do you think money can buy happiness essay

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Does More Money Really Make Us More Happy?

• Elizabeth Dunn
• Chris Courtney

A big paycheck won’t necessarily bring you joy

Although some studies show that wealthier people tend to be happier, prioritizing money over time can actually have the opposite effect.

• But even having just a little bit of extra cash in your savings account ($500), can increase your life satisfaction. So how can you keep more cash on hand?
• Ask yourself: What do I buy that isn’t essential for my survival? Is the expense genuinely contributing to my happiness? If the answer to the second question is no, try taking a break from those expenses.
• Other research shows there are specific ways to spend your money to promote happiness, such as spending on experiences, buying time, and investing in others.
• Spending choices that promote happiness are also dependent on individual personalities, and future research may provide more individualized advice to help you get the most happiness from your money.

Where your work meets your life. See more from Ascend here .

How often have you willingly sacrificed your free time to make more money? You’re not alone. But new research suggests that prioritizing money over time may actually undermine our happiness.

• ED Elizabeth Dunn is a professor of psychology at the University of British Columbia and Chief Science Officer of Happy Money, a financial technology company with a mission to help borrowers become savers. She is also co-author of “ Happy Money: The Science of Happier Spending ” with Dr. Michael Norton. Her TED2019 talk on money and happiness was selected as one of the top 10 talks of the year by TED.
• CC Chris Courtney is the VP of Science at Happy Money. He utilizes his background in cognitive neuroscience, human-computer interaction, and machine learning to drive personalization and engagement in products designed to empower people to take control of their financial lives. His team is focused on creating innovative ways to provide more inclusionary financial services, while building tools to promote financial and psychological well-being and success.

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Happiness Economics: Can Money Buy Happiness?

It only costs a small amount, a slight risk, with the possibility of a substantial reward.

But will it make you happy? Will it give you long-lasting happiness?

Undoubtedly, there will be a temporary peak in happiness, but will all your troubles finally fade away?

That is what we will investigate today. We explore the economics of happiness and whether money can buy happiness. In this post, we will start by broadly exploring the topic and then look at theories and substantive research findings. We’ll even have a look at previous lottery winners.

For interested readers, we will list interesting books and podcasts for further enjoyment and share a few of our own happiness resources.

Ka-ching: Let’s get rolling!

Before you continue, we thought you might like to download our three Happiness & Subjective Wellbeing Exercises for free . These detailed, science-based exercises will help you or your clients identify sources of authentic happiness and strategies to boost wellbeing.

This Article Contains

What is happiness economics, theory of the economics of happiness, can money buy happiness 5 research findings, 6 fascinating books and podcasts on the topic, resources from positivepsychology.com, a take-home message.

Happiness economics is a field of economics that recognizes happiness and wellbeing as important outcome measures, alongside measures typically used, such as employment, education, and health care.

Economics emphasizes how specific economic/financial characteristics affect our wellbeing (Easterlin, 2004).

For example, does employment result in better health and longer lifespan, among other metrics? Do people in wealthier countries have access to better education and longer life spans?

In the last few decades, there has been a shift in economics, where researchers have recognized the importance of the subjective rating of happiness as a valuable and desirable outcome that is significantly correlated with other important outcomes, such as health (Steptoe, 2019) and productivity (DiMaria et al., 2020).

Broadly, happiness is a psychological state of being, typically researched and defined using psychological methods. We often measure it using self-report measures rather than objective measures that are less vulnerable to misinterpretation and error.

Including happiness in economics has opened up an entirely new avenue of research to explore the relationship between happiness and money.

Andrew Clark (2018) illustrates the variability in the term happiness economics with the following examples:

• Happiness can be a predictor variable, influencing our decisions and behaviors.
• Happiness might be the desired outcome, so understanding how and why some people are happier than others is essential.

However, the connection between our behavior and happiness must be better understood. Even though “being happy” is a desired outcome, people still make decisions that prevent them from becoming happier. For example, why do we choose to work more if our work does not make us happier? Why are we unhappy even if our basic needs are met?

An example of how happiness can influence decision-making

Sometimes, we might choose not to maximize a monetary or financial gain but place importance on other, more subjective outcomes.

To illustrate: If faced with two jobs — one that pays well but will bring no joy and another that pays less but will bring much joy — some people would prefer to maximize their happiness over financial gain.

If this decision were evaluated using a utility framework where the only valued outcomes were practical, then the decision would seem irrational. However, this scenario suggests that psychological outcomes, such as the experience of happiness, are as crucial as other socio-economic outcomes.

Economists recognize that subjective wellbeing , or happiness, is an essential characteristic and sometimes a desirable outcome that can motivate our decision-making.

In the last few decades, economics has shifted to include happiness as a measurable and vital part of general wellbeing (Graham, 2005).

The consequence is that typical economic questions now also look at the impact of employment, finances, and other economic metrics on the subjective rating and experience of happiness at individual and country levels.

Happiness is such a vital outcome in society and economic activity that it must be involved in policy making. The subjective measure of happiness is as important as other typical measures used in economics.

Many factors can contribute to happiness. In this post, we consider the role of money. The relationship between happiness, or subjective wellbeing, and money is assumed to be positive: More money means greater happiness.

However, the relationship between money and happiness is paradoxical: More money does not guarantee happiness (for an excellent review, see Graham, 2005).

Specifically, low levels of income are correlated with unhappiness. However, as our individual wealth increases and our basic needs are met, our needs change and differ in their importance.

Initially, our happiness is affected by absolute levels of income, but at a certain threshold, we place importance on relative levels of income. Knowing how we rank and compare to other people, in terms of wealth and material possession, influences our happiness.

The relationship between wealth and happiness continues to increase, but only to a certain point; at this stage, more wealth does not guarantee more happiness (Easterlin, 1974; Diener et al., 1993).

This may be at odds with our everyday lived experience. Most of us choose to work longer hours or multiple jobs so that we make more money. However, what is the point of doing this if money does not increase our happiness? Why do we seem to think that more money will make us happier?

History of the economics of happiness

The relationship between economics and happiness originated in the early 1970s. Brickman and Campbell (1971, as cited in Brickman et al., 1978) first argued that the typical outcomes of a successful life, such as wealth or income, had no impact on individual wellbeing.

Easterlin (1974) expanded these results and showed that although wealthier people tend to be happier than poor people in the same country, the average happiness levels within a country remained unchanged even as the country’s overall wealth increased.

The inconsistent relationship between happiness and income and its sensitivity to critical income thresholds make this topic so interesting.

There is some evidence that wealthier countries are happier than others, but only when comparing the wealthy with the poor (Easterlin, 1974; Graham, 2005).

As countries become wealthier, citizens report higher happiness, but this relationship is strongest when the starting point is poverty. Above a certain income threshold, happiness no longer increases (Diener et al., 1993).

Interestingly, people tend to agree on the amount of money needed to make them happy; but beyond a certain value, there is little increase in happiness (Haesevoets et al., 2022).

Measurement challenges

Measuring happiness accurately and reliably is challenging. Researchers disagree on what happiness means.

It is not the norm in economics to measure happiness by directly asking a participant how happy they are; instead, happiness is inferred through:

• Subjective wellbeing (Clark, 2018; Easterlin, 2004)
• A combination of happiness and life satisfaction (Bruni, 2007)

Furthermore, happiness can refer to an acute psychological state, such as feeling happy after a nice meal, or a lasting state similar to contentment (Nettle, 2005).

