How Much Does Happiness Cost? Too Much for Most of Us

It was 2010. The country was reeling after a financial crisis but hopeful that things were on the upswing. 

Hope appeared through the turmoil. Daniel Kahneman and Angus Deaton released their oft-cited work claiming that the happiness threshold is a mere $75,000 per year

Money Does Buy Happiness

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The research suggested that money does buy happiness, but only in so much as it buys the basic necessities we need to live, with a few extra luxuries. After that, the paper suggested that more money doesn’t equal happiness. 

Happiness Threshold

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The $75,000 number was cited as the happiness threshold for over a decade, with many using it to prove money isn’t everything and others saying the number needs to keep up with inflation. 

It’s Way Off

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Those making close to the magic number often side-eyed the research, especially if they live in high-cost-of-living areas. 

As it turns out, $75,000 was off the mark by a long shot!

A More Recent Study Puts the Number Closer to $200,000

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A more recent study completed in 2021 showed that the $75,000 number is way off the mark, even after accounting for inflation. 

Economist Matthew Killingsworth found a linear relationship between income and happiness that extended well beyond a $200,000 per year salary. 

Resolving the Disparity

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Kahneman and Killingsworth teamed up in a process called adversarial collaboration to uncover the truth. They recruited colleague Barbara Meller to serve as a facilitator while they conducted a new study designed to settle the debate once and for all. 

The Truth is Far More than Anyone Expected.

How Much Money Does It Take To Be Happy?

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The latest study shows that $500,000 is the magic number for happiness. This is the point where, on average, the happiness graph flatlines. Most people continued to get happier until their incomes reached about $500,000; after that, more money didn’t lead to increased happiness. 

Of course, like everything, the number doesn’t tell the whole story. A small percentage of people found happiness at income levels around $100,000, while another percentage reported increased happiness even as their income grew beyond $500,000.

Money Isn’t the Only Key To Happiness

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The researchers pointed out that although income does correlate to happiness, the relationship is weak. 

“KD reported that the effect of an approximately four-fold difference in income is about equal to the effect of being a caregiver, twice as large as the effect of being married, about equal to  the  effect  of  a  weekend,  and  less than a  third as large as  the  effect of a headache,” stated the paper, showcasing that while more money helps, it’s not the secret sauce to a happy life that many assume it is. 

Happiness vs. Misery

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Of course, the researchers admit the errors in their work. The study measured happiness, not misery. It’s possible that misery would be much higher at the lowest income levels.

Money Can’t Buy Happiness, But You Can’t Be Happy Without It

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The research went through a lot of effort to highlight what we already know. Money doesn’t buy happiness. 

What Makes People Happy?

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Happiness comes from connections, relationships, fulfillment, and the ability to do everything that makes life worth living. It comes from living life to the fullest, exploring your passions, and engaging with the people you love. 

Money can’t buy those things, but it can give us the stability and security we need to pursue them ourselves. It opens doors of opportunity, gives us leisure time to spend with family, and funding to pursue our dreams

$75,000 Not Enough

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In this day and age, $75,000 doesn’t cut it. That barely pays living expenses. Incomes of $500,000 would cover childcare, luxury vacations, help around the house, financial security in retirement, healthcare, and everything else we need to pursue happiness in our free time.  

Money isn’t everything. But it sure helps.

Want To Be Happy? Break Free From Traditional Work with Financial Independence

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Financial Freedom is more than just a buzz word. It’s achievable for a lot of people. 

Here’s your ultimate guide to achieving financial independence

Be True To Yourself for a Happy Life

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To live a happy, healthy, life, you must be true to yourself. It can be hard to be ourselves when society wants to force us to be something we’re not. Here are 16 ways to be unapologetically you

Toxic Jobs Destroy Happiness – FU Money Can Help

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Want enough money to quit your toxic job and not have to stress about it? You need an FU money fund. 

Find out how to build your FU Fund here

How To Make a Financial Plan

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You don’t need to pay a financial advisor to craft a financial plan. Here’s how to do it on your own!

Read it Here: How To Make a Financial Plan

Let Your Free Spirit Soar

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Are you a free spirit, forced to live in a little box by society’s constraints? Here are some tips for letting your spirit soar