In an age where the dollar bill rules our lives and reality shows of the rich and famous infiltrate our homes, it’s no wonder that the American public has become obsessed with money. When we’re introduced to the lifestyle of the super rich, we witness the grandiosity money can achieve; one that we previously didn’t know existed. At the end of the day, when our extravagant dreams are put to rest, can money really buy happiness? If so, how much is enough?
According to the Time Magazine article “Do We Need $75,000 a Year to Make Us Happy?” money can buy us happiness — to a point. In a study held by Princeton University’s Woodrow Wilson School surveying 450,000 people, the happiness cap is around $75,000. This wage allows the average American to live comfortably and a little lavishly. But, there’s an interesting twist. The people who conducted the study, economist Angus Deaton and Nobel Prize winning psychologist Daniel Kahneman, tested two different types of happiness. The first being the daily up and down of mood swings that come with waking up groggy or stubbing your toe, and the second focused on a deeper, long lasting fulfillment.
Interestingly enough, $75,000 or above helps people feel the deep satisfaction of happiness and gives them a positive outlook on their future. Once under the $75,000 mark, dissatisfaction starts to arise and the worries of life (bills, not being able to take that vacation, taking your parakeet to the vet) become more apparent. It should be noted that the first kind of happiness, the daily mood swings; go untouched regardless of what kind of money is our bank accounts.
So, why $75,000 specifically? Time Magazine maps it out:
“Researchers found that lower income did not cause sadness itself but made people feel more ground down by the problems they already had. The study found, for example, that among divorced people, about 51% who made less than $1,000 a month reported feeling sad or stressed the previous day, while only 24% of those earning more than $3,000 a month reported similar feelings. Among people with asthma, 41% of low earners reported feeling unhappy, compared with about 22% of the wealthier group. At $75,000, that effect disappears. For people who earn that much or more, individual temperament and life circumstances have much more sway over their lightness of heart than money. The study doesn’t say why $75,000 is the benchmark, but “it does seem to me a plausible number at which people would think money is not an issue,” says Deaton. At that level, people probably have enough expendable cash to do things that make them feel good, like going out with friends.”
In a lot of ways, it’s less about the elusive word “happiness” and more about comfort and security, which are contributing factors to becoming content. If $75,000 makes average Americans satisfied, what about the profoundly lucky lottery winners? Surely they are happier than the “75,000 happiness average” as they pocketed millions upon millions in winnings. Surprisingly (or perhaps not surprisingly at all) quite a number of them blew all of their winnings on predictable things like huge houses, fancy cars, and extravagant parties all within the first few years of winning, and were forced to go back into the working world (or in some cases poverty) after their lottery fountain of materialism ran dry. Business Insider’s article “19 Lottery Winners Who Blew it All”, shows the magnitude of impulsiveness and greed when people are presented with a huge lump sum of money. In these rare circumstances, not only does the happiness level decrease, it explodes and leaves the person worse off than ever before. This trend perhaps shows the weakness that people have when presented with a number that is too big for one person to grasp, therefore believing they are unlimited in their purchasing power. With a large sum of money comes large responsibility, including managing your mood.
Lifehackers‘ article “Money Might be Ruining Your Mood (And Here’s How to Stop it)” speaks of the possibility that we base too much of our dispositions on this thing called money, and in some cases it may lead to serious health concerns. From the section “You’re in Debt Denial”:
“No surprise here. Debt kills your mood faster than almost anything. In fact, credit card debt is scientifically linked to anxiety and depression. Like Francine Bostick knows all too well, skyrocketing consumer debt can have serious health consequences. After accumulating more than $120,000 in debt over 13 credit cards, Bostick’s blood pressure was so high that she was at severe risk for a life- threatening stroke. Fortunately, she paid attention to the wake up call that her body was giving her, and took the necessary steps to pay down her debt.”
Having debt, especially in the thousands of dollars, is a frightening reality. Because of the nature of credit cards, with interest building and over due fees not being paid, the pressure only builds when we ignore it and our mental health can (and will) be affected. Much like the idea of winning the lottery is overwhelming to the point of over indulging, debt has the same overwhelming attributes that cause inaction, leading to more debt.
Another study from CNBC’s “The Perfect Income for Happiness?” was more straightforward in asking participants (and then averaging out the nation’s answers) what kind of money they believe they needed to be happy. The study presented questions weighing out the pros and cons of each possible life factor to arrive at a wage. The worlds average? $161,000. While in America the average was $75,000, the study reflects the economical climate of all nations surveyed. Out of 13 countries, the highest income sought was $276,150 in Dubai, while Germany claims that $85,781 would make them happy. The reasoning behind such a large discrepancy is also straightforward. Robert Frank from CNBC explains:
“Living in Dubai, with all those oil barons and oligarchs, the needs are higher. In Germany, where wealth is more evenly distributed, the needs are not as high.”
This study suggests that the projected idea of monetary happiness reflects upon on our environment and societal factors. This same study then asked what amount of money would reflect wealth, not just happiness.
“Globally, the average amount needed to feel wealthy was $1.8 million. Singaporeans took the lead on the “wealth” needs, with $2.91 million needed to feel wealthy. Dubai ranked second with $2.5 million, followed by Hong Kong with $2.46 million. Surveys show that among Americans, most say they need $1 million or more to feel wealthy. All of this shows that wealth and financial happiness is not an absolute number, but is relative to your peers and surroundings.”
Does money buy us happiness? It does, and it can. In the modern world, money (be it $75,000 or 1 million) can bring us happiness to a certain degree, optimism about our futures, and leave a little extra for indulgence. However, beyond the $75,000, there seems to be a diminishing return on our happiness because the increase in happiness from $75,000 to $100,000 is not nearly as much as the increase in happiness from $50,000 to $75,000. Keep in mind that this figure of $75,000 is a moving target as inflation eats away at our dollar. So although the magic number is $75,000 right now—it will likely be more in ten or so years.[collapse id=”collapse_93″] [citem title=”References:” id=”citem_65″ parent=”collapse_93″] CNBC’s “Perfect Income for Happiness? $161,000” http://www.cnbc.com/id/50027184
“19 Lottery Winners that Blew it All” http://www.businessinsider.com/17-lottery-winners-who-blew-it-all-2013-5?op=1
Time Magazine “Do We Need 75,000 a Year to Make Us Happy?” http://www.time.com/time/magazine/article/0,9171,2019628,00.html
“Money Might be Ruining Your Mood (Here’s how to Stop it) http://lifehacker.com/5989830/money-might-be-ruining-your-mood-heres-how-to-stop-it
Photo credit: oprah.com