Researchers might use different definitions of happiness and ways to measure it, thus leading to contradictory results. For example, happiness might be used synonymously with subjective wellbeing and can refer to several things, including life satisfaction and financial satisfaction (Diener & Oishi, 2000).

It seems contradictory that wealthier nations are not happier overall than poorer nations and that increasing the wealth of poorer nations does not guarantee that their happiness will increase too. What could then be done to increase happiness?

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What is the relationship between income/wealth and happiness? To answer that question, we looked at studies to see where and how money improves happiness, but we’ll also consider the limitations to the positive effect of income.

Money buys access; jobs boost happiness

Overwhelming evidence shows that wealth is correlated with measures of wellbeing.

Wealthier people have access to better healthcare, education, and employment, which in turn results in higher life satisfaction (Helliwell et al., 2012). A certain amount of wealth is needed to meet basic needs, and satisfying these needs improves happiness (Veenhoven & Ehrhardt, 1995).

Increasing happiness through improved quality of life is highest for poor households, but this is explained by the starting point. Access to essential services improves the quality of life, and in turn, this improves measures of wellbeing.

Most people gain wealth through employment; however, it is not just wealth that improves happiness; instead, employment itself has an important association with happiness. Happiness and employment are also significantly correlated with each other (Helliwell et al., 2021).

Lockdown on happiness

The World Happiness Report (Helliwell et al., 2021) reports that unemployment increased during the COVID-19 pandemic, and this was accompanied by a marked decline in happiness and optimism.

The pandemic also changed how we evaluated certain aspects of our lives; for example, the relationship between income and happiness declined. After all, what is the use of money if you can’t spend it? In contrast, the association between happiness and having a partner increased (Helliwell et al., 2021).

Wealthier states smile more, but is it real?

If we took a snapshot of happiness and a country’s wealth, we would find that richer countries tend to have happier populations than poorer countries.

For example, based on the 2021 World Happiness Report, the top five happiest countries — which are also wealthy countries — are Finland, Iceland, Denmark, Switzerland, and the Netherlands (Helliwell et al., 2021).

In contrast, the unhappiest countries are those that tend to be emerging markets or have a lower gross domestic product (GDP), e.g., Zimbabwe, Tanzania, and India (Graham, 2005; Helliwell et al., 2021).

At face value, this makes sense: Poorer countries most likely have other factors associated with them, e.g., higher unemployment, more crime, and less political stability. So, based on this cross-sectional data, a country’s wealth and happiness levels appear to be correlated. However, over a more extended period, the relationship between happiness and GDP is nil (Easterlin, 2004).

That is, the subjective wellbeing of a population does not increase as a country becomes richer. Even though the wealth of various countries worldwide has increased over time, the overall happiness levels have not increased similarly or have remained static (Kahneman et al., 2006). This is known as a happiness–income paradox.

Easterlin (2004) posits four explanations for this finding:

• Societal and individual gains associated with increased wealth are concentrated among the extremely wealthy.
• Our degree of happiness is informed by how we compare to other people, and this relative comparison does not change as country-wide wealth increases.
• Happiness is not limited to only wealth and financial status, but is affected by other societal and political factors, such as crime, education, and trust in the government.
• Long-term satisfaction and contentment differ from short-term, acute happiness.

Kahneman et al. (2006) provide an alternative explanation centered on the method typically used by researchers. Specifically, they argue that the order of the questions asked to measure happiness and how these questions are worded have a focusing effect. Through the question, the participant’s attention to their happiness is sharpened — like a lens in a camera — and their happiness needs to be over- or underestimated.

Kahneman et al. (2006) also point out that job advancements like a raise or a promotion are often accompanied by an increase in salary and work hours. Consequently, high-paying jobs often result in less leisure time available to spend with family or on hobbies and can cause more unhappiness.

Not all that glitters is gold

Extensive research explored whether a sudden financial windfall was associated with a spike in happiness (e.g., Sherman et al., 2020). The findings were mixed. Sometimes, having more money is associated with increased life satisfaction and improved physical and mental health.

This boost in happiness, however, is not guaranteed, nor is it long. Sometimes, individuals even wish it had never happened (Brickman et al., 1978; Sherman et al., 2020).

Consider lottery winners. These people win sizable sums of money — typically more extensive than a salary increase — large enough to impact their lives significantly. Despite this, research has consistently shown that although lottery winners report higher immediate, short-term happiness, they do not experience higher long-term happiness (Sherman et al., 2020).

Here are some reasons for this:

• Previous everyday activities and experiences become less enjoyable when compared to a unique, unusual experience like winning the lottery.
• People habituate to their new lifestyle.
• A sudden increase in wealth can disrupt social relationships among friends and family members.
• Work and hobbies typically give us small nuggets of joy over a more extended period (Csikszentmihalyi et al., 2005). These activities can lose their meaning over a longer period, resulting in more unhappiness (Sherman et al., 2020; Brickman et al., 1978).

Sherman et al. (2020) further argue that lottery winners who decide to quit their job after winning, but do not fill this newly available time with some type of meaningful hobby or interest, are also more likely to become unhappy.

Passive activities do not provide the same happiness as work or hobbies. Instead, if lottery winners continue to take part in activities that give them meaning and require active engagement, then they can avoid further unhappiness.

Happiness: Is it temperature or climate?

Like most psychological research, part of the challenge is clearly defining the topic of investigation — a task made more daunting when the topic falls within two very different fields.

Nettle (2005) describes happiness as a three-tiered concept, ranging from short-lived but intense on one end of the spectrum to more abstract and deep on the other.

The first tier refers to transitory feelings of joy, like when one opens up a birthday present.

The second tier describes judgments about feelings, such as feeling satisfied with your job. The third tier is more complex and refers to life satisfaction.

Across research, different definitions are used: Participants are asked about feelings of (immediate) joy, overall life satisfaction, moments of happiness or satisfaction, and mental wellbeing . The concepts are similar but not identical, thus influencing the results.

Most books on happiness economics are textbooks. Although no doubt very interesting, they’re not the easy-reading books we prefer to recommend.

Instead, below you will find a range of books written by economists that explore happiness. These should provide a good springboard on the overall topic of happiness and what influences it, in case any of our readers want to pick up a more in-depth textbook afterward.

If you have a happiness book you would recommend, please let us know in the comments section.

1. Happiness: Lessons from a New Science – Richard Layard

Richard Layard, a lead economist based in London, explores in his book if and how money can affect happiness.

Layard does an excellent job of introducing topics from various fields and framing them appropriately for the reader.

The book is aimed at readers from varying academic and professional backgrounds, so no experience is needed to enjoy it.

Find the book on Amazon .

2. Happiness by Design: Change What You Do, Not How You Think – Paul Dolan

This book has a more practical spin. The author explains how we can use existing research and theories to make small changes to increase our happiness.

Paul Dolan’s primary thesis is that practical things will have a bigger effect than abstract methods, and we should change our behavior rather than our thinking.

The book is a quick read (airport-perfect!), and Daniel Kahneman penned the foreword.

3. The Psychology of Money: Timeless Lessons on Wealth, Greed and Happiness – Morgan Housel

This book is not necessarily about happiness economics, but it is close enough to the overall theme that it is worth mentioning.

Since most people are concerned with making more money, this book helps teach the reader why we make the decisions we do and how we make better decisions about our money.

This book is a worthwhile addition to any bookcase if you are interested in the relationship between finances and psychology in general.

