Researched by Thomas DeMichelePublished - December 28, 2015 Last Updated - April 4, 2017
Can Money Buy Happiness?
Money can buy happiness in some ways, and cause unhappiness in others, studies have shown that different types of wealth and income affect happiness and unhappiness in a variety of ways.
Below we look at peer-reviewed studies on happiness, philosophies related to happiness, some real life examples, and then tie it all together with theories related to happiness and wealth to provide a satisfactory answer to the question, “can money buy happiness?”
TIP: Below is a list of ways in which money effect happiness. Some of this is fact-based and pulled from studies, some is theory pulled from studies, some is just our own theory. This page acts as a useful list of the ways money can and can’t buy happiness, but it isn’t the final say on the matter.
Can money buy happiness? Is there truth in the old adage “money can’t buy happiness”? We look at that, and so does this video. NOTE: $75,000 is a realistic but arbitrary number, arbitrary as in it strongly depends on other factors.
How Can Money Affect Happiness and Unhappiness? Overview of the Peer-Reviewed Studies on Money and Happiness
Studies show that there isn’t one correlation between money and happiness, there are many. Although not every study that has shown a correlation between money and happiness has equal weight, combining the studies, we can generally say:
People are generally happier when they have cash on hand and extra money in their bank account. Even for a very wealthy person who has lots of savings and investments, having more money in their checking account seems to increase their happiness.
Buying material things can make a person happier, and so can experiential purchase.
Experiential purchases caused more happiness over time than material purchases (but less happiness from anticipation than material purchases).
TIP: It is important to note that not every study showed money affected happiness. Other studies point out that despite many factors, a specific answer is elusive, as a perfect definition of happiness is elusive.
TIP: Happiness is dependent on basic needs being met. Security and insecurity are two of the biggest factors at play. Freedom to pursue passions and avoid things we don’t want to do is also a big one. Sudden wealth has a different effect than earned wealth. Working for money gives it additional perceived value. It is said that giving feels better than receiving but the amount you give seems to be less important than the act of giving. Cooperation and competition both drive happiness, although we must remember that taxes, interest, and debt do too. Ultimately, it is how you live your life and what you do with your money, not the amount of money you have, that has the greatest impact on happiness.
Summarizing the Answer to the “Can Money Buy Happiness” Question
Given the many studies noted above and more, we can summarize the answer to “can money buy happiness?” as:
Money can buy happiness, but different types of wealth and income have different effects, and it generally works on a bell curve (happiness increase v. wealth over time), offers diminishing returns, and is impacted by many internal and external factors. Factors outside money (like the material things and experiences you can buy with it, or the accomplished feeling you got from making it) are usually the direct causes of happiness (or unhappiness), while the amount of money a person has (on hand, or in other assets), their personality, and their life situation all impact how well they can achieve other external and internal happiness factors.
METAPHYSICS: If we consider this metaphor, we can say happiness comes from feeling fulfillment in personal, social, collective, and spiritual relationships. Because we live in a world driven by economy, some amount of money is required to facilitate happiness of mind, body, and spirit.
The happiness gained through economic stability, in terms of the ability to easily obtain things like food, shelter, protection for one’s family, social relationships, etc, is directly related to accessible wealth adjusted for inflation.
From this perspective, we can see wealth inequality (more than income inequality) as one of the main problems regarding happiness and money.
Simply put, if you are too poor to eat, sleep, and socialize comfortably, if you have no cash on hand compared to others, if your lack of money hurts your dignity and your ability to keep up with the Joneses, etc. it is bound to affect your happiness.
“There is no class so pitiably wretched as that which possesses money and nothing else.” – Industrialist Andrew Carnegie author of the Gospel of Wealth
A Summary of How Wealth Impacts Happiness
Above we noted peer-reviewed studies on wealth and happiness, then we mused on some socioeconomic metaphysics, below we use logic, reason, metaphysics, and cold-hard-data to connect everything together. This is to say, some of what is below is reasoned theory and should be read as such:
Wealth over time correlates directly to increases in happiness. It is not the money itself, but what the money can do, and the security it gives, that causes happiness.
When comparing having nothing to having enough money to live comfortably, every unit of money increases happiness considerably.
When comparing having enough money to having an excess amount of money, every unit of money tends to offer diminishing returns on happiness.
One of the main underlying factors relating to money and happiness is security. Money can lead to security in many ways, while a lack of money can lead to insecurity. Conversely, at some point, wealth brings anxiety over wealth.
Money buys freedom to pursue things that make us happy and avoid things that don’t. At some point, the responsibility that comes with money can take away freedom too, especially when fame is involved.
Money can also contribute to unhappiness. Those with more money may face unique and different pressures that cause unhappiness. So the money / happiness correlation is not always a positive one.
