In today’s society, financial success is often equated with happiness. After all, having more money theoretically allows you to buy more things, go on more vacations, donate more to charity, and not have to worry about paying bills. But does having more money actually make you happier?
Research on the correlation between money and happiness has shown mixed results. Some studies have found that income does correlate with increased life satisfaction and emotional well-being up to a certain point. However, this effect tends to level off around $75,000 per year. After that, increases in income don’t seem to make much difference in overall happiness levels.
So why doesn’t having more money continue to make people happier after a certain income level? There are a few potential explanations:
Adaptation
One reason that having more money doesn’t make people continually happier is because of adaptation. This is the tendency for people to get used to or bored of new things after the initial excitement wears off. For example, when someone first purchases a luxury car, they may get a thrill from driving it. But after a few months, the car becomes their normal mode of transportation. The emotional boost diminishes.
This adaptation effect applies to money as well. People may get an initial surge of happiness from a pay raise, bonus, or other windfall. But they quickly adjust to their new income level and it becomes their “new normal.” They still have the same innate desires and problems as before. More money alone doesn’t change that.
Social Comparisons
Another reason more money doesn’t make millionaires continually happier is because of social comparisons. Humans have an innate drive to compare themselves to others and determine where they stand in the social hierarchy. While an objective increase in income should make someone better off, people tend to compare themselves subjectively to their peer group.
For millionaires and high-income earners, their peers tend to also be wealthy. So day-to-day comparisons likely involve other people with lavish lifestyles, expensive possessions, and travel opportunities. This downward social comparison effect can make millionaires feel like they don’t have enough, even though by any objective standard they are quite wealthy.
Hedonic Treadmill
The tendency for humans to quickly return to a relatively stable level of happiness despite positive or negative life changes is sometimes called the hedonic treadmill. Like running on a treadmill and staying in one place, we work hard to get ahead but still seem stuck in neutral regarding lasting happiness.
For millionaires, each new acquisition like a house, car, or investment brings a temporary joy spike. But it fades quickly. And soon they are on the hedonic treadmill again working towards the next goal. Unless they consciously work to find meaning and purpose, happiness remains elusive.
Diminishing Marginal Utility
Why does money provide less and less happiness the more of it someone has? The principle of diminishing marginal utility plays a role here. This economic concept states that the more you have of something, the less additional satisfaction you get from one more unit of that thing.
For example, if you don’t have a car, getting your first car brings a huge amount of utility and opens up lots of new opportunities. A second car for your spouse still provides significant utility. But a third or fourth car brings much less happiness even though it costs the same amount of money.
The same applies to money. Earning your first $100,000 provides life-changing utility like being able to buy a home or retire debt. But the difference in happiness provided by the millionth dollar and the million-and-first dollar is negligible.
Purpose and Meaning
Research suggests one of the biggest factors impacting happiness is feeling a sense of purpose and meaning in life. Money can help facilitate pursuing purposeful activities, but by itself provides little lasting meaning.
Having an intentional vision and priorities for how to spend their time and resources tends to make millionaires happier than simply accumulating more wealth. Devoting money to family, charity, passion projects, faith, and causes bigger than oneself provides significance that material goods alone cannot.
Many millionaires and billionaires like Warren Buffett, Bill Gates, and Mark Zuckerberg have pledged to give away most of their wealth rather than passing it down to heirs. They seem to recognize that finding purpose through service and doing good brings a deeper fulfillment.
How Millionaires Can Buy Happiness
Does this mean the pursuit of money is futile and provides no happiness? Not at all. Having wealth allows you to do good things for yourself, loved ones, and the world. Certain purchases can bring lasting enjoyment.
Here are a few ways millionaires can get the most happiness for their buck:
- Spend on experiences, not things. Using money for meaningful experiences provides more enduring satisfaction than material goods.
- Buy time. Hire others to do disliked tasks so you have more time for what’s important.
- Give to others. Giving provides joy and meaning. Support causes and people you care about.
- Invest in relationships. Share experiences with family and friends rather than spending only on yourself.