4. Happiness: The Science Behind Your Smile – Daniel Nettle

If you are interested in happiness overall, then we recommend Happiness: The Science Behind Your Smile by Daniel Nettle, a professor of behavioral science at Newcastle University.

In this book, he takes a scientific approach to explaining happiness, starting with an in-depth exploration of the definition of happiness and some of its challenges.

The research that he presents comes from various fields, including social sciences, medicine, neurobiology, and economics.

Because of its small size, this book is perfect for a weekend away or to read on a plane.

5 & 6. Prefer to listen rather than read?

One of our favorite podcasts is Intelligence2, where leading experts in a particular field gather to debate a particular topic.

This show’s host, Dr. Laurie Santos, argues that we can increase our happiness by not hoarding our money for ourselves but by giving it to others instead. If you are interested in this episode , or any of the other episodes in the Happiness Lab podcast series, then head on over to their page.

There are several resources available at PositivePsychology.com for our readers to use in their professional and personal development.

In this section, you’ll find a few that should supplement any work on happiness and economics. Since the undercurrent of the topic is whether happiness can be improved through wealth, a few resources look at happiness overall.

Valued Living Masterclass

Although knowledge is power, knowing that money does not guarantee happiness does not mean that clients will suddenly feel fulfilled and satisfied with their lives.

For this reason, we recommend the Valued Living Masterclass , for professionals to help their clients find meaning in their lives. Rather than keeping up with the Joneses or chasing a high-paying job, professionals can help their clients connect with their inner meaning (i.e., their why ) as a way to find meaning and gain happiness.

Three free exercises

If you want to try it out before committing, look at the Meaning & Valued Living exercise pack , which includes three exercises for free.

Recommended reading

Read our post on Success Versus Happiness for further information on balancing happiness with success, in any domain . This topic is poignant for readers who conflate happiness and success, and will guide readers to better understand their relationship and how the two terms influence each other.

For readers who wonder about altruism , you would find it interesting that rather than hoarding, you can increase your happiness through volunteering and donating. In this post, the author, Dr. Jeremy Sutton, does a fabulous job of approaching altruism from various fields and provides excellent resources for further reading and real-life application.

Our last recommendation is for readers who want to know more about measuring subjective wellbeing and happiness . The post lists various tests and apps that can measure happiness and the overall history of how happiness was measured and defined. This is a good starting point for researchers or clinicians who want to explore happiness economics professionally.

17 Happines Exercises

If you’re looking for more science-based ways to help others develop strategies to boost their wellbeing, this collection contains 17 validated happiness and wellbeing exercises . Use them to help others pursue authentic happiness and work toward a  life filled with purpose and meaning

17 Exercises To Increase Happiness and Wellbeing

Add these 17 Happiness & Subjective Well-Being Exercises [PDF] to your toolkit and help others experience greater purpose, meaning, and positive emotions.

Created by Experts. 100% Science-based.

As you’ve seen in our article, the evidence overwhelmingly clarifies that money does not guarantee more happiness … well, long-term happiness.

Our happiness is relative since we compare ourselves to other people, and over time, as we become accustomed to our wealth, we lose all the happiness gains we made.

Money can ease financial and social difficulties; consequently, it can drastically improve people’s living conditions, life expectancy, and education.

Improvements in these outcomes have a knock-on effect on the overall experience of one’s life and the opportunities for one’s family and children. Nevertheless, better opportunities do not guarantee happiness.

Our intention with this post was to illustrate some complexities surrounding the relationship between money and happiness.

Knowing that money does not guarantee happiness, we recommend less expensive methods to improve one’s happiness:

• Spend time with friends.
• Cultivate hobbies and interests.
• Stay active and eat healthy.
• Try to live a meaningful life.
• Give some love (go smooch your partner or tickle your dog’s belly).

Diamonds might be a girl’s best friend, but money is a fair weather one, at best.

We hope you enjoyed reading this article. Don’t forget to download our three Happiness Exercises for free .

• Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative? Journal of Personality and Social Psychology , 36 (8), 917.
• Bruni, L. (2007). Handbook on the economics of happiness . Edward Elgar.
• Clark, A. E. (2018). Four decades of the economics of happiness: Where next? Review of Income and Wealth , 64 (2), 245–269.
• Csikszentmihalyi, M., Abuhamdeh, S., & Nakamura, J. (2005). Flow. In A. J. Elliot & C. S. Dweck (Eds.), Handbook of competence and motivation (pp. 598–608). Guilford Publications.
• Diener, E., Sandvik, E., Seidlitz, L., & Diener, M. (1993). The relationship between income and subjective well-being: Relative or absolute? Social Indicators Research , 28 , 195–223.
• Diener, E., & Oishi, S. (2000). Money and happiness: Income and subjective well-being across nations. Culture and Subjective Well-Being , 185 , 218.
• DiMaria, C. H., Peroni, C., & Sarracino, F. (2020). Happiness matters: Productivity gains from subjective well-being. Journal of Happiness Studies , 21 (1), 139–160.
• Easterlin, R. A. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. A. David & M. W. Reder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramovitz (pp. 89–125). Academic Press.
• Easterlin, R. A. (2004). The economics of happiness. Daedalus , 133 (2), 26–33.
• Graham, C. (2005). The economics of happiness. World Economics , 6 (3), 41–55.
• Haesevoets, T., Dierckx, K., & Van Hiel, A. (2022). Do people believe that you can have too much money? The relationship between hypothetical lottery wins and expected happiness. Judgment and Decision Making , 17 (6), 1229–1254.
• Helliwell, J., Layard, R., & Sachs, J. (Eds.) (2012). World happiness report . The Earth Institute, Columbia University.
• Helliwell, J. F., Layard, R., Sachs, J. D., & Neve, J. E. D. (2021). World happiness report 2021 .
• Kahneman, D., Krueger, A. B., Schkade, D., Schwarz, N., & Stone, A. A. (2006). Would you be happier if you were richer? A focusing illusion. Science , 312 (5782), 1908–1910.
• Nettle, D. (2005). Happiness: The science behind your smile . Oxford University Press.
• Sherman, A., Shavit, T., & Barokas, G. (2020). A dynamic model on happiness and exogenous wealth shock: The case of lottery winners. Journal of Happiness Studies , 21 , 117–137.
• Steptoe, A. (2019). Happiness and health. Annual Review of Public Health , 40 , 339–359.
• Veenhoven, R., & Ehrhardt, J. (1995). The cross-national pattern of happiness: Test of predictions implied in three theories of happiness. Social Indicators Research , 34 , 33–68.

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More Proof That Money Can Buy Happiness (or a Life with Less Stress)

When we wonder whether money can buy happiness, we may consider the luxuries it provides, like expensive dinners and lavish vacations. But cash is key in another important way: It helps people avoid many of the day-to-day hassles that cause stress, new research shows.

Money can provide calm and control, allowing us to buy our way out of unforeseen bumps in the road, whether it’s a small nuisance, like dodging a rainstorm by ordering up an Uber, or a bigger worry, like handling an unexpected hospital bill, says Harvard Business School professor Jon Jachimowicz.

“If we only focus on the happiness that money can bring, I think we are missing something,” says Jachimowicz, an assistant professor of business administration in the Organizational Behavior Unit at HBS. “We also need to think about all of the worries that it can free us from.”

The idea that money can reduce stress in everyday life and make people happier impacts not only the poor, but also more affluent Americans living at the edge of their means in a bumpy economy. Indeed, in 2019, one in every four Americans faced financial scarcity, according to the Board of Governors of the Federal Reserve System. The findings are particularly important now, as inflation eats into the ability of many Americans to afford basic necessities like food and gas, and COVID-19 continues to disrupt the job market.

