Does Money Make Us Happy? Yes. No. Maybe.
Does Happiness Rise with Income?
Yep. The more money we make, the happier and more satisfied we feel, according to Betsey Stevenson and Justin Wolfers of the Gerald R. Ford School of Public Policy at the University of Michigan.
The researchers used 2007 Gallup polling data to determine the relationship between happiness and household income. Only 35 percent of respondents earning less than $10,000 per year reported they were "very happy," while 100 percent of those earning more than $500,000 described their lives as "very happy" and "very satisfied."
In their 2013 paper -- "Subjective Well‐Being and Income: Is There Any Evidence of Satiation?" -- they concluded -- sit down for this – the more money people earned, the generally happier they felt, with "no signs of petering out even at the very high incomes."
Is There an Income Threshold for Day-to-Day Happiness?
Yes, again. And $75,000 per year seems to be the income sweet spot; below that, people generally feel less happy day-to-day, but above that, moods don't change, according to a 2010 study by psychologist Daniel Kahneman and economist Angus Deaton.
Researchers looked at the link between income ($10,000 to $160,000 annually), daily mood (joy, stress, sadness, anger and affection) and how people generally felt about life.
The results: Poverty is a real buzzkill, and people feel better about life as their income rises. But their day-to-day happiness tops out at $75,000; more money isn't better, when it comes to mood.
Can You Spend Your Way to Happiness?
Assuming you have money to spend, the way you dole out those dollars will boost or bust your happiness. In their 2010 paper, "If Money Doesn't Make You Happy, Then You Probably Aren't Spending It Right," researchers Elizabeth W. Dunn, Daniel T. Gilbert and Timothy D. Wilson say that people "routinely squander [money] because the things they think will make them happy often don't."
Case in point: People generally think that buying tangible, permanent "things" will give them more happiness that buying experiences, which happen then exist only in our memory and in smartphone photos.
In fact, studies have shown, the opposite is true. People report greater happiness thinking about a vacation they took or a concert they attended, than thinking about, say, the large-screen TV they bought.
"One reason is that we adapt to things so quickly," the researchers say. "After devoting days to selecting the perfect hardwood floor to install in a new condo, home buyers find their once beloved Brazilian cherry floors quickly become nothing more than the unnoticed ground beneath their feet. In contrast, their memory of seeing a baby cheetah at dawn on an African safari continues to provide delight."
What's the Real Secret to Happiness?
Give your money away.
In a Harvard Business Review article, Elizabeth Dunn and Michael Norton say spending money on others – whether giving to charity or buying a gift -- makes people more reliably happy than spending money on themselves.
And here's the good news: You don't have to spend a lot to feel a lot better, says Dunn and Norton, authors of "Happy Money: The Science of Smarter Spending." Spending as little as a fiver on someone else can make you feel warm all over.