Money Can Buy Happiness After All

What’s the relationship between money and happiness? Previous studies have indicated that, while money can in fact buy happiness, it plateaus at approximately $75,000/year. However, new research suggests otherwise.

Using over a million real-time reports from a large U.S. sample group, a recent study found that happiness increases linearly with reported income (logarithmic), and continues to rise beyond the $80,000/year mark.

Below, we’ll provide more details on the research methodology, while touching on a few possible reasons why higher incomes may improve people’s happiness levels.

How is Happiness Measured?

Past research on happiness relative to income has relied on retrospective data, which leaves room for human memory errors. In contrast, this new study uses real-time, logged data from a mood tracking app, allowing for a more accurate representation of respondents’ experienced well-being. 

Data was also collected by random prompts over a period of time, with dozens of entries logged for each single respondent. This provides a more well-rounded representation of a person’s overall well-being.

Two forms of well-being were measured in this study:

• Experienced well-being: A person’s mood and feeling throughout daily life
• Evaluative well-being: Someone’s perception of their life upon reflection

Both forms of well-being increased with higher incomes, but evaluative well-being showed a more drastic split between the lower and higher income groups.

Why Does Money Buy Happiness?

The report warns that any theories behind why happiness increases with income are purely speculative. However, it does list a few possibilities:

• Increased comfort: As someone earns more, they may have the ability to purchase things that reduce suffering. This is particularly true when comparing low to moderate income groups—larger incomes below $80,000/year still showed a strong association with reduced negative feelings
• More control: Control seems to be tied to respondents’ happiness levels. In fact, having a sense of control accounted for 74% of the association between income and well-being
• Money matters: Not all respondents cared about money. But for those who did, it had a significant impact on their perceived well-being. In general, lower income earners were happier if they didn’t value money, while higher income earners were happier if they thought money mattered

Whatever the cause may be, one thing is clear—Biggie Smalls was wrong. Looks like more money doesn’t necessarily mean more problems.