You may have heard of that widely-cited study from 2010 which theorized that happiness caps at US$75,000 (US$102,500 today), with each dollar earned past that mark making little impact on the earner's well-being—well, turns out that may not be true, after all.
Driving the news: Newer research is challenging the idea that there’s an inflection point where money stops making an impact on life satisfaction.
Researcher Matthew A. Killingsworth collected real-time data from over 33,000 working-aged Americans. They were tasked with evaluating their "experienced well-being" or how they felt at that moment.
- They also tracked their "evaluative well-being" or how satisfied they felt about their life generally.
Killingsworth found that more money does make life better—in some ways.
- Higher earners reported feeling more autonomy—they felt more control of their lives and had more choices, which led to greater life satisfaction
But as people earn more money, each extra dollar “buys less happiness.”
- For example, someone who earns $20,000 a year feels the effects of a 10% raise more than someone who makes $200,000 getting a 10% raise.
Why it matters: The study shows that more money doesn’t necessarily make people happier because they can buy more things, but because it gives them more choice and control over their life.
- For example, someone living paycheque to paycheque doesn't have the luxury of enjoying a brief "funemployment" stint. If they lose their job, they must take the first available job, which might be a bad one.
Yes, but: Killingsworth's research also showed that people who related success with money scored lowest on the "happiness" scale regardless of income.
- And high earners felt more stress working longer hours and feeling pressed for time.
Bottom line: The trick to being happy? Don't overemphasize money's role in your life—according to Killingsworth, that's a great way to become unhappy. To quote 90’s rapper Jelleestone: Money can’t buy me happiness, but I’m happiest when I can buy what I want.