Other factors that impact happiness include, but are not limited to, consistency of income, expenses, family size, age, region, mentality, appreciation of material objects, debt owed, aspirations, and generally, what you plan to do with the money.
Sudden wealth and accumulated wealth over time have different effects on happiness. Humans acclimate to situations quickly and this can make it hard to stay appreciative of large sudden changes in wealth. Humans also respond to changes quickly, and this makes it easier to appreciate little changes.
Markus “Notch” Persson (the guy who created Minecraft and sold it for obscene amounts of money) was reportedly very unhappy with his sudden wealth (as reported in a series of tweets from Ibiza) shortly after the purchase of his $70 million dollar mansion. Public sympathy was noticeably lacking. It’s easy to say we should all be like Musk, but in practice that rarely happens. This story at least shows us ways in which money does not buy happiness, how sudden wealth can have negative impacts, how isolating being wealthy is (especially in regards to sympathy and empathy), and how others misjudge the impact of money on happiness.
People tend to overstate the impact that money has on their happiness. They also tend to falsely assume X amount of money will make them X amount happier.
Generally, “tis better to give than receive” when it comes to happiness (and it’s less about the amount and more about the action). Selfishness can increase wealth, but it isn’t as likely to increase happiness. Studies have found that happiness tends to increase selflessness and sadness tends to increase generosity. We have to actively apply logic to our pursuit of happiness and money.
“Things that matter, matter fairly equally (vice versa)“. The difference between enough money for rent and losing your apartment is immense. It doesn’t matter whether it the difference is $10 or $1,000. Buying a cup of coffee for someone feels about as good as buying them a coffee maker. Giving $1 to a homeless man feels about as good as giving $1,000 to charity. It’s not an exact science, but generally, like the happiness / money bell curve, the curve spikes up quickly. If $1,000 doesn’t matter to you, getting an unexpected check for $1,000 will have a limited effect. If $1 matters to you, finding $1 on the street can brighten your day.
Essentially it is the perception of value, and not always the actual value, that affects happiness. For example: If someone spends 5 hours making a gift it may be more meaningful than a gift that cost $50. Also, after basic needs are met after basic needs are met perception of wealth has more to do with happiness than actual wealth.
The Bill Gates Versus a Poor Working Mom Example: The difference between Bill Gate’s happiness at $90 billion versus $90 billion plus $200 thousand is likely nearly impossible measurable, but the difference between a struggling working mother having $2,000 versus $100 is probably an exponential increase by the dollar. The less money you have, the more it can be thought to mean to your happiness to have a little more.
How Money Increases and Decreases Happiness
Money is such a fundamental part of society that it affects a large array of happiness factors. Let’s try to list some key aspects in a rough, but non-exact, order starting with the basic hierarchy of needs and working our way to instances where the money actually decreases happiness.
These factors greatly increase happiness:
Basic needs of food, safety, health, shelter, climate, and generally being physically comfortable.
Health is not necessary for happiness, but it is much harder for those with significant health issues, or those unable to get needed medical help, to be happy.
Freedom to pursuehobbies and spend time with loved ones. Although it should be noted that those with more money tend to have less leisure time and more responsibility. One of the most important factors when it comes to happiness is having new positive experiences. “The freedom to pursue” can’t be overstated.
The pursuit of wealth and success has a larger effect on happiness than achieving it. In other words, hard work, unknowns, ups and downs, and success are all happiness triggers. The pursuit of happiness is often the cause of happiness. People are generally happier and more appreciative when they put in a hard day’s work and have a feeling of accomplishment.
Freedom to avoid a work environment where one is overworked, stressed, or generally unhappy.
How you live your life and your mentality are probably the most important factors when it comes to happiness. These can be better accessed with money (think the right medication and counseling). On the flip side, as with other factors, aspects of this cannot be bought directly. A person’s personality can be changed, but this is easier said than done. Threats to safety or health can change anyone’s perception of life. Personality can greatly impact how wealth v. happiness applies to them.
Beauty, grooming, and status symbols. Those who can show society they have value by having “fresh” clothes, proper grooming, and material good that others perceive as having value. Essentially the illusion of money as others perceive it and as is perceived by self. The amount of happiness increase is dependent upon value placed on material objects and the approval of others. For some, these factors greatly increase happiness.
Factors of influence. To what extent can I influence someone else to work for me. This can be using money as a currency or money as it relates indirectly to power. For instance, if I own a successful company, the building, property, people, and investors in that company can affect happiness. Also, the money I give away to charity can influence by happiness by increasing my influence.
Money given away. On the last point. The ability to give away money greatly increases happiness, but it also can decrease happiness (think taxes, employee salaries, lawyer fees, general fees, rent, etc.).
