Does Money Buy Happiness?

Have you ever thought to yourself, “If only I could increase my salary by 10%, I’d feel better”? How about, “I wish I had a trust fund. How happy I would be!” I don’t blame you -- I’ve had the same thoughts many times. Money is a big part of our lives, our identities, and perhaps our well-being. Sometimes, it can certainly feel like your happiness hinges on how much cash is in your bank account.

But what does psychological research say about the age-old question: Can money really buy happiness? Freddie Mercury didn’t think so in his 1984 song "Money Can’t Buy Happiness," but rapper Fabolous said in his song "Change Up" “...but it’s a damn good down payment.” So who is right?

Let’s take a brutally honest exploration of how money and happiness are (and aren’t) related. (Spoiler alert: I’ve got bad news, good news, and lots of caveats.)

Higher earners are generally happier

Over 10 years ago, a study based on Gallup Poll data on 1,000 people made a big splash in the news. It found that people with higher incomes report being happier...up to an annual income of $75,000 (equivalent to about $90,000 today). After this point, more money wasn’t related to higher emotional well-being. This seemed to show that once a persons’ basic (and some “advanced”) needs are comfortably met, more money is useless for well-being. 

But a brand new 2021 study of over one million participants found that there’s no such thing as an inflection point where more money doesn’t equal more happiness, at least not up to an annual salary of $500,000. In this study, participants’ well-being was measured more carefully. Instead of being asked to remember how well they felt in the past week, month, or year, they were asked how they felt right now in the moment. And based on this real-time assessment, very high earners were feeling great. 

Similarly, a Swedish study on lottery winners found that even after years, people who won the lottery had greater life satisfaction and mental health than similar people who didn’t win the lottery. Those unfortunately regular folk also had worse emotional pain when they faced misfortunes like divorce, illness, and being alone. It’s almost as if having a pile of money made those things less difficult to cope with for the winners.

Evaluative vs. experienced well-being

At this point, it's important to suss out what...

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