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Money Does Buy Happiness… Imagine that!

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It's long been assumed that money doesn't buy happiness. There was a famous study in the 70s (PDF) that supported this claim. It concluded that as long as your basic needs are met, money doesn't buy happiness - it's money relative to the people around you. If you don't believe the study, what about the anecdotal evidence of lottery winners reporting that they are less happier after winning? When I think about it, some of the happiest people I know aren't particularly rich, but have good friends, family, and hobbies that they enjoy.

New York Times published an article yesterday saying that maybe everything has changed, money does buy happiness after all. In my opinion, this is the defining statistic:

In the United States, about 90 percent of people in households making at least $250,000 a year called themselves "very happy" in a recent Gallup Poll. In households with income below $30,000, only 42 percent of people gave that answer.

I think you have to look at money as a way to buy various freedoms. If you win the lottery, you might not need a day job, which gives you a lot of freedom. However, you now have cousin Nick asking you to help him out of his credit card problem. You trade one stress for another. If you are a CEO of a big company, you have plenty of money. But then you have to deal with all the responsibility that comes with it. If a friend comes up with great tickets to the big game, you often have to say no and get back to work.

I think it's very difficult to find that happiness balance. Having money (and not the responsibility that comes with it) seems like a way to reduce those obstacles to a very happy life.

Last updated on June 14, 2008.

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17 Responses to “Money Does Buy Happiness… Imagine that!”

  1. No Debt Plan says:

    I wonder if they went into detail on what defines happiness. We are very consumerism oriented society, so if the lower rungs of the income level see that they can’t afford everything they see on TV, perhaps they are ‘unhappy’ about it.

  2. A certain income level also buys more autonomy. I recently watched a great Frontline documentary about health and wealth. Those who were higher up the hierarchy of an organization (like a hospital) were more in control of their day-to-day lives and “happier” with that autonomy.

  3. Dave C says:

    I would suggest that the findings of the 70’s study are not necessarily refuted by the findings of the NYT. But rather, “those around us”, aka “the Joneses” has continued to expand to encompass everyone under the sun (literally). This started way back in the 50’s with the advent of television and so was well under way in the 70’s. But since then we’ve had an increases in the number of TV channels, in the obsession with celebritocracy, in 24 hour news coverage, in all forms of mass media…. and oh yeah, the age of the internets. So those making 30k a year are given the painful impression they’re nowhere near as successful and “fulfilled” as their “counterparts” via constant bombardment (even if they’re roughly at the same level as all their neighbors/family).

  4. Cos says:

    Money opens up a lot of doors – both to great opportunities and experiences but also to the cousin Nick’s of the world. I’m of the personal opinion that the great offsets the not-so-great. If having “lots of money” meant I *had* to deal with the not-so-great things .. I say give me that problem.

    I’d be happy to deal with cousin Nick in my off-time from handling new business ventures, exploring financial planning options and otherwise enjoying the opportunities that a small fortune would grant me.

  5. Llama Money says:

    Surely someone who makes $250k plus is happier than the guy who makes $18k per year. The first guy doesn’t ever wonder how to pay rent, buy food, or buy his kids clothes. Not having to worry about that sort of stuff will definitely make one happier.

  6. That’s pretty interesting. Though much like Llama Money, I wonder if it’s because people making more have no problem funding basic necessities like food, shelter, clothes etc, whereas someone earning less will probably have a harder time making ends meet. The person who has all their ends covered and can afford some luxury purchases and vacations I’m sure is happier than the person who is in the verge of losing their home and behind in car payments. These days, $250,000 isn’t as much as it used to be. With inflation, and wages going down as costs going up, money doesn’t buy what it used to. In hard times like this, it’s not surprising that people with more money are happier.

  7. You have to love those academic studies. After scanning through the article in NY Times remembered the cable TV commercial where a guy claims that 90% of statistics could tell what you want them to tell 50% of the time”

  8. deepali says:

    There’s a lot of research out there about this. One study showed that 40K is the magic number, with happiness increasing as you approach 40K and then leveling off to a more modest rise.

    Another study showed that you’d need a substantial raise in income to counteract unhappiness caused by some life change (perhaps related to a promotion) – often numbers in 6 figures.