Spirituality, community, friendship, and connection with self. Our connection with others, a higher being, and ourselves greatly impact happiness. You can buy most of these superficially, and money helps you access them in many ways… but money can also draw you away from any of these. In the regard to our connection with others and ourselves, money can be both a blessing and a curse.
These factors tend to decrease happiness:
Money owed in taxes and fees. Imagine you win the Lotto. Finally you, yes you, have ONE MILLION DOLLARS. So maybe you buy the house for your mom, get the Lamborghini, pay off the mortgage, go on a cruise, pop some crystal… And then April 15th rolls around. Now you begin to file bankruptcy. Why? Because the top tax rate in America is 40%. Your agent took a fee, you took the lotto money up front incurring other fees, you pay the lawyers, you pay the accountant, you paid off the interest rates. You now owe Uncle Sam $400,000. Good luck with that.
More money means more responsibility. Why do I have to file all these forms? What happens to your company when you go on vacation? Why is your competitor suing you? Why does the lawyer want more money? Why do I have to pay a tax on paying an employee who pays taxes? What is this wacky cut-throat world of Wall Street and investments? Why does everyone act so jolly and passive aggressive? Umm, I’d better update the security system with that new painting on the wall. I’d better pay a maid and butler and someone to watch the couch so the spouse’s dog doesn’t tinkle on it. Ahhhh. It comes with the territory, and it may even be worth it, but let’s be honest more money really does mean more problems.
A lack of connection and sympathy: Remember that time Bill Gate’s friend said, “Oh Bill, I’m so sorry that must have been rough”. You don’t, because this never happened. Wealth does not bring one sympathy, it garners respect, but rarely sympathy. Humans are communal creatures. The richer you get, the fewer peers you have with similar wealth. Having a lack of peers is not as attractive as it sounds unless you have an unhealthy appreciation of everyone bowing down to you. No one likes other people having contempt for them.
The factors can go either way:
Procrastination versus patience. The rate at which we accomplish things, the rate at which we want things, and the rate at which we wait for things are all variables. Working hard for something makes us value it more. What if we never have to wait? What if we have to wait too long? What if it is our own procrastination holding us back?
Competition can be healthy and positive or it can be cut-throat. The correlation between money and competition shouldn’t be underrated, and competition may be a positive or a negative factor.
Social comparisons and higher aspirations. Generally getting rich and realizing everyone around you is poor, or only mildly rich and having everyone else around you be more rich in uncomfortable at best. When you go from rags to riches the first thing you realize is that you can’t help everyone. The second thing you realize is that people have contempt for statuses above them. The third thing you realize is that you do have the power to make a difference. When you go from riches to riches, the increases don’t mean much. Worse, you are trying to keep up with Joneses who are like ultra versions of Joneses, whom which keeping up with will trigger a number of other unhappiness factors. Generally, however, the more difference you make, or the more you appreciate your status and less you worry about the statuses of others. We can’t be MC hammer and give it away faster than we have it, and we have to be weary of the games the .0001% play, strongly doubt that leads to happiness either.
The general accumulation of money as a sport. Money can symbolize power, it can symbolize status, and it can symbolize wealth. For a power investor, the money they technically have in stocks at a given moment can equate directly to happiness. For some an accumulation of wealth with no work causes great distress, for some this accumulation causes joy (at least moments of joy). Generally, the joy dampens with repetition; it varies from person to person.
Debt and interest. Having negative money is just about the unhappiest thing there is next to health and life-threatening tragedy. Paying interest on a debt only makes it worse. The only time this rule is broken is when debt corresponds to assets. For instance, going into debt to own a home may make one happy (due to having a home). So the debt and interest itself are almost always negative, but what you can get from the debt can actually have positive correlations.
The Difference Between Being an Individual, a Family, a Community, a Business, a Country, Industries, and the World in Terms of Wealth and Happiness
Above, we focused on individual wealth versus individual happiness. Let us look at families, communities, businesses, countries, industries, and even the world. Each is vastly different.
For instance, as America’s fading middle class gets wealthier, it’s happiness decreases when it’s members can’t have a pool, look like Kim, send the kids to private school, and create THE startup.
Also, as wealth increases, taxes increase. Most people don’t calculate what that means at the beginning. Few people realize that this will cause inflation and artificially bring the meaning of the new wealth down while making it harder for the poor.
To be fair, we really would need to look at each group individual and do many studies to really have a take away about how money affects groups. We know that a lot of what is wrong with individual money v. happiness is that inequality puts a damper on happiness. We also know that a lack of competition puts a damper on happiness (“why capitalism“).
Thomas DeMichele is the content creator behind ObamaCareFacts.com, FactMyth.com, CryptocurrencyFacts.com, and other DogMediaSolutions.com and Massive Dog properties. He also contributes to MakerDAO and other cryptocurrency-based projects. Tom's focus in all...