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"The best things in life are free," or "money can't buy happiness" are common sayings when it comes to money and happiness. As it turns out, a certain level of money does buy happiness, but that figure is not as high as we might imagine. So, how much money do you have to earn a year to make you happy? According to a study by Princeton researchers, the price of happiness clocks in about $75,000 a year. Once we surpass a certain level of stable income, researchers say the data suggests that "individuals' emotional well-being is constrained by other factors in their temperament and life circumstances."
This doesn't mean, the study is quick to add, that increases in income doesn't matter. An $80,000 consultant may well be happier or more satisfied with her career if she became a $120,000 senior consultant. Money helps us think that our career or life is on a successful trajectory, and feeling good about our lives is an important component in feeling "happy." But if that consultant is unhappy at $80,000, chances are that there are other factors at play in her unhappiness that don't have to do with money.
What implications does this study have on everyday life? Is it ammunition for college students or young workers to aspire to careers where a $75,000-plus income is likely to be achieved, an encouragement for freelance workers to take on more assignments or figure out how to bump up their hourly rate, or a renewed sense of focus on interpersonal connections and giving to others? I'd like to think it's a little bit of all of the above. Money is important -- there is no doubt. A high income (combined with prudent financial decisions and planning) affords us choices, leisure, and feeling of satisfaction -- all of which contribute to a happier life.
But if John and Jane are making $150,000 a year and they are still living paycheck to paycheck, or they are still mired in unhappiness, then the problem probably isn't something that can be resolved by an additional $50,000 in income. It's all the other things in life (good friendships and relationships, a feeling of being valued and challenged at our jobs, interest in our jobs and hobbies, and giving of time and money to causes that move us) that have the power to make -- or break -- our happiness scale.
So what's the good news for all of us bumping at or below that happiness threshold? Next time someone says "money can't buy happiness," you can interject, "for me it can, and it's backed up by science!"
http://wellheeledblog.com http://twitter.com/wellheeledblog Savvy Living Through Personal Finance
