The interesting question is how fast that happens. (That’s literally a roll of toilet paper made of gold that some people bought.) This is what every economist, philosopher and psychologist who works on this topic expects to see.Īt some point you end up spending money on stuff that doesn’t make much difference. If you draw out a graph of income against happiness, it’ll look a bit like the graph below. In other words, you’d expect the relationship to be diminishing. Maybe you’ll just use it to eat out a bit more. But if you’re earning $100,000 per year, you’ll hardly notice an extra $1,000. If you’re earning $10,000 a year, and you get an extra $1,000, you’re probably going to use it on something pretty important, like making rent, which will make a big difference to your happiness. Thinking about it for a moment, you’d expect that the richer you are, the more extra money you need to further increase your happiness. 14 Enjoy this? There’s much more where that came from.Īre richer people more satisfied with their lives?.13 Appendix I – But I’ve always been told we just look at relative rather than absolute income?.11 If you gave money to charity, would it make you more satisfied or less?.10 What does this mean for having a positive impact on the world?.9 What does this mean for your career choice?.8 How much does income matter relative to other factors?.7 Are there exceptions to this general rule?.5 So would making more money make you happier?.4 What can make sense of these results?.2 Are richer people more satisfied with their lives?.Giving some money to charity is unlikely to make you less happy, and may well make you happier.If you want to help people, this is a major reason to focus on international poverty rather than helping the relatively poor in richer countries. The correlations above suggest that it will be about 25 times more valuable. Giving money to someone living on $1,000 per year in the developing world will do far more to improve their lives than giving the same amount to someone earning $25,000.However, you may gain from earning more than that if: you have dependents, you care about money more than other people, or you live in an area with an unusually high cost of living.So our recommendation is not to focus on earning more than this (insofar as you want to become happy, anyway). Once you get to an individual income of around $40,000, other factors, such as health, relationships and a sense of purpose, seem far more important than income.Unfortunately, how much of the above relationships are caused by money making people happier is still not known with confidence. This means the effect of gaining extra money on your happiness is weaker than the above correlations suggest. For example, healthier people will be both happier and capable of earning more. Moreover, some and maybe even most of this relationship is not causal.
One large study found people in countries with average incomes of $32,000 were only 10% happier with their lives than those in countries with average incomes of just $2,000 another within the US could find no effect above a $40,000 income for a single person.
This is because people spend money on the most important things first. Recent surveys of hundreds of thousands of people, in over 150 countries, show that richer people report being more satisfied with their lives overall, but that the richer you become, the more money you need to increase your satisfaction further.And this has many important implications about trade-offs you face in your life and career. The truth seems to lie in the middle: money does make you happy, but only a little. We’ve sifted through the best studies available to figure out what’s really going on. In particular, we now finally have survey data from hundreds of thousands of people all around the world.
But there have been some recent major studies in economics that allow us to make progress. 2 What’s going on here? Who is right?Ī lot of the research on this question is of remarkably low quality. 1 Moreover, when people are asked what would most improve the quality of their lives, the most common answer is more money. It’s a cliché that “you can’t buy happiness”, but at the same time, financial security is among most people’s top career priorities.