Money doesn't buy happiness--at least, that's what the old adage says. But with the plethora of data analytics tools at our disposal, and access to decades of salary and happiness data, we're closer to coming to a definitive conclusion on the age-old question.
So let's try to answer the question: how much money do you really need to be happy?
The 2010 Princeton Study
One of the most widely-cited studies on the matter comes from Princeton University, circa 2010. In the study, researchers took measurements of U.S. citizens' annual salaries and self-reported feelings of happiness. As you might suspect, the higher your annual salary is, the more likely you are to feel both kinds of happiness--the day-to-day mood-based happiness you might feel in response to a specific event, and the long-term stable happiness you feel when you're satisfied with your life--but only up to a certain point ($75,000 a year). People who made more than $75,000 experienced some increases in overall life satisfaction, but almost no increases in daily moods.
There are a few problems with this finding, which I'll delve into later on, but it's important to note that 85 percent of Americans--regardless of income--felt happy each day. It's also important to note that a lack of money didn't necessarily make people sad, but complicated the problems they were already experiencing, such as making doctor visits more stressful because of financial concerns.
Skandia International Wealth Sentiment Monitor
A slightly more recent analysis by Skandia International found the results to be higher. The study revealed that as many as 80 percent of people, worldwide, believe money is capable of bringing them happiness--though individual countries vary from 68 percent (in Germany) to 93 percent (in Brazil). The survey sample indicated they wanted a salary equivalent to US $161,000 a year to feel wealthy--which is a staggering 15 times the global average income.
This study is interesting not only because it targets a wider audience, but because it also asks people how much money they think they would need to feel happy--rather than taking objective measurements of people who already make it. If you combine the results of this study with the results from the Princeton study, you could glean the conclusion that people think they need $161,000 a year to be happy, but any more than $75,000 probably isn't going to do much.
There are, of course, some complicating factors here:
- The source of money. The source of your acquired money matters. Earning your money in a solid career is much different than effortlessly gaining all your money through an inheritance; the latter can result in silver spoon syndrome, or the inability to lead a "normal" life or have a strong sense of purpose. Making the money gradually over the course of a long career, filled with hard work, will inevitably fill you with satisfaction and a sense of purpose. If you've grown up wealthy and have never known any different, the money won't mean anything to you.
- Lifestyle factors. We also need to consider lifestyle factors. For starters, differences in cost of living can play a role: a two-bedroom apartment in San Francisco, for example, costs an average $4,650 a month in rent--a $75,000 salary, when nearly 75 percent of it is spent on rent, is going to feel very different than it does to someone in rural Texas, where the cost of living is much lower. People may also have individual lifestyle preferences that affect their happiness; for example, is it important to you to be able to go out to a nice dinner a few times a week?
- Individual differences. Everyone has different values and different personalities that affect how money influences their happiness. Person A may be highly extroverted and social, and care far more about having a close network of friends than making lots of money. Person B may be highly self-motivated, and feel more fulfilled accomplishing personal goals than bonding with others. Person B's happiness will obviously be more influenced by their income than Person A.
- Other happiness indicators. Of course, we also need to remember that money is only one part of the equation of happiness. For example, what's your family life like? Do you have close friends? Are you in good health? Do you like your job? Do you have a hobby you're passionate about? Money alone won't influence you if all these other factors are already in place.
So how much money do you really need to be happy? Despite the average predicted salaries that researchers have calculated, the answer to that question is almost entirely dependent on your personality and history.
How are you making that money? What else do you have in your life? And perhaps most importantly, do you believe that money will make you happier?