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At what Income does Money no Longer Affect your Happiness?

Last updated by on 12 Comments

Money & Happiness Study Looks at the Magic Number

A recent happiness and money study completed by Princeton economist Angus Deaton and psychologist Daniel Kahneman analyzed Gallup surveys of 450,000 Americans in 2008 and 2009 to determine the ‘magic’ annual income level at which day-to-day happiness no longer increases.

What ‘magic’ number did they come up with?

$75,000

But there’s a caveat. The study also suggests that there were two forms of happiness:

  1. money and happinessday-to-day contentment (emotional well-being)
  2. overall “life assessment” (feeling accomplishment)

While a higher income than $75,000 didn’t have much impact on day-to-day contentment, it did boost happiness in the life assessment area – the more you earned, the higher your ‘life assessment’ happiness level was – with no plateau, apparently.

But what About Cost of Living?

I do think this study is a little flawed in that $75,000 in New York, for instance, is much different than $75,000 in Alabama. They would have earned a little more credibility in the study had they worked in cost of living data somehow (maybe that data wasn’t available to them).

I do agree that once your daily needs are met and you have a base amount of ‘stuff’, you reach a plateau where more money and stuff doesn’t increase your day-to-day happiness. I also agree that working towards larger goals does have an impact on your happiness. Can you separate the two completely? Probably not. But it is a distinction worth making.

I’d like to poll you all to see what you think (would love to see your comments on your $ amount and place of residence for context, additionally).

At what income level do you think you would reach a plateau where more money no longer makes you happier on a day-to-day basis?

View Results

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12 Comments »
  • robin says:

    I think I’d be satisfied with this “average” income (I make slightly more) if I were married and Uncle Sam wasn’t taking such a depressingly- large cut, and then the California Franchise Tax Board wasn’t tearing of a shred of what’s left.

  • Kevin says:

    I agree that not taking into account cost of living is a fatal flaw in that study/survey. I live in Chicago and have approx. $100k in student loan debt. I make close to the survey’s magical income happy place. It seems like much less with that amount of student loan debt.

  • Shaun says:

    I live in Arkansas, and 75k here is more than enough to have a large house, a couple of nice cars, and a healthy monthly stash for retirement.

    I like that there are two types of happiness mentioned — that’s a healthy way to look at it.

  • Ron Ablang says:

    Thanks for the comments guys.

  • Andrew says:

    Very philosophical question. I personally think it’s at the point where you no longer are forced to spend large portions of your days doing something you don’t love (if you’re in that situation) and you can focus on your hobbies and interest. The caveat is even if you do reach a certain level of wealth, you need to be careful not to get into a rut or boredom and keep yourself stimulated and thinking. I think it’s a constant battle in some ways to remain happy even if money is no longer an issue.

  • Budgeting in the Fun Stuff says:

    My husband and I saw huge changes to our lives between $25,000 a year and $60,000, but after $70,000 jointly, hardly anything has changed…I like having more money though. :-)

  • Natalie says:

    I’ve seen a similar article which said there is no increase in happiness after 100k. (Sorry, it was a long time ago, I don’t remember where I found it.) I think these studies make the point that money can help avoid some pain and discomfort but cannot make one happy. I think they are still flawed. How many of these people, who said that 75k makes them happy, have spouses that also make 75k?

    I think a better study would be household disposable income rather than individual income. What if a person makes 50k, but has a wife that stays home with their 5 kids? I’ve known guys who make only 30k but rent a room for a couple of hundred a month from a friend and don’t drive. I still haven’t figured out how he manages to spend all his excess cash and not save a dime.

  • Joe says:

    Living in an expensive state like California, I would have to agree with you on your assessment. I’d also like some more specific data on family situations. Where people tend to need more money is when they have children and start sending them to school, violin lessons and soccer practice. I can’t imagine getting all that done with two children on just $75K.

  • Jason @ Redeeming Riches says:

    Interesting study. You’re right, where you live will have a big impact on happiness and income. $75k isn’t much in NY.

    Isn’t it intersting how we work so hard and sacrifice so much to work our way up the ladder and make more and more money when in reality, there is a law of diminishing returns on our happiness!?

  • G.E. Miller says:

    Wow – more money is better than less, but 50% of you feel like you need over $100k as a baseline minimum for happiness?

  • Josh says:

    Great article. I was just thinking about this a few hours ago.

    The problem is this, when you don’t make nearly anything, you say I’ll be happy with just a little more. Then you start making more and what happens, your standard of living goes up. Then you feel strapped again and say, “I’ll be happy when I make more.”

    You would think that the more money you make the less debt you would be in, and that as you make more then more would go to savings. But that isn’t true. In fact, many successful doctors, lawyers, and others who make very large amounts of money are in debt. And they are in substantially more debt then you can even imagine.

    So I guess my real answer in the end is that your happiness shouldn’t be a reflection of the amount of money you make. Unless you don’t make enough to eat then I would say you have an excuse.

  • JESSU says:

    I picked 50-60K because I live in California and I’m thinking if we had only one income between my husband and I (or a combined income of the two of us). I think most people who live here would want 100K plus because they are thinking about mortgages and nice cars, etc. I’m more concerned about buying little things I like rather than big things, or going out to eat everyday instead of cooking.

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