Financial happiness starts at $85,000 per year
- Americans earning more than $85,000 a year are happier than those who earn less.
- A study in Proceedings of the National Academy of Sciences found that the more you earn, the happier you are.
- Previous research found that
happinessplateaued when earning $75,000 a year.
Want to be happier than the average American? Make (at least) $85,000 a year.
So says a new study, which found that money does buy happiness.
The study, published in the Proceedings of the National Academy of Sciences, drew on 1.7 million experience-sampling reports from 33,000-plus employed US adults using the iPhone app Track Your Happiness. Developed by former software product manager and Wharton fellow Matthew Killingsworth, the app analyzes the relationship between income and happiness by randomly asking users to log their activities and feelings.
The study revealed that the turning point for financial happiness is an income of $85,000. Those earning less than that are less happy on average than the overall average happiness, while those earning over $85,000 are happier.
The study measured happiness in two ways: evaluative, looking at life satisfaction, and experienced, looking at feelings. Happiness increased pretty steadily as income increased in both cases, but significantly more so for life satisfaction than for feelings.
As reported by Bloomberg Opinion's Justin Fox, this new study is a sharp contrast from a 2010 study by psychologist Daniel Kahneman and economist Angus Deaton, which looked at surveys of 450,000 Americans and found that participants with higher incomes reported higher emotional wellbeing up to an annual income of $75,000 ($90,000 when adjusted for inflation, per Bloomberg).
After that, per the 2010 study, happiness plateaus.
Money can bring happiness if you spend it right
Killingsworth's study might be onto something.
Lindsay Bryan-Podvin, LMSW, a financial therapist and author of "The Financial Anxiety Solution" previously told Insider that an annual income of $75,000 may not be the threshold for everyone, depending on your basic needs, cost of living in your area, and your personal interests.
"The data is pretty clear that when we can financially take care of ourselves, our mental health is better," she said. "It's stressful to be on the grind all the time."
She added that spending money on experiences or items that align with your values will increase happiness, but falling victim to lifestyle creep (increasing your expenses as your salary increases) won't.
Her view echoes previous psychological research. Harvard psychologist Dan Gilbert has said that money can buy happiness if you spend it right, Insider's Drake Baer reported.
Of the sentiment that money can't buy happiness, Gilber wrote in a coauthored paper: "This sentiment is lovely, popular, and almost certainly wrong."
He and the authors said that it doesn't buy more happiness, but provides an "opportunity for happiness" in that moneyed people live longer and healthier lives, enjoy financial security, have leisure time, and control what they do every day.
As they put it, money "is an opportunity that people routinely squander because the things they think will make them happy often don't."
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