Happiness and Money

Had a conversation with my mum today about happiness and money.


Its an age old question.  Does more money = more happiness?


There is some pop research that I’ve heard about, that above an income of $70,000, i.e. where a person’s basic needs are met, the more money one has doesn’t lead to more happiness.


I can relate to that in some ways.


At the moment I’m earning a comfortable income.  By no means anything spectacular, but comfortable.  I also have the benefit of running my own business, so I have a lot of freedom.  I can travel to conferences, which I love doing in order to meet cool new people and learn about my industry (last year I think I travelled overseas about 6 times or so, lost count…), I take a morning off or a day off if I like (but I only rarely do this, because I love what I do and usually can’t wait for the weekend to end so that I can get back in to the office).  I can go to any restaurant I like and eat out as much as I like.


So I can safely say that my “basic needs” are met.  If I’m earning the income that I am now or if I’m earning $1,000,000 per month, I don’t think I would be significantly happier.  Maybe 1% happier, perhaps 10%.  I’d have a few less existential moments of fear, as I sometimes experience now in my business, since I would have more financial security.  I might have a slightly nicer house (I don’t care about cars, would probably still drive the cheapest car on the market as long as it is safe).


What IS important for me is to have a goal.   So now I want to build amazing games to delight our customers and I have quite lofty income goals.  But the income goals are just that.  They are goals.  They are something to strive for. It’s a game and I want to get the high score (quite meta, since I’m developing games and trying to create goals for them to strive for within the games…).


Martin Seligman, a leading psychologist and the father of the Positive Psychology movement, breaks down wellbeing (i.e. “happiness”) into what he calls PERMA:

  • Positive Emotion
  • Engagement (i.e. achieving Flow State)
  • Relationships
  • Meaning
  • Achievement

I am very achievement orientated and also meaning orientated, so what I’m doing now both gives me a degree of meaning and also gives me achievement goals which I know are key to my own personal wellbeing.


The worst thing that could happen if I was earning $1,000,000 per month and absolutely “financially free” would be to have nothing to do, nothing to strive for, no purpose, nothing that I can sink my teeth into and lose time in (experience flow).


For me, as long as I always have something that motivates me and something to strive for and doing what I love to do, I will be pretty much as “happy” whether I’m earning a decent salary or an insane amount of money.



That’s all nice and good, but lets look at the research.


Have a read of this article (fairly recent, from 2013).    If you skip down to the conclusion, you’ll see that actually, there is a linear-log correlation between income and well being.  They do mention the previous research by Kahneman, but state “the relationship between wellbeing and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.”

And this statement makes it a bit clearer: “Deaton (2008) and Stevenson and Wolfers (2008) find that the well-being–income relationship is roughly a linear-log relationship, such that, while each additional dollar of income yields a greater increment to measured happiness for the poor than for the rich, there is no satiation point. ”

I don’t think the research is so much at odds.  The oft-quoted Kahneman article states in the abstract “when plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000.” So, what I understand from this, is that you don’t experience more of the “P” from PERMA beyond the $75,000 income threshold (positive emotion, the feeling of “happiness”).  But the P is just one out of the 5 factors that contribute to wellbeing.  And what I believe Kahneman is saying that overall life satisfaction STILL DOES INCREASE with greater income, although the effect of this increase may well diminish as we can see from Stevenson and Wolfers.


This table from the research paper is quite interesting in itself:

happiness and income table

So as with many cases of research, it depends how you measure, what you measure, how you analyze.  But there seems to be some validity to the case that the more money you have the happier you’ll be BUT at lower incomes each $1 buys you more happiness than at higher levels of income.   So like some drugs, money causes tolerance in its human subject, requiring more and more money in order to generate the same effect…


I think we can safely conclude that the advice you receive from your poor relatives that “Money doesn’t buy happiness” is overall bullshit.  While beyond a certain threshold you don’t experience more positive emotions, money DOES buy more overall life satisfaction and wellbeing. Although beyond a certain point each extra dollar becomes less effective at improving life satisfaction, the research hasn’t found a point where money stops improving wellbeing all together.


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Author: David Janner

David Janner is a former M.D. and the Editor-in-Chief of MAKE APP Magazine. His passion is app development and app marketing. You should follow him on Twitter and Facebook and Google+ in order to get the most important industry related news, hot off the press. If you would like to arrange a 15 minute app marketing session to discuss your App Store Optimization strategy, contact him here.

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