It seems human nature to think we’d be happier if we could buy all the lovely things we’ve always wanted. However, current research shows the problem with this thinking. More money and more stuff does not make us happier.
Jack Ma, the richest man in china, referred to his teaching experience making $12 a month as “the best life I had”. According to Ma, when you don’t have much money, you know how to spend it. But once you become a billionaire, you have a lot of responsibility.
I know some of you are thinking that it’s easy for some super rich guy to feel guilty about his riches. Yet the idea of being a billionaire seems quite appealing, especially for us ‘simple folk’ trying to get by. It’s easy for most of us to believe that we would be happier if we made more money. Next time you doubt that, just ask the person next to you if they think they should get paid more.
Lets start by looking at a study conducted by the authors of Happy Money: The Science of Spending.
During research for the book, the authors found that Americans anticipated that they would feel twice as happy if their salaries more than doubled. But when researchers polled participants at two different income levels, they found that people making twice as much were only 9% happier than those making the half as less.
One reason for these findings may have something to do with the amount of money one needs to experience happiness.
There are a few studies that found a threshold of income that keeps people happy, and making over that amount did not increase happiness. In April of 2012, the Marist Poll stated that annual income of $50,000 is all one needs to experience happiness. A September 2010 Princeton study found that number to be $75,000. According to a Skandia International poll, you need $161,810 in annual income to be happy.
Now obviously the amount varies across individuals and countries. However, these studies seem to indicate that there is a magic number that defines the amount of money one needs to reach a comfortable standard of living. Going beyond that mark does not necessarily make us happier, and in some cases can even make us less happy.
For example – the respondents to the Marist poll who made $50,000 indicated that they were more satisfied with their lives when it came to factors ranging from friends, to health, to how they spent their time. Researchers from Princeton took Gallup collected data from almost half a million Americans, and found that higher household incomes were associated with better moods on a daily basis — but the beneficial effects of money tapered off entirely after the $75,000 mark.
Now obviously the amount of money needed to live comfortably changes from city to city and nation to nation (often called the cost of living). For example, you can rent a house in Indonesia for a year for less than a small flat in New York for a month. If we were to live in Tokyo or London than our yearly salary would have to be substantially more than if we lived in Baton Rouge or Bangkok.
However, once we have our basic needs met, finding happiness is really up to each individual – Regardless of where we live.
Let’s be honest, once we have enough to pay for our daily needs, all the rest of our money usually is spent on buying stuff or buying experiences. Most of the studies above showed that experiential purchases tended to bring more happiness, than accumulating more stuff (outside of investing or saving money). This is because people tend to look back on experiences more fondly than the extra stuff they have lying around their house, or attic, or garage, or basement or storage shed (more on this in our next article).
Being happier than we are now really needs to be done on our own. Regardless if we make a thousand dollars or a million dollars. But if you still think making more money will make you happier, than go for it. Just don’t say no one ever warned you.