Buying less stress

The inspiration for researching how money alleviates hardships came from advice that Jachimowicz’s father gave him. After years of living as a struggling graduate student, Jachimowicz received his appointment at HBS and the financial stability that came with it.

“My father said to me, ‘You are going to have to learn how to spend money to fix problems.’” The idea stuck with Jachimowicz, causing him to think differently about even the everyday misfortunes that we all face.

To test the relationship between cash and life satisfaction, Jachimowicz and his colleagues from the University of Southern California, Groningen University, and Columbia Business School conducted a series of experiments, which are outlined in a forthcoming paper in the journal Social Psychological and Personality Science , The Sharp Spikes of Poverty: Financial Scarcity Is Related to Higher Levels of Distress Intensity in Daily Life .

Higher income amounts to lower stress

In one study, 522 participants kept a diary for 30 days, tracking daily events and their emotional responses to them. Participants’ incomes in the previous year ranged from less than $10,000 to $150,000 or more. They found:

• Money reduces intense stress: There was no significant difference in how often the participants experienced distressing events—no matter their income, they recorded a similar number of daily frustrations. But those with higher incomes experienced less negative intensity from those events.
• More money brings greater control : Those with higher incomes felt they had more control over negative events and that control reduced their stress. People with ample incomes felt more agency to deal with whatever hassles may arise.
• Higher incomes lead to higher life satisfaction: People with higher incomes were generally more satisfied with their lives.

“It’s not that rich people don’t have problems,” Jachimowicz says, “but having money allows you to fix problems and resolve them more quickly.”

Why cash matters

In another study, researchers presented about 400 participants with daily dilemmas, like finding time to cook meals, getting around in an area with poor public transportation, or working from home among children in tight spaces. They then asked how participants would solve the problem, either using cash to resolve it, or asking friends and family for assistance. The results showed:

• People lean on family and friends regardless of income: Jachimowicz and his colleagues found that there was no difference in how often people suggested turning to friends and family for help—for example, by asking a friend for a ride or asking a family member to help with childcare or dinner.
• Cash is the answer for people with money: The higher a person’s income, however, the more likely they were to suggest money as a solution to a hassle, for example, by calling an Uber or ordering takeout.

While such results might be expected, Jachimowicz says, people may not consider the extent to which the daily hassles we all face create more stress for cash-strapped individuals—or the way a lack of cash may tax social relationships if people are always asking family and friends for help, rather than using their own money to solve a problem.

“The question is, when problems come your way, to what extent do you feel like you can deal with them, that you can walk through life and know everything is going to be OK,” Jachimowicz says.

Breaking the ‘shame spiral’

In another recent paper , Jachimowicz and colleagues found that people experiencing financial difficulties experience shame, which leads them to avoid dealing with their problems and often makes them worse. Such “shame spirals” stem from a perception that people are to blame for their own lack of money, rather than external environmental and societal factors, the research team says.

“We have normalized this idea that when you are poor, it’s your fault and so you should be ashamed of it,” Jachimowicz says. “At the same time, we’ve structured society in a way that makes it really hard on people who are poor.”

For example, Jachimowicz says, public transportation is often inaccessible and expensive, which affects people who can’t afford cars, and tardy policies at work often penalize people on the lowest end of the pay scale. Changing those deeply-engrained structures—and the way many of us think about financial difficulties—is crucial.

After all, society as a whole may feel the ripple effects of the financial hardships some people face, since financial strain is linked with lower job performance, problems with long-term decision-making, and difficulty with meaningful relationships, the research says. Ultimately, Jachimowicz hopes his work can prompt thinking about systemic change.

“People who are poor should feel like they have some control over their lives, too. Why is that a luxury we only afford to rich people?” Jachimowicz says. “We have to structure organizations and institutions to empower everyone.”

[Image: iStockphoto/mihtiander]

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Can money buy happiness it depends on why you’re spending it, according to new research, our purchases may make us happier when they're motivated by goals we care about..

Imagine that someone gives you a cash gift and tells you that, instead of saving or investing it, you need to spend it right now. What should you put your money toward if you want to make yourself happiest?

According to past research , we’ll be happier if we spend money on an experience than if we buy a material object—like traveling or going out for a meal instead of buying the latest product we see on social media. For example, people report more gratitude when they spend on experiences rather than possessions.

On the other hand, we can all probably think of times when we’ve spent money on an experience that ended up not being worth it. Maybe you bought pricey event tickets to avoid missing out, only to realize on the day of the event that you’d much prefer a cozy night at home. Or perhaps you went out to dinner with a friend at a fancy restaurant, only to find that your friend was more focused on posting the meal to Instagram than having a deep conversation.

It turns out that there might be another factor at play beyond whether we spend money on an experience or a material item: According to a new study published in the British Journal of Social Psychology , it may also matter how our purchases align with our goals.

In the study, researchers asked 452 participants in an online survey to describe a recent purchase. They were asked to write about something they had spent money on in the last three months (ranging from about $60 to $1,200), excluding everyday expenses such as bills and groceries. After describing it, people were asked to indicate the extent to which the purchase helped to fulfill different goals. They also noted how much they felt the purchase contributed to their happiness and life satisfaction.

According to self-determination theory , goals reflect our intrinsic and extrinsic motivations. Extrinsic goals are things that other people expect for us: for example, working hard at a job not because you’re passionate about the work, but because you need the money or want a high-status job to impress others. Intrinsic goals, on the other hand, are ones that we have a strong internal motivation to pursue. In the survey, extrinsic goals included gaining wealth or social status, whereas intrinsic ones included cultivating relationships, helping other people, and contributing to growth, learning, and development.

The researchers found that, the more a purchase reflected people’s intrinsic goals, the more they thought it improved their well-being. In other words, the greatest well-being occurred when people spent money on something that was personally important to them.

To compare this finding with past research, the current study also asked participants to indicate to what extent their purchase was an experience or a material item. As in past research, participants did report higher well-being from experiences. However, when the researchers looked at both factors together, they found that how much a purchase reflected intrinsic goals explained more of the differences in well-being than whether something was material or experiential.

So, what does this research mean for our spending habits? Olaya Moldes Andrés, lecturer at Cardiff University and the study’s author, points out that we’re under a lot of pressure to spend money these days; just think about the number of targeted ads you see each time you open social media. However, this pressure to spend has a downside: In past research , Moldes Andrés has found that people who are exposed to more materialistic messages have lower well-being.

Before purchasing something, she recommends pausing to think about the reason for our purchase, and what use we will get out of it. If we’re spending money on trying to impress people or project a certain image (in other words, extrinsic goals), the purchase may not actually be worth it.

So, next time you’re planning to buy something, take a moment to think about whether it’s something you’re buying because you feel it’s what’s expected of you—or whether it’s truly something that you want.

About the Author

Elizabeth Hopper

Elizabeth Hopper, Ph.D. , received her Ph.D. in psychology from UC Santa Barbara and currently works as a freelance science writer specializing in psychology and mental health.

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A business journal from the Wharton School of the University of Pennsylvania

Does Money Buy Happiness? Here’s What the Research Says

March 28, 2023 • 5 min read.

Reconciling previously contradictory results, researchers from Wharton and Princeton find a steady association between larger incomes and greater happiness for most people but a rise and plateau for an unhappy minority.

• Finance & Accounting

The following article was originally published on Penn Today .

