Will Earning More Make You Happier?

July 25, 2006

Interesting question. According to this article by Sarah Needleman of the CollegeJournal website, the answer is not necessarily. The interesting thing I found in the survey is that for those who make less than $20,000 per year, over 17% said they were “not too happy” and over 60% said they were “pretty happy.” For those who made $90,000 or more, only 5.3% were “not too happy.” Here’s a copy of the graphic (source: Science) that I put together in Excel:

Income and Happiness

Personally, I think it is less about the income and more about the personal finance situation of the individual that makes them happy or not happy (at least from a financial standpoint). I know lots of people who make well over $90,000 per year and struggle to make ends meet because they have no financial discipline. Now it’s your turn to weigh in.

Will Earning More Make You Happier?

15 responses to Will Earning More Make You Happier?

  1. Happiness is such a difficult thing to measure, as it means different things to different people. Perhaps contentment or satisfaction with lifestyle would be more well-defined.

    At any rate, I have definately become more satisfied with my life and lifestyle (i.e. happier) as my income and wealth have grown. The media is always so income-focused, which doesn’t help. I have to agree, that they key to the question is not simply income, it’s the total financial picture – being able to save for the future, having a safety net, being able to pay down debt, having freedom from certain worries, etc.

    There are some recent books/articles that suggest that our happiness is relative – that we’re not happy unless we are not just keeping up with the Jone’s, but beating the Jone’s at their own game. Maybe that’s true to some extent.

    The big question is what are people willing to sacrifice in the name of earning more? Now, that would be an interesting survey.

  2. JLP, I think you got close to the crux of it. I think a more complete explanation for it is that it’s about taking responsibility in one’s own hands. This includes financial discipline, which you mention.

    Unfortunately–and this is a gross generalization which does not apply across the board–many of the people earning

  3. …less then 20k expect someone else to take care of their problems. When this doesn’t happen, they get angry at everyone and everything around them. It’s a vicious cycle in which misery brings down more misery.

  4. How about health versus wealth ? You can have all the money in the world, but without your health, your money is worthless.

  5. Brian,

    That is so true… But if you’ve ever been seriously poor, you’ll realize that money and health are strongly related. Money impacts everything from the healthcare you receive as an infant, your exposure to a toxic environment, your diet, your safety and security, etc.

    I makes a very big difference.

  6. Money may not buy happiness, but poverty sucks. This is actually borne out by your stats, where the “unhappiness factor” drops by something like 70% between the low income and higher income group.

    As for the “under 20K” group, I wonder how many of these are students? I suspect the unhappiness factor would be higher if students, new immigrants, and others who are “temporarily poor by choice” aren’t in the data.

  7. Foobarista makes an excellent point about the “under $20,000” group. I wondered the same thing.

  8. It’s a matter of priorities, or, as David Bach likes to put it values. If you value time with your family, the ability to help others, or your health the most, you can probably manage to be pretty happy regardless of income. However, if one of your highest values is security (specifically financial security), then a certain baseline level of income might be necessary for you to be completely worry-free.

    Since security is pretty important to most people, the higher percentages of “Not too happy” at lower income levels makes sense.

  9. If you have money, do you rule your life, or does your life rule you?

    There is a break point where enough money is essential, the rest is just extra. If things rule your life, then the money to have things has to be there. Happiness comes from a variety of sources.

    Depending on what you value, more money has negligible value toward effecting additional happiness.

    Someone dying of thirst is suddenly thrown into a tank of fresh water and will drown. Too much of any one thing doesn’t make anyone happier.

    Warren Buffett is happy overall and would still be happy if he had 99% less of the total wealth he now has (as long as he didn’t lose 99% of the money – as if it was never there in the first place).

    It comes down to having balance in life after everthing else is satisfied to elevate the degree of happiness experienced.

  10. I agree that balance is key to hapiness. But, I disagree with the school of thought that too much money would make people less happy. True, excessive amounts of money thrust upon someone who didn’t expect it and has not a clue as to how to handle it would be bad – for example many Lotto winners. Hence, Brad’s comment that “Someone dying of thirst is suddenly thrown into a tank of fresh water and will drown.”

