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At What Price Happiness? $75,000

A Princeton University study finds that money makes people more satisfied with their lives overall, but doesn't make them happier day-to-day above $75,000.

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Research by Nobel laureate Daniel Kahneman examined people's daily happiness and overall satisfaction with life.

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Who says money can't buy happiness? 

Certainly not two Princeton University researchers -- including a Nobel laureate -- who suggest it comes with a $75,000 price tag.

Not having enough money causes emotional pain and unhappiness, the researchers found. But the happiness tipping point is about $75,000 – more money than that doesn't make a person cheerier, though it can help people view their lives as successful or better.

The study – published on Monday in the Proceedings of the National Academy of Sciences -- analyzed poll data from the Gallup Organization of more than 450,000 U.S. residents in 2008 and 2009.

The two researchers – Daniel Kahneman, the 2002 winner of the Nobel Prize in economics, and Angus Deaton, past president of the American Economic Association – broke the question of whether money can buy happiness in two, examining both how people evaluated their day-to-day happiness and their overall satisfaction with life.

With every doubling of income, people tended to say they were more and more satisfied with their lives on a 10-point scale – a pattern that continued for household incomes well above $120,000.

But when asked to assess the happy hours of the previous day – whether people had experienced a lot of enjoyment, laughter, smiling, anger, stress, worry – money mattered only up to about $75,000. After that, money didn't buy more (or less) happiness. (About one-third of U.S. households had incomes above $75,000, according to the U.S. Census Bureau's American Community Survey. The average household income was $71,500.)

Among life's misfortunes made worse by lack of money: disease (including ailments such as asthma), divorce and being alone.

"We conclude that lack of money brings both emotional misery and low life evaluation; similar results were found for anger," Kahneman and Deaton, both professors at Princeton University, wrote in the report. "Beyond $75,000 in the contemporary United States, however, higher income is neither the road to experience happiness nor the road to relief of unhappiness or stress, although higher income continues to improve individuals' life evaluations."

Why does money help brighten a person's picture of their life overall, but not the individual days?

"We suspect that this means, in part, that when people have a lot more money, they can buy a lot more pleasures, but there are some indications that when you have a lot of money, you will savor each pleasure less," said Kahneman, who, for the record, makes more than $75,000. "Perhaps $75,000 is a threshold beyond which further increases in income no longer improve individuals' ability to do what matters most to their emotional well-being, such as spending time with people they like, avoiding pain and disease, and enjoying leisure."

What's the take-home message? "If you want to enjoy life, focus on relationships and health once you make more than $70,000 a year," wrote Ed Diener, a University of Illinois psychology professor who studies well-being, in an e-mail to the Philadelphia Inquirer. Diener wasn't part of the study. "If you are poor, it makes a great deal of sense to be concerned about higher income."

And if you're thinking this means you don't need to pay anyone above $75,000, think again.

"Our data speak only to differences," the authors wrote. "They do not imply that people will not be happy with a raise from $100,000 to $150,000, or that they will be indifferent to an equivalent drop in income.... What the data suggest is that above a certain level of stable income, individuals' emotional well-being is constrained by other factors in their temperament and life circumstances."

Last updated: Sep 7, 2010

COURTNEY RUBIN

Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.




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