Does money buy happiness? Though it seems like a straightforward question, research had previously returned contradictory findings, leaving uncertainty about its answer.

Foundational work published in 2010 from Princeton University’s  Daniel Kahneman  and Angus Deaton had found that day-to-day happiness rose as annual income increased, but above $75,000 it leveled off and happiness plateaued. In contrast, work published in 2021 from the University of Pennsylvania’s  Matthew Killingsworth  found that happiness rose steadily with income well beyond $75,000, without evidence of a plateau.

To reconcile the differences, Kahneman and Killingsworth paired up in what’s known as an adversarial collaboration, joining forces with Penn Integrates Knowledge  University Professor  Barbara Mellers  as arbiter. In a new  Proceedings of the National Academy of Sciences  paper , the trio shows that, on average, larger incomes are associated with ever-increasing levels of happiness. Zoom in, however, and the relationship becomes more complex, revealing that within that overall trend, an unhappy cohort in each income group shows a sharp rise in happiness up to $100,000 annually and then plateaus.

“In the simplest terms, this suggests that for most people larger incomes are associated with greater happiness,” says Killingsworth, a senior fellow at Wharton and lead paper author. “The exception is people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help. For everyone else, more money was associated with higher happiness to somewhat varying degrees.”

Mellers digs into this last notion, noting that emotional well-being and income aren’t connected by a single relationship. “The function differs for people with different levels of emotional well-being,” she says. Specifically, for the least happy group, happiness rises with income until $100,000, then shows no further increase as income grows. For those in the middle range of emotional well-being, happiness increases linearly with income, and for the happiest group the association actually accelerates above $100,000.

Joining Forces to Ask: “Does Money Buy Happiness?”

The researchers began this combined effort recognizing that their previous work had drawn different conclusions. Kahneman’s 2010 study showed a flattening pattern where Killingsworth’s 2021 study did not. As its name suggests, an adversarial collaboration of this type — a notion originated by Kahneman — aims to solve scientific disputes or disagreements by bringing together the differing parties, along with a third-party mediator.

Killingsworth, Kahneman, and Mellers focused on a new hypothesis that both a happy majority and an unhappy minority exist. For the former, they surmised, happiness keeps rising as more money comes in; the latter’s happiness improves as income rises but only up to a certain income threshold, after which it progresses no further.

To test this new hypothesis, they looked for the flattening pattern in data from Killingworth’s study, which he had collected through an app he created called Track Your Happiness. Several times a day, the app pings participants at random moments, asking a variety of questions including how they feel on a scale from “very good” to “very bad.” Taking an average of the person’s happiness and income, Killingsworth draws conclusions about how the two variables are linked.

A breakthrough in the new partnership came early on when the researchers realized that the 2010 data, which had revealed the happiness plateau, had actually been measuring unhappiness in particular rather than happiness in general.

“It’s easiest to understand with an example,” Killingsworth says. Imagine a cognitive test for dementia that most healthy people pass easily. While such a test could detect the presence and severity of cognitive dysfunction, it wouldn’t reveal much about general intelligence since most healthy people would receive the same perfect score.

“In the same way, the 2010 data showing a plateau in happiness had mostly perfect scores, so it tells us about the trend in the unhappy end of the happiness distribution, rather than the trend of happiness in general. Once you recognize that, the two seemingly contradictory findings aren’t necessarily incompatible,” Killingsworth says. “And what we found bore out that possibility in an incredibly beautiful way. When we looked at the happiness trend for unhappy people in the 2021 data, we found exactly the same pattern as was found in 2010; happiness rises relatively steeply with income and then plateaus.”

“The two findings that seemed utterly contradictory actually result from data that are amazingly consistent,” he says.

Does It Matter Whether Money Can Buy Happiness?

Drawing these conclusions would have been challenging had the two research teams not come together, says Mellers, who suggests there’s no better way than adversarial collaborations to resolve scientific conflict.

“This kind of collaboration requires far greater self-discipline and precision in thought than the standard procedure,” she says. “Collaborating with an adversary — or even a non-adversary — is not easy, but both parties are likelier to recognize the limits of their claims.” Indeed, that’s what happened, leading to a better understanding of the relationship between money and happiness.

And these findings have real-world implications, according to Killingsworth. For one, they could inform thinking about tax rates or how to compensate employees. And, of course, they matter to individuals as they navigate career choices or weigh a larger income against other priorities in life, Killingsworth says.

However, he adds that for emotional well-being money isn’t the be all end all. “Money is just one of the many determinants of happiness,” he says. “Money is not the secret to happiness, but it can probably help a bit.”

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Research: Can Money Buy Happiness?

In his quarterly column, Francis J. Flynn looks at research that examines how to spend your way to a more satisfying life.

September 25, 2013

A boy looks at a toy train he received during an annual gift-giving event on Christmas Eve 2011. | Reuters/Jose Luis Gonzalez

What inspires people to act selflessly, help others, and make personal sacrifices? Each quarter, this column features one piece of scholarly research that provides insight on what motivates people to engage in what psychologists call “prosocial behavior” — things like making charitable contributions, buying gifts, volunteering one‘s time, and so forth. In short, it looks at the work of some of our finest researchers on what spurs people to do something on behalf of someone else.

In this column I explore the idea that many of the ways we spend money are prosocial acts — and prosocial expenditures may, in fact, make us happier than personal expenditures. Authors Elizabeth Dunn and Michael Norton discuss evidence for this in their new book, Happy Money: The Science of Smarter Spending . These behavioral scientists show that you can get more out of your money by following several principles — like spending money on others rather than yourself. Moreover, they demonstrate that these principles can be used not only by individuals, but also by companies seeking to create happier employees and more satisfying products.

According to Dunn and Norton, recent research on happiness suggests that the most satisfying way of using money is to invest in others. This can take a seemingly limitless variety of forms, from donating to a charity that helps strangers in a faraway country to buying lunch for a friend.

Witness Bill Gates and Warren Buffet, two of the wealthiest people in the world. On a March day in 2010, they sat in a diner in Carter Lake, Iowa, and hatched a scheme. They would ask America‘s billionaires to pledge the majority of their wealth to charity. Buffet decided to donate 99 percent of his, saying, “I couldn‘t be happier with that decision.”

And what about the rest of us? Dunn and Norton show how we all might learn from that example, regardless of the size of our bank accounts. Research demonstrating that people derive more satisfaction spending money on others than they do spending it on themselves spans poor and rich countries alike, as well as income levels. The authors show how this phenomenon extends over an extraordinary range of circumstances, from a Canadian college student purchasing a scarf for her mother to a Ugandan woman buying lifesaving malaria medication for a friend. Indeed, the benefits of giving emerge among children before the age of two.

Investing in others can make individuals feel healthier and wealthier, even if it means making yourself a little poorer to reap these benefits. One study shows that giving as little as $1 away can cause you to feel more flush.

Quote Investing in others can make you feel healthier and wealthier, even if it means making yourself a little poorer.

Dunn and Norton further discuss how businesses such as PepsiCo and Google and nonprofits such as DonorsChoose.org are harnessing these benefits by encouraging donors, customers, and employees to invest in others. When Pepsi punted advertising at the 2010 Superbowl and diverted funds to supporting grants that would allow people to “refresh” their communities, for example, more public votes were cast for projects than had been cast in the 2008 election. Pepsi got buzz, and the company‘s in-house competition also offering a seed grant boosted employee morale.

