How Money Contributes to Happiness
Finding happiness and having a purpose in life is a goal of many people. However, the concept of happiness is so broad that people can’t even begin to understand where they should start to look for it. People start to define their version of happiness and what could make them happy. Having a family, a successful career, and a big house are among the things that most people often associate with happiness.
One of the most prominent aspects that are often associated with happiness is money or how much money people can make. One famous study from 2010 by Daniel Kahneman and Angus Deaton even tried to test this hypothesis by measuring people’s level of happiness with their income. They found that the more money people make, the more they tend to have an increase in emotional wellbeing. In other words, as someone’s income increases, their wellbeing also increases.
However, this effect stops at a certain point. Once people make about $75,000 a year, their wellbeing stops increasing altogether. This study answers some people’s earlier questions about how important money is to happiness and how they can achieve it by making $75,000 a year.
However, a newer study in 2021 by Matthew Killingsworth contradicted this research. They found that a higher income above $75,000 can still positively affect people’s happiness and wellbeing. In this study, they also measured wellbeing in greater detail by using real-time assessment in asking participants how they are feeling at the moment instead of how they felt in the previous week or month. The result was that they found higher earners felt great and happy.
So, does that mean that people with low income can’t ever be happy? Researchers argue that, although money does play an important role in people’s overall happiness and satisfaction of life, it is also only a modest determinant of happiness. There are many ways how money can contribute to people’s happiness.
Although money is not everything, it is a means to have a comfortable life. When you have enough money, you can have all your basic needs fulfilled. Living in a comfortable house, eating healthy food, having access to health care, and feeling secure and safe are things that everyone needs. You won’t be able to think about happiness or enjoyment when you are feeling hungry or cold and have no home to go to.
This is in line with the NCHS data statistic that found people living in poverty were three times more likely to have depression. Another thing to highlight from Kahneman and Deaton’s research is that their participants are all American, so the living standard and income that they found is limited to them. An income of $75,00 a year might not be the threshold for everyone; it could vary, depending on the cost of living in a specific area and one’s interest.
As long as you have enough money to fulfill your basic needs, then you are halfway there. Having more money to buy things that you like can increase your positive emotions and comfort. You can also use the money to hire help to do your household chores so you can have more time to spend with your friends and family which is also important for your wellbeing.
Control in life
From Killingsworth’s research, they found that control in life plays a significant impact on their respondent’s level of happiness. People who have a higher income are happier, partly because they have an increased sense of control over life. Moreover, a sense of control accounted for a 74% correlation between income and wellbeing.
People that have more money can have more choices and options on how they want to live their life. For instance, having extra income can allow them to eventually afford a better housing arrangement or eat better meals. The more money one has, the more options become available to them.
However, it is also worth noting that making more money could also mean dealing with more pressure from work, leading to less time for socializing, and even lesser time for leisure and rest. So, the autonomy that you have by having more money might come with sacrificing other areas of your life. Therefore, you need to understand how much money is “enough” to avoid constantly chasing for more in exchange for the things that are more important in your life.
Value of money
How much money can bring you happiness also depends on how much value and meaning one puts into the amount of money one has. People who put a great emphasis on how money contributes to their happiness will feel happier when they have more money than people who don’t value money as much. A study found that for those living in rural areas, spending time with family, and having contact with nature are things that contributed to their level of happiness as opposed to those who live in a metropolis.
However, with increasing income that is commonly found in industrialized countries, social and economic factors have a bigger impact on people’s level of happiness. This finding suggests that people’s perspectives on the importance of money will affect how much money they need to bring them joy and happiness. In contrast, people who put less value on money are happy in a comfortable, safe, and strong community; they feel free to enjoy life regardless of how much money they are making.
Instead of focusing more on how you can make more money, try to understand what you think money will bring to your life. Having more money may help you gain certain things that will bring you happiness and other positive emotions. It is important to note that money can’t buy all of the things that will make you happy; in fact, you might find another way to attain certain types of happiness even without money.
Experience vs material goods
How you spend your money is also crucial on how it can affect your happiness. Some people spend their money on material or tangible things like bags and jewelry, while others spend more on experiences like going on vacation or attending a concert. A 2014 research found that experiential purchases bring greater happiness than material goods because they can effectively improve social relationships, form an important part of one’s identity, and lead to fewer social comparisons than material purchases.
Aside from that, a poll in 2014 also supports this research where they found that millennials prefer to spend their money on experiences than on material goods. However, this can’t be applied to anyone. For some people, material goods can bring them a lot of happiness if they have a very strong affinity for them. The main point is that spending money on experiences or material goods could increase wellbeing because it can fill one’s higher psychological needs like connectedness and a feeling of being alive.
Be it experience or material things, you need to understand why you feel they can bring you happiness. One does not better than the other because, in the end, it is still spending vs. spending. So, before you spend your money, ask yourself why you need a certain thing and what you can get from purchasing it.
A lot of evidence suggests that having more money will bring more happiness. However, money will not inevitably increase your happiness. The way you perceive, spend, and how much you value money will shape how much happiness you can get from it. How much money a person needs to be happy varies depending on how much to cover their basic needs and what can bring them joy without sacrificing other important aspects in one’s life such as time or rest. Whether it is a concert ticket or a new pair of shoes, ultimately money can increase your happiness if you spend it on experiences or items that are aligned with your values.