- Pursue your purpose. Devote money to realizing your values and passions.
- Take care of your health. Good health allows enjoying other aspects of life.
- Develop yourself. Learn, grow and become your best self through books, courses and coaches.
Avoiding Pitfalls
In chasing happiness through money, there are some common mistakes millionaires can avoid:
- Thinking more is always better. The marginal utility of each additional dollar diminishes.
- Mindless spending. Thoughtfully plan purchases that provide meaning, rather than impulse buys.
- Social comparison. Avoid comparing yourself to others. Run your own race.
- Reckless risks for more. Don’t gamble with what you have chasing unnecessary excess.
- Self-entitlement. Feeling you deserve special treatment can negatively impact relationships.
- Losing sight of what’s important. Don’t let making money eclipse nurturing relationships.
Can Money Buy Happiness Research Studies
Numerous research studies have tried to pin down the relationship between money and happiness. Some key findings include:
- A 2010 Gallup poll found only 11% of respondents with income over $160,000 reported being “very happy” compared to 31% of those making under $24,000.
- A study published in Nature Communications in 2021 found the ideal income for emotional well-being in North America to be around $105,000.
- Researcher Ed Diener claims the percentage of people describing themselves as “very happy” does not change much above an annual income of $75,000.
- A study in Proceedings of the National Academy of Sciences found spending money on others increased happiness more than spending on oneself.
- According to economist Richard Easterlin, higher income is associated with more happiness, but only up to about $75,000 per year. Beyond that, the two factors are unrelated, illustrating the Easterlin paradox.
Happiness Recommendations for Millionaires
Based on the latest research, here are some recommendations for what millionaires can do to maximize happiness:
Have Experiences
Spend disposable income on experiences like vacations, hobbies, and cultural events rather than material goods. The memories last longer than the happiness spike from buying more “stuff.” Chartering a yacht with friends makes for better memories than buying a slightly bigger house.
Give Back
Use wealth to support causes aligned with your values. Funding scholarships, volunteering skills, and mentoring others gives a sense of meaning. See the difference you are making.
Go to Therapy
Seeing a psychologist helps reveal blind spots about your own thinking patterns. Get professional support uncovering repressed issues and making positive life changes.
Practice Gratitude
Consciously count your blessings daily. Keep a gratitude journal listing things you are thankful for. Savor the good in life instead of taking it for granted.
Connect with Others
Relationships provide meaning. Nurture your closest bonds. Deepen connections through shared activities and communication. Avoid isolation.
Take Care of Your Body
Your mind and emotions are tied to your physical well-being. Eat nutritious foods. Exercise daily. Get regular physical and mental health care checks even if you think nothing is wrong.
Develop Emotional Intelligence
Learn to understand and master your own emotions through introspection, then apply that skill to empathizing with others. Improving EQ increases overall life satisfaction.
The Formula for Happiness
Based on the research, here is an overview of the “formula” for what makes millionaires happy:
Happiness = Purpose x (Health + Relationships) / Challenges
To maximize your happiness no matter your net worth:
- Have a sense of purpose in your life
- Prioritize your health through self-care
- Invest in close relationships with others
- Minimize unnecessary challenges and adversity
While money gives you more choices, it’s ultimately how you choose to live that determines happiness. Consciously living your values, nourishing your body and connections, and having an intentional vision for leaving a legacy will point you down the path of fulfillment.
Can Money Buy Happiness Conclusion
Does money buy happiness? Research shows having more income provides diminishing returns on happiness at about $75,000 per year. After that, finding purpose and cultivating relationships become more important than chasing more wealth.
While being financially secure certainly allows more life options, millionaires still must avoid common pitfalls like overspending and social comparison to maximize life satisfaction. Ultimately, living intentionally, helping others, and developing inner peace determine happiness more than a number in a bank account.
Money can buy some happiness, but wisdom and mindfulness must guide spending. With some reflection on priorities, millionaires can certainly leverage their financial resources to create fulfilling lives of purpose.