It's officially proven: Money can buy happiness... but it's not what you think
The latest psychological research shows that higher annual salaries are related to improved life satisfaction and happiness... with a few important nuances.
Last week we dove into the Maker Mix theory, which describes three key areas that you can fine-tune for maximum career satisfaction: Money, Impact, and Self-Expression. This week we’ll dive into the first slider, money, and what the latest psychological research says about the age-old question: Does money buy happiness?
During my teenage years, I stumbled upon a life-changing statistic: earning less than $75K yearly reduces life satisfaction, but anything over $75K doesn't impact your happiness. Being a data nerd, I kept this factoid in mind when making career choices, convinced that earning $75k/year was the secret to happiness... or so I believed.
However, the problem with studies are… sometimes they get it wrong.
The famous study by Kahneman and Deaton in 2010 popularized the idea that money above $75k/year can't lead to increased happiness. However, recent studies by Killingsworth in 2021 and Killingsworth, Kahneman, and Mellers in 2023 employed improved research methods and statistical analysis and have shed new light on the matter.
Here are all the juicy details of the latest 2023 study, published just a few months ago:
Your starting happiness impacts the money x happiness relationship:
For individuals who are already very unhappy, an increase in income can bring some relief. Still, the impact diminishes once their earnings reach $100K annually. However, for most people with average levels of happiness, a higher salary corresponds to increased overall satisfaction without reaching a plateau. For those fortunate few already radiating joy, more money seems to amplify their happiness even further. In other words, unless you're utterly miserable due to circumstances that money can't fix, like health issues, grief, or depression, money can indeed buy happiness.
As Killingsworth, the researcher behind the new study, eloquently says, "If you're rich and miserable, more money won't help. For everyone else, more money was associated with higher happiness to somewhat varying degrees."
It takes a lot more money to buy noticeable increases in happiness:
Before you rush to quit your job and become a cosmetic surgeon or actuary, let's discuss the numbers. These studies measure marginal shifts in happiness against significant financial changes. In the grand scheme, the correlation between money and happiness is statistically significant but not terribly practically significant. While this finding may thrill statisticians, the reality is that the happiness gains we're talking about require vast sums of money, making little difference to the average person in real life.
The 2023 study sheds light on this: the difference in happiness medians between household incomes of $15,000 and $250,000 is about five points on a 100-point scale. This finding is consistent with the 2010 study, which suggested that the positive impact of earning four times more income is equivalent to the positive effect of it being the weekend. Money certainly matters, but it isn't the sole influencer of our overall well-being.
A Quick Aside: Before you jump to conclusions, let me clarify: ample research has shown that living in poverty has a tremendous negative impact on physical and mental health and other critical life outcomes. These studies reaffirm this fact, demonstrating that happiness increases and suffering decreases with higher salaries. The 2010 study even highlighted how poverty exacerbates the pain of life's misfortunes, including asthma, divorce, and loneliness. So please, don't interpret these results as downplaying the extreme tragedy of poverty and income inequality. Instead, remember that these studies focus solely on the impact of salary on one specific outcome: happiness. Other variables, such as personality, age, and life circumstances, also influence our well-being.
Many other factors besides money come into play:
Intriguingly, these studies uncovered that the money-happiness relationship is influenced by numerous factors such as personality, values, and life circumstances. For instance, Killingsworth found that those who value money highly and see it as a measure of success are happier with a higher income and unhappier with a lower income. Surprisingly, the more people equate money with success, the lower their overall well-being, regardless of their income level. Take this as your sign to start sorting through your internalized capitalistic views on money being the epitome of success.
Killingsworth's research also highlighted the significance of feelings of control over one's life, financial security, optimism, and time poverty (the perception of lacking enough time). In other words, if you feel in control of your life, maintain optimism, and strike a healthy work-life balance, your salary may have less impact on your happiness.
Here's what this means for your career:
Let's translate these findings into practical advice:
Choosing Career Paths or Jobs:
When considering different career paths or job opportunities, find a path that meets your financial needs. Letting the higher salary be the tiebreaker if all other factors are equal is reasonable. However, it's crucial not to pursue a high-paying career solely for the money if you have no interest in it. In essence, if you have the chance to love a job that pays more and still aligns with your interests and values, go for it. But don't accept a job you'll hate because of the high salary.
Aiming for Higher Earnings:
If your goal is to earn more, evaluate how you would achieve it, how much it would increase, and what impact it would have on your time and work hours. Remember that study participants reported lower happiness when they had high income combined with high time poverty (feeling short on time). Therefore, if achieving a higher income means working longer hours, the net gain in happiness may be limited despite the increased earnings.
Additionally, these studies suggest that unless you're living on a meager income, even a substantial raise (e.g., $20-30K) may not significantly increase happiness. Also, remember the research on happiness setpoint and the hedonic treadmill, which implies that your overall satisfaction will likely stabilize even with a substantial raise.
Finally, remember that an increase in work hours only sometimes directly translates into a higher salary, and people often overestimate the salary increase they would receive for working longer hours.
Working significantly harder and longer for a higher salary may erode the positive impacts of the increased income.
Applicable to Everyone:
Remember that money is just one piece of the puzzle, and many other factors contribute to increased happiness. These studies highlight the importance of growing optimism, reframing success beyond money, enhancing your sense of control over your life, and reducing feelings of time poverty. Let's chat if you'd like help in any of these areas; holistic career coaching can help you with these endeavors.
In Conclusion:
As tempting as it is to max out your money slider in your Maker Mix, remember that money is only one thread in the complex tapestry of career satisfaction and happiness. Despite money having some impact on happiness, a massive paycheck really won't solve all of your problems.
As you design your career, pursue a path that leads to your ideal balance across all your Maker Mix sliders, provides for the lifestyle you want, and aligns with your passions and values.
Don’t forget to tune in next week, where we’ll talk about another critical money relationship and start discussing the Impact slider.
Hey, I’m Lydia Johnson, MS, a dual-certified career coach and Industrial-Organizational Psychology consultant with one big mission: Help ultra-busy people like you design a fulfilling, burnout-free career so that you have more time and energy to do what you love outside of work.
If you or someone you know could use some help on the work front, schedule a free 25-minute consultation call to see if coaching can help you finally best burn out and stop those Sunday Scaries.