How Much Happiness Can Money Buy?

How much money does it take to make you happy?

Probably a lot of it. The more the better, right?

As a rule, the answer is yes, but there is a threshold: $75,000. According to research by Princeton Professors Daniel Kahneman and Angus Deaton,money makes us happy, up to $75,000. Beyond that, the effect of money on happiness depends on how happiness is defined.

When happiness is defined as overall satisfaction with life, money continues to raise happiness — beyond that threshold. But when happiness is defined as the satisfaction from day-to-day life, more money doesn’t raise happiness.

What can explain this?

Here are three plausible explanations:

1.   With more money usually come more headaches. If you make more money by expanding your small business, for instance, you’ll be facing a lot of day-to-day problems that you must solve. And though you may hire people to help you out, you may still have to make all the important decisions – and they could keep you up in the middle of the night.

2.   The prosperity that comes with more money is not by itself a cure-all against an ill-led life, and may be a source of dangerous foolishness, as Aeschylus warned centuries ago. Money is a necessary but not a sufficient condition for the good life, for happiness and wisdom.

3.   While money can certainly buy a lot of goodies that make us happy, it cannot buy true friendship, the reciprocal attachment that fills the need for affiliation. Friendship cannot be acquired in the market place, but must be nurtured and treasured in relations imbued with trust and amity. No amount of wealth, status, or power can adequately compensate for a life devoid of genuine friends.

The Bottom line: More money may be the necessary, but not the sufficient condition for happiness, measured by the satisfaction that may be derived from daily living.