    Comparing 250K to 30K doesn’t seem viable (especially in light of the 40K value). I’d like to see the actual trend from 30K to 250K.

    I’m also skeptical of the value of gallup polls. :)

  9. Mrs. Micah says:

    Up to a point it certainly makes sense. After that it’s mostly about whether you can use the money to pursue your dreams.

  10. Wade Young says:

    I don’t trust these types of studies. People who travel extensively abroad say that the smiles they see on the faces of people in poor countries aren’t seen here in the states. I do, however, think that control makes people happy. And people with more money have more control over their lives.

  11. Any study like this makes me wonder about causality. Are people who are naturally happy more likely to be optimistic and successful? Probably. Although, the basic needs theory mentioned by others must also explain part of the gap.

    Dave suggested TV and the celebrity culture as causing people to feel poorer. This could also explain some of the increase. I read a book by a Chinese immigrant to the US who said that almost everyone was happy in China – until they started watching TVs. When they started seeing what they were missing, the general contentment dropped in the average person.

  12. That is how I always looked at it. If you have money you don’t have to work(unless you choose to). You can spend your time with your family or whatever else you want to spend your time on.


  13. Ryuko098 says:

    I wouldn’t quite say money buys happiness, but certainly the peace of mind from being able to cover your basic needs and then some doesn’t hurt.
    Recently, I heard a report similar to this on NPR. What you suggest at the end seems to coincide with their survey that found that on average, the older you get, the happier you are – specifically in advanced age.
    I would guess that, aside from a debilitating disease, most people would just plain be happy to still be alive past their 70’s. Not to mention, they don’t normally have to deal with kids (except when they want to, which adds happiness), and get senior discounts. Many of these people of course are retired, and so have money (pension, investment, etc.) but very few responsibilities.

    I agree with Brett as well. Optimism is a big deal. At least in my personal life, when I am optimistic, I perform better – which leads to promotion. Most successful people I’ve met are generally optimistic (hard work & smart thinking doesn’t hurt, either). And paying too much attention to the material possession we’re bombarded with every day not only increases pessimism, but by increasing your spending habits, you become less financially sound, which when those credit card bills come in (a requirement for a lavish lifestyle on an average income), happiness tends to depart.

  14. Pearl says:

    I always thought of “money can’t buy happiness” in the sense that if you can do what you love, it doesn’t compare to making more money at a job you hate.

    Obviously if you’re poor, you’re not going to be happy. But I still wouldn’t trade in being a musician for being a CEO.

    Also I think this study might turn out differently if taken in a different country; being poor in America doesn’t just mean having no money, it also means having no health care. This isn’t the case in many other first world countries.

  15. $18k would suck because you can’t pay the bills.

    $40k might seem great (until you reach retirement, then see how badly ff you REALLY are).

    $250k of income sucks because it is always ‘at risk’ (might lose that cushy job or high-flying business at any time).

    … but, $250k in PASSIVE income is just fine ;) I can assure you, that’s a very ‘happy’ number …

  16. can't say says:

    Bull excrement. THis is a “study” that uses peoples responses as “evidence”. People lie.

    The LOVE of money is the root of ALL evil. In every single case. Money turns good human beings into……..less than good. I’ve experienced it in ALL my business dealings. Sometimes this lust TOTALLY envelopes a person, where EVERY MOVE they make is polluted by the desire for more, more, more. ANd sometimes, MOST of the time really, even good, moral people succumb to the temptation of making out and act in ways LESS than stellar. They MAY do the right thing most of the time, but when they do do something underhanding, theres always dollar signs attached to it.

    I make money because I got a family. When I didn’t make a lot of it, I liked people a whole lot more. Now that things are easier, and I make more, I come in contact with people who have more money, who make more money. I like people a whole hell of a lot less now. ANd the bunch EXCUSES I hear about how and why they behave the way they do…..its nauseating.

    Money. You gotta have it, but be careful.

  17. can't say says:

    18K annually would “pay the bills” if you lived your life accordingly.

    Peoples “wants” have become peoples “needs”.

    Capitalism is the best system on the planet. It also creates the most NEEDY people on earth.

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