For those of us who aren’t millionaires, the phrase “money doesn’t buy happiness” is certainly a welcome one.
Sure, being in the top 0.1% sounds great in theory. But they’re not any happier than the rest of us…right?
Well, a study has been done into just that. And it turns out that, in fact, all those extra dollars do, indeed, lead to extra happiness.
It’s perhaps not exactly the result you were hoping for, especially if you were looking at pictures of your billionaire of choice on a yacht recently and being sure they were actually miserable.
But as you’ll see, there are actually some great lessons that the rest of us can take from this.
Background
For around a decade now, there’s actually been data supporting the idea that money doesn’t buy happiness.
Specifically, in a study from 2010, it was found that earning more than $75,000 each year didn’t make you any happier.
That is, the more you earned, the happier you were – to the $75k point. From there, happiness plateaued, leading people to believe that higher incomes don’t lead to higher amounts of happiness.
You may have even seen the $75,000 figure cited in other articles. It’s been a solid, fairly frequent point to rely on for anyone trying to make the argument that earning more money is great, but there are other pleasures to be had in life.
And so we all continued to rely on this information, satisfied with your life choices that led us to not be billionaires – until 2021.
So can money buy happiness?
Those earlier findings were refuted in a study by Matthew Killingsworth released earlier this year. There, 1,725,994 samples from 33,391 employed adults in the US were used and, based on this, Killingsworth found that there’s actually no evidence that happiness plateaus once people earn more than $75,000 a year.
On the contrary, he found that the higher your income, the happier you are both in the current moment and with life overall.
The study also revealed that people’s levels of happiness continue to increase as their earnings grow.
So that billionaire on a yacht we mentioned earlier? Maybe not quite as miserable as we first thought.
Why exactly does money make people happier?
The answer to the question of why money apparently buys happiness isn’t quite as simple as “because they can more easily afford a jet ski”. And while the study doesn’t provide any definitive responses to this question either, it does include some educated guesses.
That is, Killingsworth speculates based on the data that people spend money to reduce their suffering and increase their enjoyment. The outcome of this is that as they earn more, they have more funds available to pay for more of this suffering to be even further limited.
There’s also reason to believe that having a higher income allows people to have more control over their lives. This was actually directly addressed in two of the questions that participants in the study answered, which asked respondents the extent to which they felt in control of their life overall as well as their current situation.
The results showed, perhaps unsurprisingly, that there was a clear link between how much control people felt they had and their income level. You could then easily tie this into the first point, in that those who have a higher income also have the means to buy some of this control.
For example, someone on a lower income level may feel like they have no option but to keep working so as to hopefully one day reach financial freedom and retire. Someone who earns more though may, in theory, have already reached the point where they have more than enough money to live off if they wanted to, even just for a shorter period as a break between roles, meaning they’re not required to stick with a job they hate.
Was there anything negative in this study?
Now, to be clear, the purpose of this article isn’t to make you entirely depressed at not being rich.
And perhaps it helps that I also point out one of the downsides of having money mentioned in the study.
Specifically, one of the questions in it asked respondents about time poverty (“Do you have too little time to do what you’re currently doing?”). This turned out to be one of the few aspects where negative feelings went up as people’s income similarly increased.
That is, there was a very slight increase in people feeling like they didn’t have enough freedom with their time as they started to earn more.
It’s worth mentioning that those same people still reported feeling much happier overall, so this answer may not be quite the silver lining you were hoping for. But it’s something to keep in mind if you’re someone who values your free time.
What can the rest of us take from this?
The fact that money does, actually, buy happiness may not be the groundbreaking result that you’d first think it may be.
Similarly, this new study’s rebuttal of the $75,000 figure that was so widely accepted before may be entirely in line with what you actually suspected if you’d ever heard that “fact” being cited.
But I’d also argue that there is a great takeaway here for us mere mortals and that comes from the assumption from this data that people spend money to reduce their suffering and increase their enjoyment.
That is, this aligns nicely with a concept called “intentional spending”. One of the main goals of this idea is to move away from the idea that frugality means spending only what you absolutely have to. While that can be a good option if you seriously need to reduce your expenses, it’s not entirely sustainable for the long term, meaning there’s a good chance you won’t be able to stick with it and will instead revert to less positive spending habits.
Instead, intentional spending involves only using your money for those things that align with your most important values.
For instance, the idea of frugality says that you shouldn’t buy a coffee from a cafe if you ever want to be able to afford a house. Intentional spending, however, suggests that getting a coffee with a friend is fine if it helps you maintain those relationships. Just maybe stick with that coffee instead of, say, going out with them for an expensive meal every week.
It’s about focusing on the why of spending. And if that why helps you reduce your suffering and increase your enjoyment (and, in turn, increase your savings to give you more control over your life, in line with one of the other conclusions from this study), then we can perhaps start to see how these findings can also put us on the path to increased happiness, no matter our income level.