Can Money Buy Happiness? Not as Much as You Think
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Here's your money briefing for Thursday, May 30th. I'm J.R. Whelan for The Wall Street Journal. Who wouldn't want to have more money? It's easy to think that getting a raise or even a hefty tax refund would make you more happy. But it turns out money isn't everything.
It's not about the products and the stuff that money buys per se, but rather the choices that having money affords you. In other words, it's giving you more control of your life.
We'll talk to Wall Street Journal personal finance reporter Joe Pinsker after the break.
and how they may affect your finances and portfolio.
Listen at schwab.com slash Washington Wise.
Does having more money make you happier? Researchers are still running the numbers on that. Wall Street Journal personal finance reporter Joe Pinsker joins me.
What question does the episode introduce about money and happiness?
Joe, about 15 years ago, a study found that $75,000 was the peak salary for happiness. What's changed?
It's been almost a decade and a half since that study popularized $75,000 as a sort of magic number here and some other studies published since then some soon after and some from the past couple years have have called that number into question and they find that instead of plateauing somewhere happiness on average keeps rising and rising with income and the authors of those studies actually say they they don't see a point in their data where happiness stops rising with income though they are quick to note that there's not a ton of data on people at pretty high income levels. So that's kind of one unknown in this area of research.
Well, also, you fast forward to 2024, $75,000 doesn't seem like it would go as far, considering how inflation has risen.
Of course. Regardless of what you think about what has happened in the research world, the amount of money here is really going to change a lot in terms of purchasing power. And even if researchers hadn't been questioning this $75,000 finding, you certainly need to just update it now in terms of how much prices have risen. $75,000 in 2010 ends up being somewhere around $110,000 today. today. And an important note, one that actually a lot of people miss in this research, is that we're talking about household incomes here, not individual salary.
So the people who study these things, they say that money does play some role in happiness.
Oh yeah, it definitely does. One researcher I spoke with who's done work in this area, Matt Killingsworth, he framed it like this. He said it'd be wrong to reduce the pursuit of happiness to money, but it also would be wrong to ignore money as an important factor for happiness. He and other researchers in this area who I'm in touch with talk a lot about how much people like to zoom in on a single thing that will make them happier, like their paycheck, for instance, when in reality, the way happiness works is that it's the product of a bunch of different things. Maybe it's money, but it's also your social life and how you feel about your family and friends and the work that you do and your hobbies and so on.
So how does money fit into the happiness equation?
The relationship between money and happiness has been studied a lot. But one kind of interesting thing that researchers don't know as much about is exactly why money is connected to happiness. We can intuitively guess, but nailing it down in the research has just been more difficult. One of the leading explanations in the work of that researcher I mentioned, Matt Killingsworth, is that it's not about the products and the stuff that money buys per se, but rather the choices that having money affords you. In other words, it's giving you more control of your life. And as a side note, another kind of interesting area where researchers are still figuring out the happiness equation is that it may look different for different people.
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