Money and Happiness

I don’t know about you, but over the course of the last year or so I have heard a lot of chatter about the connection between money and happiness. Actually, there have always been discussions about the connection between money and happiness. We are all familiar with the phrase, “money can’t buy happiness.” Is that true? More specifically, it seems to me the recent discussions have been about attaching a specific dollar amount – in the form of annual household income – to happiness.

HappinessA quick search led me to an article I read last year on the topic. The article referenced a 2010 Princeton study by Daniel Kahneman and Angus Deaton. The study found that at the national level, making more than $75,000.00 per year does not significantly improve your day-to-day happiness.

Using that $75,000 as a benchmark and conducting a more detailed analysis – you can get more specific details on the numbers here – Doug Short, vice president of research at investment group Advisor Perspectives, concluded that the $75,000 is probably a reasonable national benchmark. However, he suggests how much you need to get to that [happiness] threshold really depends on where you live.

The infographic below, created by Jan Diehm for the Huffington Post article, illustrates the threshold for each state and the District of Columbia. If you are interested in the mean (average) and median like I was, I’ve got you covered and have already done the math. The mean is $78,105.69 and the median is $73,950.00 (West Virginia); both pretty close the $75,000.00 benchmark.

Happiness Benchmark Infographic

One of the things that was being reported when this study first appeared was that, “money does not buy happiness after $75,000.” If you read the Princeton study or review the analysis by Mr. Short, a more accurate reading is that your emotional well-being (your day-to-day happiness) doesn’t get any better for the typical American household after earning $75,000 annually – slightly lower or higher depending on exactly where you live. However, what Kahneman and Deaton call life evaluation – how you feel about your life and accomplishments – can continue to rise with higher income and education levels.

Personally, I have always been a very happy individual, even when my household income was substantially less than $75,000 annually. I believe that is due simply to my personality and the fact that I have enjoyed great physical health.

My own take is that happiness, or life evaluation, does continue to increase with income levels, in large part because having money often equates to having more and better choices. And one thing I know for sure, I haven’t gotten any less happy as my income, and retirement portfolio, have steadily increased.

What are your thoughts on the connection between money and happiness?

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. I think each financial goal you achieve creates a release of tension, which leads to a more secure feeling (warm fuzzy) about what you can do when the work ends and a whole new life begins. While money does not create happiness, easy come easy go doesn’t either. Like James and Brian I think we tend to create our own happiness.

  2. I remember a conversation with my medical doctor where we talked about health issues and I told him I had three income streams and that I was still falling short. He said, “You will never make enough money.” That’s all he said, leaving me to ponder what he meant. My interpretation and something I’ve been saying for some time now … Searching for happiness through money doesn’t work. Folks have to know what truly can make them happy, outside of money, and then use money (if needed) to facilitate those things that make them happy.

    • ” … use money (if needed) to facilitate those things that make them happy.” Exactly right. I was just telling my daughter today it isn’t about relentlessly pursuing x number of dollars. It is about understanding what quality of life means for you as an individual (family) and then using money to bring it about.

  3. A Twitter reader notes …

    “Loved this post. I love having money but never want to be dependent on it for my happiness. Easy come easy go.”

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