When money stops buying happiness

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Does money buy happiness? A study led by Nobel Prize-winner Daniel Kahneman sheds light on the answer[1].

Kahneman and a colleague analyzed survey results from 450,000 Americans, studying three different aspects of happiness:

  1. The positive emotions of emotional well-being, for which respondents were asked how much happiness and enjoyment they’d felt the previous day and whether they’d laughed or smiled.
  2. The negative emotions of emotional well-being, for which respondents were asked how much anger, worry, stress, and sadness they’d felt the previous day.
  3. Life satisfaction, for which respondents answered the question, “Please imagine a ladder with steps numbered from 0 at the bottom to 10 at the top. The top of the ladder represents the best possible life for you, and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?”

First, the study found that 85 percent of Americans felt happy every day, regardless of their income. Most people were living lives in which they reported experiencing happiness and enjoyment, laughing and smiling on a daily basis.

But when it came to negative emotions—what the researchers called “blue affect”—the study found that lower-income people were more susceptible to feeling ground down by the problems in their lives, such as divorce, asthma, headaches, and being alone. Their poverty exacerbated the stress and sadness they felt about their situations.

But among people with incomes above a certain point, that effect disappeared. The original 2010 study put that number—sometimes called “the happiness tipping point”—at $75,000 per year. People making less than that seemed to worry a lot about having enough money to pay for rent, food, and medical costs. Greater wealth, on the other hand, seemed to inoculate people from the stress, anger, and sadness that come from life’s petty problems.

Finally, the researchers found that income had a direct effect on life satisfaction, the degree to which people felt they were living their best possible life. The more money people made, the more they felt their lives were going well. The researchers’ conclusion: “High incomes don’t bring you happiness, but they do bring you a life you think is better.”

More recent research has added to our understanding of the relationship between money and happiness, showing that how you choose to spend the money you have also has a profound effect on your happiness. In particular, spending money on experiences provides a greater happiness boost than does purchasing material possessions.

In one rather straightforward study[2], researchers asked subjects to describe the most recent purchase they’d made over $100, whether it was material or experiential, and simply asked them to rate how happy it had made them. Sure enough, subjects reported that experiences made them happier in the long run. Another study[3] found that when asked, 57 percent of people said the experiential purchase made them happier, whereas only 34 percent reported the opposite.

Other research[4] suggests that the reason buying a ski trip brings more happiness than spending the same money on a stereo is that (1) purchasing material objects orients people toward social comparison—that “keeping up with the Joneses” mindset you can never win, and (2) experiences, more than material things, bring people together and make us feel more connected to the people in our lives. Finally, the feelings of joy you get from a vacation or a Broadway play starts long before the experience itself, as you begin to get excited in anticipation of it[5], and goes on for a long time after the experience is over as you think back on the happy memories you created.

?References?

1. Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the National Academy of Sciences, 107, 16489–16493.
2. Van Boven, L., & Gilovich, T. (2003). To do or to have? That is the question. Journal of Personality and Social Psychology, 85, 1193–1202.
3. Vohs, K.D., Mead, N.L., & Goode, M.R. (2006). The psychological consequences of money. Science, 314, 1154–1156.
4. Howell, R.T., & Hill, G. (2009). The mediators of experiential purchases: Determining the impact of psychological needs satisfaction and social comparison. The Journal of Positive Psychology, 4, 511–522.
5. Kumar, A., Killingsworth, M.A., & Gilovich, T. (2014). Waiting for merlot. Psychological Science, 25, 1924–1931.