Could this altruistic happiness principle be applied to one of our most disputed spheres — paying taxes? As it turns out, countries with more equal distributions of income also tend to be happier. And people in countries with more progressive taxation (such as Sweden and Japan) are more content than those in countries where taxes are less progressive (such as Italy and Singapore). One study indicated that people would be happier about paying taxes if they had more choice as to where their money went. Dunn and Norton thus suggest that if taxes were made to feel more like charitable contributions, people might be less resentful having to pay them.

The researchers persuasively suggest that the proclivity to derive joy from investing in others may well be just a fundamental component of human nature. Thus the typical ratio we all tend to fall into of spending on self versus others — ten to one — may need a shift. Giving generously to charities, friends, and coworkers — and even your country — may well be a productive means of increasing well-being and improving our lives.

Research selected by Francis Flynn, Paul E. Holden Professor of Organizational Behavior at Stanford Graduate School of Business.

For media inquiries, visit the Newsroom .

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Can money buy happiness, three psychological principles to consider before you make your next purchase.

By Sarah Gervais, Associate Professor of Psychology, Social and Cognitive Program and Law-Psychology Program

11 Nov 2015

We’re all familiar with the idea that money can’t buy happiness. Yet, the reality is that we all spend money and for most of us it is a limited resource. How can we spend our hard earned dough in ways that will maximize our happiness? Psychological research offers some useful insights about the connections between money and happiness to consider before you make your next purchase.

• Being Rich Isn’t Necessarily the Path to Happiness. Money is important to happiness. Ask anyone who doesn’t have it. Having a higher income, for example, can give us access to homes in safer neighborhoods, better health care and nutrition, fulfilling work, and more leisure time. However, this only works up to a certain point. Once our income reaches a certain level and our basic needs for food, health care, safety, and shelter are met, the positive effects of money—such as buying your dream home—are often offset by the negative effects—such as working longer hours, or in more stressful jobs, to maintain that income.
• Doing Makes us Happier than Having. Most people assume that “things” will lead to more happiness than “experiences.” Physical objects—such as the latest iPhone, handbag, or car—last longer than say going to a concert, taking a cooking class, or going on vacation. Buying things does make us happy, at least in the short term. In the long-term, however, we habituate to new things and even though they may have made us excited and happy at first, eventually the item becomes the new normal and fades into the background. The happiness that comes from purchasing experiences, however, tends to increase over time. One reason is that we often share experiential purchases with other people. Even when you’ve driven that new car into the ground, you’ll still be telling stories with your family and friends about that time when you went on vacation to Colorado and you’ll even be chuckling about when the car broke down and you had to spend the night in the shady motel
• Consider Spending Money on Others. Most people think that spending money on themselves will make them happier than spending it on other people. Yet, when researchers assess happiness before and after people spend an annual bonus, people report greater happiness when they spend the bonus money on others or donate it to charity than when they spend it on themselves. This occurs regardless of how big the bonus was. One reason for this phenomenon is that giving to others makes us feel good about ourselves

So, before you pull out your wallet or click to order online, think about whether this purchase will really make you happy. If it will jeopardize your basic needs, think twice. If you have some disposable income, considering planning a trip or taking a class to learn a new skill. Finally, in this season of giving, know that if you spend your money on others or donate it to good causes, you may feel better than if you spend it on yourself.

Note: This article presents some basic principles for money and happiness. Individuals differ in their financial situation and psychological well-being. Consult a financial expert or behavioral health professional for guidance about finances and happiness.

Money can buy happiness: Here's how much you need and how to spend it, according to a financial therapist

• Money can buy happiness up to a point — studies indicate emotional well-being rises with income up to about $75,000.
• Researchers have also found that experiences make people happier because they enhance social relationships and are a bigger part of one's identity.
• Spending money on experiences or items that align with your values can increase your potential for happiness.
• This article was  medically reviewed  by  Alisa Ruby Bash , PsyD, LMFT, in Malibu, California. 

You know the phrase: money can't buy happiness. It turns out, that's not entirely true. Money can buy a certain degree of life satisfaction, depending on how much wealth you have and how you spend it. 

Research shows that emotional well-being rises along with income, up to a point. A 2010 study looked at surveys of 450,000 Americans and found that participants with higher incomes reported higher emotional well-being, up to an annual income of $75,000. After that, it drops off. 

Beyond simply having money, here's why being able to meet your basic needs, enjoying life experiences, and having social ties are also important factors for satisfaction and happiness in life.

Basic Needs

Lindsay Bryan-Podvin, LMSW , a financial therapist and author of "The Financial Anxiety Solution" says an annual income of $75,000 may not be the threshold for everyone. Being able to meet basic needs like food, housing, and healthcare are top priorities.  Then, the amount of satisfaction derived from income varies depending on factors like the cost of living in your area and your personal interests.

"The data is pretty clear that when we can financially take care of ourselves, our mental health is better," says Bryan-Podvin. "It's stressful to be on the grind all the time."

In fact, according to the CDC , adults living below the poverty level were three to four times more likely to have depression than adults living at or above the poverty level. 

The ability to meet basic needs without working multiple jobs also means you are more likely to have time for your friends and family, which is important for happiness. A Harvard study , which started in 1938 and tracked hundreds of men for nearly 80 years, collected data on both physical and mental well-being. The researchers found that close relationships, more than money or fame, keep people happy throughout their lives. 

Experience vs materials

Once you cover basic needs, whether money buys happiness may depend on what you spend it on, says Bryan-Podvin. 

There is a common theory that spending money on experiences will make you happier than spending money on material objects. Some studies back this up. A 2014 review found that experiences make people happier because they enhance social relationships, are a bigger part of one's identity, and are less likely to be compared to other people's experiences. 

A poll of more than 2,000 millennials in 2014 found that 78% prefer spending money on experiences or events compared to a material object. It's not just millennials. The same poll found that consumer spending on experience and events is up 70% since 1987. 

For some people, though, it may be buying a tangible item that brings the most happiness. "What research shows is if we have a very strong affinity for something, then we do get a lot of happiness out of buying that thing," says Bryan-Podvin, who gives the example of someone passionate about cars. 

When money doesn't buy happiness

One reason more money doesn't always equal more happiness is a tendency for what Bryan-Podvin calls "lifestyle creep." Meaning that when you are making more money, your expenses often go up.

For instance, you may end up spending money on things like a country club membership or dinners at more expensive restaurants. If this is happening, you may not feel like you don't have enough money even though you are making a substantial salary.  

Happiness also depends on how much you have to work to make that money. "You might be pulling in $300,000, which sounds great in theory, but if you are working 80 hours a week and can't enjoy the money you are earning, then what is the point?" says Bryan-Podvin. 

Bottom line

How much money a person needs to be happy varies. Happiness may depend on how much money is required to cover your own basic needs and what brings you joy personally.

For one person, that might be season tickets to the Yankees. For someone else, it might be a massage once a month or a new pair of running shoes. 

Ultimately, money can increase the potential for life satisfaction, depending on how you spend it. If you spend money on experiences or items that align with your values, you will increase your happiness, says Bryan-Podvin.

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• Main content

Connection Between Money and Happiness Essay

Introduction, money and happiness, personal life’s experiences, life’s experiences of others.

Does money buy happiness? If you ask anyone this question, the obvious answer will be yes. There is an intricate relationship between money and happiness, which confounds literal observation that money is happiness. Critical analysis of money-happiness relationship shows that socioeconomic factors determine the happiness of an individual; therefore, it is quite unsatisfactory to attribute money as the only factor and determinant of happiness.

