Personal Finance

More Money Makes You Happier

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  • May 2nd, 2013 10:02 am
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Deal Addict
Feb 15, 2013
2445 posts
573 upvotes

More Money Makes You Happier

It's a good thing most people don't choose their vocations entirely on the basis of research about the link between money and happiness. It's been so contradictory that we'd all be changing careers entirely every few years.

First there was the Easterlin Paradox, named after economist Richard Easterlin, who found that average happiness rankings don't vary much between countries of different income levels.

Then came the idea that making money was like eating a giant bowl of Skittles -- it's great, but when you've reached a certain point (some researchers have found the sweet spot to be $75,000), having more doesn't bring you any additional satisfaction. That extra yacht, the thinking went, was just a cloying, sweet-tangy aftertaste in the back of your throat.

Now, new research from Brookings finds that, across the world's 25 most-populous countries, as households get richer, people report feeling more satisfied.


More Money Makes You Happier No Matter Where You Live | The Atlantic
18 replies
Deal Fanatic
May 31, 2007
5018 posts
2175 upvotes
I've read the 75,000k study and tend to agree with that. The skittles example is a great explanation for that!
Deal Addict
Feb 15, 2013
2445 posts
573 upvotes
Jungle wrote: I've read the 75,000k study and tend to agree with that. The skittles example is a great explanation for that!
Confirmation bias?

Or was there something specific about that study methodology that you feel makes the link between money and happiness less correlative?
Deal Addict
User avatar
Dec 27, 2006
1913 posts
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Toronto
Don't know about others. If I make double my current income, I will not have to worry about my bills as much as I am. Certainly more money makes me happier. Maybe at a certain point, the positive effect of more money starts to diminish. My case is far from that.
Newbie
Sep 17, 2012
46 posts
3 upvotes
TORONTO
money means freedom, more freedom will make most happy but not everyone and not in all circumstances
Deal Addict
May 2, 2007
3013 posts
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Kingston
If money means freedom then your not living life.
Newbie
Sep 17, 2012
46 posts
3 upvotes
TORONTO
that'd be true if I had no money, but I have some money therefore some freedom :)
Deal Fanatic
May 31, 2007
5018 posts
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Rickson9 wrote: Confirmation bias?

Or was there something specific about that study methodology that you feel makes the link between money and happiness less correlative?
The article was on mrmoneymoustash blog linked back to the NY Times. I read it and agreed on the basis that once you have your basic needs, house, food, clothing, support for family, hobbies, plus a little luxury, spending more money beyond that really isn’t going to increase happiness by too much. I can get all that and be happy while building wealth on household gross of 100k

Very basic example using household gross income: range per year 10-20k = poverty
increase to 40-50 k per year , can afford housing, meals, clothes, support family
Increase 70-100k, afford housing, retirement savings, vacations, entertainment, etc.
100-200k what else do you need to buy that would make you much happier?

Maybe you could save more money and pay your debts/ retire faster, but I agree with more money does not always equal more happiness.
Deal Addict
Nov 6, 2003
3519 posts
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Calgary
I am very happy when I spent $200,000 per year. I would be even happier if I can spend a million per year. There are so many ways to spend money, if you don't know how to spend money, than you really don't know how to live. All those talks about money doesn't buy happiness is nonsense.
Banned
Jul 26, 2009
4315 posts
663 upvotes
Toronto
cko64 wrote: I am very happy when I spent $200,000 per year. I would be even happier if I can spend a million per year. There are so many ways to spend money, if you don't know how to spend money, than you really don't know how to live. All those talks about money doesn't buy happiness is nonsense.
Money buys happiness to a certain extent. After a certain point, it just doesn't help. Its the law of depreciating returns. After a while, the return, eg happiness you get from money depreciates until there's so little return its not worth it. Its just that many of us haven't hit the upper threshold of this law, and never will.
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Deal Addict
Aug 14, 2007
2434 posts
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Waterloo
At some point there is diminishing returns, and then at another point it becomes meaningless. (i.e, for me having 10 million would be exactly the same as me having 1 billion. There is nothing I could do with a billion that I couldn't do with 10 million to make me happy. Yes there is stuff I can by with 1 billion that I can't with 10 million, but won't make me more happy), this number obviously varies by person
There was a good quote on Game of Thrones the other night by little finger.. Can't remember word for word but went something like "I always wanted a boat, and now that I got one, I want the next thing". Materialism is an endless chase

