are: bitter, unhappy, and hateful people.

    That family has all the money in the world, more than anyone I’ve ever met in real life. And yet, I can’t think of a sadder example. They’re just so miserable, all the time. Money is clearly not buying them happiness. Yes, it buys them scuba lessons, trips to the Grand Canyon, a month’s stay in Cancun. But they are miserable people, all the way around.

    I think money can affect your happiness level. But I think happiness goes a lot deeper than that. I was particularly touched by your statement that money buys freedom, and freedom means happiness. I think this is true, to a point, but I tend to take the Buddhist perspective. Freedom from desire–freedom from the craving of the car, the big house, the fancy trip–is true freedom. Happiness is mostly internal, and for me, to be happy is to be free from craving. I look at my aunt and cringe. I never want that lifestyle now, ever, no matter how much money I may have. It brings them nothing.

  16. Anonymous

    I think it definitely does buy happiness through freedom and choice. Granted the more money you have won’t correspond to the same increase in level of happiness in my opinion.

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