There is a linear relationship between money and happiness; nevertheless, to some extent money has no effect to the happiness of an individual. “According to rank hypothesis, income and utility are therefore not directly linked: Increasing an individual’s income will only increase their utility if ranked position also increases and will necessarily reduce the utility of others who will lose rank” (Boyce, Brown, & Moore, 2008, p. 1).

If one has the highest-ranking income in a given social group or workplace, one tends to be much happier than the other one with the lowest-ranking income. Money facilitates things that bring happiness but itself does not bring happiness.

Since the general perception of money is that it is the ultimate source of happiness, many people work tirelessly day and night to ensure that they earn more money to satisfy their needs.

This belief is quite evident in the way people devote most of their time and energies in work places rather than spending time in pleasure by relaxing with family members and friends. Akin, Norton and Dunn (2008), observe that, “the amount of time the average American spends at work has grown steadily over the past several decades, despite the fact that this apparent investment comes at the cost of family and leisure time” (p. 4).

Although money brings happiness and satisfaction in life through spending to satisfy needs, people also derive pleasure in getting money. Life becomes happier if one is working extra to get more income. Otherwise, working overtime without commensurate income results into loss of happiness and morale of working amongst workers. Hence, money is a motivating factor in the work place and source of pleasure in satisfying needs of the family, and thus there is a linear relationship between money and happiness.

The relationship between money and happiness is very complex since money is not only a factor that determines happiness. The state of happiness results from diverse socioeconomic factors that make it hard to attribute to economic factors only.

Due to existence of the complex relationship, money can have direct relationship with the happiness, but up to a certain level of satiation where money has no effect on happiness. Easterlin paradox reveals that, “since the Second World War, despite getting richer, many countries have not shown improvement in average levels of happiness” (Albor, 2009, p. 38).

Easterlin paradox explains that social and economic factors do not have positive correlation yet they are the factors that influence the state of happiness in an individual, family, community and the entire nation. Improvement in economic factors in terms of increase in income levels does not mean that there is concomitant improvement in social welfare, which reflects happiness in the society.

According to Albor (2009), happiness is composed of seven factors namely, “family relationship, community, social affiliation, financial institution, work, personal freedom and personal values” (p. 44). Thus, money is not the only source of happiness.

My psychological understanding of the fact that money alone cannot buy happiness has helped me in coping with life’s great challenges because the world perceives money as the sole source of happiness. Earlier, I thought that money was everything in life, and that I could even buy happiness with it when deprived of the same.

My dream in life was to achieve great knowledge for the sole purpose of earning huge income that would make my life better and happier. “… priming individuals with the concept of money or wealth appears to increase their feelings of self-sufficiency,” (Quoidbach, Dunn, Petrides, & Mikolajczak, 2010, p. 2). I was so happy nurturing and fantasizing about money, wealth and happiness for I did not know the complexity of happiness because to me, money and happiness were equal.

I longed for the time when I would own as much money and property as I could to surpass everybody in everything including happiness, because money translated into happiness. Not until I gained psychological insight on happiness, only to realize that money was not the core factor in felicity realization.

Having gained psychological perception and understanding of what constitutes happiness, I now perceive life quite differently. I now understand that money is one of the factors that determine happiness, but not the only means to happiness.

Easterlin in explanation of his paradox argues that, “economic growth is a carrier of a material culture of its own that ensures that humankind is forever ensnared in the pursuit of more and more economic goods” (Albor, 2009, p. 47). From this argument, I understand that without psychological perception of what really constitutes happiness, the pursuit of money and wealth will enslave me.

On contrary, people amass money and wealth to have financial freedom, which means abundant happiness, but in real sense, they attain financial slavery. The business of managing and gaining more money is very hectic and weary as an individual spends many hours doing it than having pleasure. I have realized that for money to bring happiness in life there should be a balance between work and pleasure, otherwise overindulgence in money making will lead to enslavement.

I have experienced that the more money one owns, the more he/she walks deeper into this enslavement. Owning a lot of money and wealth is quite challenging because it demand immense psychological attention, which overwhelms the happiness derived from them. At some instances when I have a lot of money, I find myself quite unstable, for I am busy running up and down spending it to attain satisfaction; regrettably, the very goods I buy do not satisfy my thirst for happiness.

Research study by Akin, Norton, & Dunn, (2008), demonstrates that, “…adult Americans erroneously believe that earning less than the median household income is associated with severely diminished happiness- a false belief that may lead many people to chase opportunities for increased wealth” (p. 11). With changed psychological perception, I cannot pursue happiness by indefinitely striving to hoard money and wealth since I will be striving after the wind, and that is vanity.

Many people poorly understand the relationship between money and happiness. They think that the only means to attain happiness is through the satisfaction of human needs that literally money can buy. However, money cannot buy everything that determines happiness, for instance, good friends, friendly community, and personal values amongst other key factors that define happiness.

Due to lack of psychological understanding of real meaning and source of happiness, many people grope in economic circles thinking that happiness lies there. False perception of happiness has made many people to struggle endlessly in pursuit of financial happiness, which never materializes. People think that solutions of many problems they encounter in life lies in money, because money pays education, rent, food, healthcare and many others needs.

Smith (2008) cautions this form of thinking for people assume that they “…might work longer hours to make more money, but then face heightened anxieties regarding childcare cost, comminuting, diminished leisure, physical and mental costs that accrue for the well-being of the families” (Smith, 2008, p. 20). In the course of achieving happiness through financial means, the process is tedious and very demanding making people to lose happiness instead of gaining more.

As aforementioned, money alone cannot have overwhelming influence on happiness since there are other factors that influence the status of happiness. These factors are personal values, personal freedom, family, community, work and social affiliation.

These factors constitute happiness; unfortunately, due to poor psychological understanding, many people neglect them and focus on the financial aspect of happiness only. Below poverty level, money is the overriding factor of happiness and as the financial status changes above the poverty level, others factors gradually become dominant.

International comparison of average levels of happiness shows that, “…among poorer countries, gains in income are accompanied by dramatic increases in happiness, but among richer countries, higher income do not buy more happiness” (Albor, 2009, p. 39). This confirms that, at the level of satiation, money no longer determines happiness but other factors begin to have significant influence. Thus, achievement of the greatest felicity requires consideration of all factors that constitutes happiness.

All the factors, which constitute happiness, are in two broad categories, social and economic factors. Economic factors partially influence happiness because the perception and the source of happiness lie in the social context of life, as happiness is not quantifiable in terms of money. According to Albor, “happiness is a universal feeling that all human beings have the potential to experience” (2009, p. 40).

Happiness is a contagious feeling, which makes everybody happy in the family, community, workplace and the whole world. I have noticed that, people think that money is everything in life, for out of their abundant riches; they afford to live in seclusion where they get satisfaction of their wealth and money while the surrounding people are struggling in abject poverty. Only the sight of the poor people makes them lose happiness.

Moreover, they live in great fear of robbery attacks and property loss, wishing to have their own continent, free from the eyesore status of the poor. All these happen because they have poor psychological understanding of happiness. If they could embrace social factors, they could derive ample happiness from their environment by relating to and assisting the poor.

In pursuit of happiness, young people do not have the right perception of what constitutes happiness. Given the choice between the money and schooling, they would prefer money, because they do not understand that money gives short-lived happiness. Regardless of virtues, and values we instill in children, they still perceive that money equals happiness.

