More Money Does Make You Happier

A decade ago, a widely publicized study from Princeton University suggested that happiness plateaued after a household reached an annual income of $75,000. Beyond that point, more money didn’t supposedly bring more joy. However, new research debunks this claim, revealing that happiness continues to rise alongside income albeit with some caveats.

The Myth of the Happiness Plateau

In a study published in the Proceedings of the National Academy of Sciences, Matthew Killingsworth, PhD, a senior fellow and happiness researcher at the University of Pennsylvania, analyzed the well-being of over 33,000 individuals through real-time check-ins on their happiness levels. The findings? Happiness increased steadily as income grew, with no clear ceiling.

Dr. Killingsworth’s research highlights the role money plays in improving well-being by enhancing control over one’s life. Clinical psychologist Aimee Daramus, PsyD, elaborates: “Money buys safety and security. It allows you to afford health insurance, live in safe neighborhoods, or take a vacation to relax.” These are not just luxuries but critical factors tied to health and quality of life.

Why Money Matters But Isn’t Everything

While income and happiness are correlated, money is not the sole driver of well-being. Once a person can meet their basic needs, the role of money shifts. “Happiness comes from more than just money,” says Dr. Daramus. “It also comes from relationships, job satisfaction, and enjoying your life.”

Financial psychologist Amanda Clayman, LCSW, emphasizes that people quickly adapt to increased income. "It’s only pleasurable to us because the change is pleasurable, but then it ceases to have the same positive effects," she says. This phenomenon, known as hedonic adaptation, explains why a raise might not boost your happiness as much as you expect.

Clayman also points out that the meaning you assign to money heavily influences its impact on your happiness. For some, money represents freedom whether that’s the freedom to choose meaningful work or to spend without restraint. For others, conflicting goals about saving and spending can lead to financial stress, offsetting potential happiness gains.

How to Make Money Work for Your Happiness

Instead of focusing solely on earning more, consider these strategies for aligning money with your personal goals and values:

• Define what money means to you: Is it freedom, security, or the ability to enjoy life’s pleasures? Understanding your financial values can help you use money in ways that genuinely enhance your well-being.

• Invest in experiences: Research shows that spending money on experiences, like travel or hobbies, tends to create longer-lasting happiness than purchasing material items.

• Balance your goals: If financial freedom is your ultimate aim, create a spending and saving plan that supports that vision while still allowing room for enjoyment in the present.

• Focus on what you can control: Even if earning more isn’t immediately possible, aligning your spending with your values can help you feel more satisfied with your financial situation.

The Takeaway: Money and the Bigger Picture

While the new research challenges the notion of a happiness plateau, it also underscores the complexity of the happiness equation. Money matters, but its impact is nuanced, tied to your ability to meet basic needs and align financial choices with your deeper intentions.

Rather than chasing a specific number, focus on how you can use the resources you have to create a fulfilling and balanced life. And remember, while financial security is important, happiness also grows through meaningful relationships, purposeful work, and personal growth.

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