    But, we don’t have to think in those extremes. Frankly, if I found an extra few million in my bank account tomorrow, I’d have a pretty good idea what to do with it and how to manage it and I think it would change my life for the better. I would be happier – perhaps even significantly happier. In my experience, people with substantial money are by and large happy, well-adjusted folks. They usually worked hard for it, realize how fortunate they are, generally don’t flaunt it, and try to stay grounded. So, I’d like to think that if the man dying of thirst were given gradually increasing levels of fresh water, that eventually he could learn swim and thrive in it.

    Ironically, it’s the in between folks who seem to have the most warped money issues – professionals who are high earners, high debt, and low networth. Many of these people are extra-sensitive about keeping up with the Jone’s. In those cases, chasing after money does appear to be a curse. But, it’s not the fact that they have money, it’s how they value it, what it means to them, and what they do with it. Money itself isn’t the issue.

  11. The June 30 issue of Science published “Would You Be Happier If You Were Richer? A Focusing Illusion” which says the belief that money brings happiness is widespread but mostly illusionary.
    You probably won’t be able to find the full text online, but your library probably can help you get access 😉

  12. Udandi,

    I read the original text from the research paper that eventually got published in Science. Actually, the paper seems more an exploration of surveying techniques than anything conclusive on whether more momey makes you happier.

    But, my problem with most of the surveying on this issue of money and happiness, is that researchers are generally focusing on income, and as the paper points out, folks at higher income levels are typcially devoting more of their time to work – the work necessary to achieve high income – rather than play. So, their “happiness” is not much greater than if they were middle-income, because the added work and stress can offset the added utility of the higher income.

    Anyhow, what if these researchers focused on wealth, instead of income? What would be the results? Are millionaires happier than the middle-class. Are middle-class people with little debt, solid retirement savings, and money in the bank happier than middle-class people who are leveraged to the hilt, constantly blowing money on material goods, etc.?

    Income really doesn’t tell the whole story. Plus, what about future happiness. Wealth may not matter at a certain point in one’s life, but as people age, having the ability to support a family, put kids through college without mortgaging their future, and retire in comfort… those things could add up to some cumulative extra happiness over time.

  13. Will earning more make you happier? Relatively, I think so because it affords an individual increase in purchasing power. Specifically, it defends because there are pros and cons in having more income. For one increase in earning would also mean increase in income tax. I believe increase in assets would be a better term specially assets producing earning. Increase in income per se would be ambivalent in the sense that there is the tendency to increase ones overheads or expenses. Again it all defends on the individual if he indulges his increase in earning and place it to savings and investments that would be much better and will afford him happiness since it will be a long lasting asset. Merely increase in earning may or may not make a person happy since earning more might mean having more responsibility and accountability. Striking earning with what is really and only needed by an individual would propel more happiness instead of having more earnings than his needs. People are recanting that their values had simmered once they won in a lottery and that includes happiness. Earning more would propel more happiness if the income is used for specific purposes. Squandering money due to increase in earning would make an individual a habitual consumers or spenders. Increase in earnings will make a person happier if it meets his needs rather than gratifying his wants, whims and caprices.

  14. I do believe that earning makes one person happier… but it demands full wisdom in handling it. We’ve seen famous people who remains to the top because they earned more. Buffet, Gates and Winphrey are one good example we can emanate lasting and good happiness.

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  1. » Weekly Blog Round-Up » Consumerism Commentary: A Blog About Personal Finance - July 28, 2006

    […] It was a busy week in the personal finance blogosphere. Here’s what you might have read if you’ve been browsing the MoneyBlogNetwork. Nickel gave his first impressions of Emigrant Direct’s new interface and Mighty Bargain Hunter suggests celebrating your debt reduction progress. AllFinancialMatters wonders if earning more will make you happier and Blueprint for Financial Prosperity has been running a series on determining the worth of a stock. Free Money Finance was on vacation this week, so he’s been running a retrospective of last year’s posts, including five tips for saving money on gas. […]