Smith (2008) argues that, “… rather than setting off to follow their deepest passions, many of our most talented and driven graduates just need to get a job, whatever job that best allows them to begin their a life of paying off debt,” (p. 23). Young people have abandoned personal development, which is another source of happiness and are busy pursuing financial pleasures that give short-lived happiness.

In youths, there are many pleasures money can buy, hence, money has blinded their life’s priorities due to false satisfaction of needs that brings happiness. A rich person without personal development is as a fool is a sea of knowledge who wants to satisfy psychological needs out of folly. For one to achieve lasting happiness it requires understanding of the factors that significantly contribute to happiness and not mere stereotyping that money is equal to happiness.

Money and happiness have linear relationship but up to a certain level of satiation where other factors of happiness such as work, family, community, social affiliation, personal values and freedom, come into effect. Poor psychological understanding of happiness has led many people to believe erroneously that, money is the only source of happiness.

It is true that money brings happiness but the misunderstanding arises in the cumulative source of happiness. People derive happiness from both economic and social aspects of life, but rarely do people consider the social aspects. Social aspects demand psychological understanding of happiness; however, many people fail to realize its importance as source of happiness in the family, community and the entire society.

Therefore, people should be wary in attributing money as the only source of happiness for they will pursue happiness in vain, unless they come to the realization that social aspects are also integral part of happiness. Thus, happiness and money have partial relationship; whereby, money facilitates things that bring happiness but in itself, money lacks the capacity to bring happiness.

Akin, L., Norton, M., & Dunn, E. (2008). From Wealth to Well-Being? Money Matters, but Less People Think. Journal of Psychology University of British Columbia, 2(5), 1-20.

Albor, C. (2009). How Much Can Money Buy Happiness? Is the Debate Over for the Easterlin Paradox? Radical Statistics, 1(98), 38-48.

Boyce, C., Brown, G., & Moore, S. (2008). Money Happiness: Rank of Income, not Income, Affects Life Satisfaction. University of Warwick Psychology Journal, 1-16.

Quoidbach, J., Dunn, E., Petrides, K., & Mikolajczak, M. (2010). Money Giveth, Money Taketh Away: the Dual Effect of Wealth on Happiness. Association for Psychological Science, 20(5), 1-5.

Smith, N. (2008). Poverty, Money, and Happiness. A University Dialogue on Poverty and Opportunity Journal, 20-25.

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Can Money Buy You Happiness? Yes, It Can. However…

Having a higher income doesn't mean you also have enough of the other things that make you feel truly happy and wealthy (relationships, hobbies, time).

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The age-old question of whether money can buy happiness has perplexed philosophers and economists for centuries. While conventional wisdom states that money, beyond basic needs, cannot purchase a person’s search for happiness, the research paints a more nuanced picture.

I grew up frequently hearing the biblical phrase, "The love of money is the root of all evil." This warns that prioritizing money above all else corrodes the soul because money becomes one’s god. However, now that I’m in my 60s, after raising five boys and accumulating 15 grandchildren, I believe the greater danger lies in worshipping money by surrendering your autonomy to its lure and becoming enslaved to the growth of money over the pursuit of wealth (happiness).

In this context, “money” is an object or commodity, something to be controlled, whereas “wealth” is having enough: enough love, friends, hobbies, time and money. Therefore, money is a subset of wealth, not the other way around.

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Happiness plateaus at $75,000?

Foundational research in 2010 by economist Angus Deaton and psychologist Daniel Kahneman discovered that, up to a point, higher incomes correlate with greater day-to-day contentment. But this effect disappears at an annual salary of about $75,000. Beyond that level, more money does not seem to move the needle on happiness.

This research supported the paradigm of my early years. The scoop from high school and university educators was that money buys happiness to the point that basic needs are met. Think Maslow’s hierarchy of needs . After that point, increased revenue has diminishing returns. Therefore, the initial research was a rule of thumb in philosophical conversations regarding the theme of happiness and money.

Matthew Killingsworth from the Wharton School at the University of Pennsylvania recently presented findings that challenge the plateau theory . His research reveals that there is no monetary threshold at which money's capacity to improve well-being diminishes. On the contrary, its positive impact appears to persist and even increase across all income levels.

One explanation for this lies in perceived control. Money enables choices and freedoms that are hard to attain otherwise. As income grows, so do available options for how to live. This expanded autonomy and opportunity, in turn, boost well-being.

Money and subjective well-being

A collaborative analysis by scholars from the University of Pennsylvania and Princeton University unveils a complex relationship between money and subjective well-being. Their research delineates how increased earnings relate to enhanced day-to-day mood for most individuals while also identifying a subset for whom higher incomes fail to boost happiness.

Three key findings merit consideration. First, there's the notion that beyond a certain threshold, additional money ceases to significantly impact well-being. Second, an opposing perspective suggests that there is no discernible limit, with money consistently enhancing quality of life as income grows, affording greater autonomy and opportunities. Last, researchers have identified a segment for whom the level of income appears to have little bearing on happiness, regardless of how much they earn.

A constructive collaboration

Seeking to reconcile their contradictory findings, the researchers collaborated with the addition of Professor Barbara Mellers as an impartial, third-party arbitrator. Their adversarial collaboration integrated rigorous statistical analysis of previous data on both earnings and happiness levels.

Additionally, their investigative approach encouraged the direct questioning of underlying assumptions between the two camps. Through this constructive back-and-forth engagement, powered by substantial data review and a debate of ideas amongst the whole team, the aim was to reach an elevated synthesis.

So, which is it? Does the money-happiness connection fade out or keep strengthening? Killingsworth summarized it.

"For most people, larger incomes are associated with greater happiness. The exception is people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help. But for everyone else, we found increased income related to feeling happier across income levels, even into wealth.”

This aligns closely with my own findings about prioritizing money over purpose and people. When we view money as the scorecard of success or when we sacrifice too much to pursue it, our joy quickly crumbles. As Killingsworth notes, “Those equating money and success ended up unhappier despite higher pay.”

The bottom line

Surrendering one’s soul or sanity chasing dollars and glory doesn’t work. True prosperity fuses financial stability with meaning, relationships and service. If money leaves you feeling empty inside, no amount will ever fill that void.

There are currently 58 million Americans age 65 and older, and about 10,000 individuals are joining them daily. Despite this trend of more people retiring from the accumulation phase, precious little is being done to address their transition into a new lifestyle. Financial planners and their clients would benefit from shifting focus away from rates of return and concentrating on developing strategies for utilizing the accumulated money to secure a fulfilling lifestyle called wealth.

Related Content

• The Five Stages of Retirement (and How to Skip Three of Them)
• Being Rich vs Being Wealthy: What’s the Difference?
• Are You Rich? Latest Survey Results Provide Some Clues
• How to Have a Happy Retirement
• To Create a Happy Retirement, Start With the Three Ps

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA .

Dr. Richard Himmer is a seasoned professional with expertise in Emotional Intelligence (EI), Clinical Hypnotherapy and Workplace Bullying prevention. He holds an MBA, a master’s degree in psychology and a PhD in Industrial and Organizational Psychology. He combines academic knowledge with practical experience. His doctoral dissertation focused on the Impact of Emotional Intelligence on Workplace Bullying, showcasing his commitment to understanding and addressing complex workplace dynamics. Dr. Himmer leverages the subconscious (EI) to facilitate internal healing, fostering healthy interpersonal relationships built on trust and respect.

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Home / Essay Samples / Life / Money / Can Money Buy Happiness? An Argumentative Analysis

Can Money Buy Happiness? An Argumentative Analysis

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• Topic: Happiness , Money , Personal Statement

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