It also depends on where you live, 75k/year in Vancover won't get you as far as say in Newfoundland

I wouldn't be able to tell you were my diminishing returns would start, but I know im definitely not there.. While I don't have to "stress" for bills, I am not saving much either. If I had to guess, me being single, the 75k/year probably would be pretty spot on. I could afford all my bills, buy pretty much what I want, and still save. If I was married with kids, it would have to be higher but not necessarily 75k x2. Maybe 100k would be fine
As soon as i become mortgage free, it could be way less (although not really, because at that point inflation will be up a lot, so 100k will be the new 75)
Newbie
Jun 13, 2012
3 posts
I think Jungle got it dead on, money provides different needs / wants and it really depends what that money will be spent on.
There has also been a lot of research showing happiness comes from compassion, so once you have your needs taken care of you have more time and energy for compassion and being happy
Sr. Member
Nov 3, 2009
599 posts
273 upvotes
I'm an explorer at heart. If I had more money I would be able to explore more places, go further, do more. Agreed there are diminishing returns eventually, but for me that number would be into the tens of millions before I had enough that I could retire and do whatever I wanted whenever I wanted.
Deal Expert
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Dec 11, 2005
20134 posts
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A lot of this I suspect has to do with the survey questions and wording.

There is a HUGE difference between "being happy" and "being satisfied". I could be EXTREMELY satisfied, and not happy. Having a crapload of money is OBVIOUSLY going to make any rational person satisfied... but they may not be happy.

The way you were raised also has a huge bearing on this. The benchmark for being happy isd usually "are you as well of or better off than your parents were". The worse off you were raised the lower that bar is and the less you need to earn to be happy. People who were raised with little appreciate things more when they get them. People who were raised with a lot, tend to not appreciate anything.
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
Deal Expert
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Dec 11, 2005
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starboy869 wrote: If money means freedom then your not living life.
Very confused by this comment; I fail to see any circumstance in which more money woudl not mean more freedom (until you get into the tens of millions, and back to the Skittles example)
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
Deal Guru
Dec 31, 2005
13306 posts
750 upvotes
brunes wrote: Very confused by this comment; I fail to see any circumstance in which more money woudl not mean more freedom (until you get into the tens of millions, and back to the Skittles example)
I tend to agree; however, often money is dependent on position. And with more senior positions you can have less "freedom". With my new senior position, I can no longer take more than 2 weeks vacation at a time. Because of this, I no longer can take 4 weeks for larger travels with the family to Asia/Australia (which is what we have 2 in the last 3 years).

We had far more freedom when when we earned much less (but also no kids).
Deal Addict
Jul 21, 2011
1731 posts
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RMB
More money will not make me happier but the less money other people had relative to me will make me happier. It is only matters how you are doing relatively to the others.
Deal Guru
May 9, 2007
14883 posts
4842 upvotes
Nanaimo, BC
If more money were to make people happier, there would be very low rates of happiness among ascetics. I haven't done the search, but I doubt that is the case.

I suspect there are several factors in play here.

1. Income or wealth can be a surrogate measure for the difference between wants/needs and the capacity to achieve those wants/needs. Two people may want their children to be able to play in a hockey league. The person with less money cannot afford the equipment and fees resulting in a gap between wants and ability to achieve the wants.

2. Income or wealth may correlate with other variables that result in happiness. For example, the health and wealth of a population are correlated. Health is correlated to happiness. If one improves the health of a population, the happiness of the population may increase. This may true even of the increase in health produces a decrease in individual wealth. (e.g., through socialized medical services)

3. It may be that happiness results in increase income or wealth, not the reverse. Happy people tend to be more productive. Healthy people tend to be more happy. Increase the health (or some other variables) of a population, you may produce happier people and those happier people may produce more wealth.

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