In 2010, two Nobel laureates in economics published a paper that created a tidal wave of interest both inside and outside academia. With careful data analysis, the researchers showed that people believe the quality of their lives will increase as they earn more, and their feelings do improve with additional money at low income levels. But the well-being they experience flattens out at around $75,000 in annual income (about $92,000 in today’s dollars). The news materially affected people’s lives—especially the part about happiness rising up to about $75,000: In the most high-profile example, the CEO of a Seattle-based credit-card-payment company raised his employees’ minimum salary to $70,000 (and lowered his own salary to that level) after reading the paper.
This January, another economist published a new paper on the subject that found that even beyond that income level, well-being continues to rise. That’s not to imply (as much of the popular press did) that money can buy happiness off into infinity. The new study simply suggests that the drop-off occurs, on average, at higher income levels. I graphed the raw income data from the study and found that happiness flattens significantly after $100,000; at even higher levels there is very little extra well-being to be had with more income.
The lesson remains the same as it was a decade ago: At low levels, money improves well-being. Once you earn a solid living, however, a billionaire is not likely to be any happier than you are. Yet for the most part, this truth remains hard for people to grasp. Americans work and earn and act as if becoming richer will automatically raise our happiness, no matter how rich we might get. When it comes to money and happiness, there is a glitch in our psychological code.
Understanding this can help us build happier lives. Even further, it uncovers strategies for using income at all levels to raise well-being. Just because most people generally don’t get happier as they get richer beyond a certain point doesn’t mean that they can’t. In fact, no matter where we sit on the income scale, with a little knowledge and practice any of us can use money to bring more happiness.
Below a certain degree of financial prosperity, seeking more money is a sensible way to pursue happiness. As economists have repeatedly shown, well-being rises with income at low socioeconomic levels because it alleviates the problems of poverty. People can erase calorie deficits, educate their kids, and go to the doctor—in other words, they can lower their unhappiness. Even if you live above the poverty line in a rich country, you might have experienced this sort of transition in early adulthood. When I could finally afford to see a dentist at age 25 after ignoring my cavities for six years, it was a huge relief. (My lack of dental care might also have been partly due to misplaced spending priorities, however—I don’t recall ever being without cigarettes during those lean years.)
Raising positive emotions and lowering negative ones involve independent neurological processes, but few of us recognize the difference. All we know is that we didn’t have enough money, then we got more, and then we felt better. The (incorrect) lesson that money buys happiness, especially programmed into us early in life or when we are vulnerable, can be hard to shake. Over the rest of our lives, like Pavlov’s dogs, we figuratively salivate in anticipation of good feelings when the bell of money rings.
But after a while, the good feelings don’t come, because there’s no more material deprivation to relieve. For the most part, remediating the small size of your TV screen or the low horsepower of your car has no effect on your unhappiness whatsoever. This is not to say that people who make more than six digits should stop working hard—earning success through work has been shown to bring happiness at all financial levels. But beyond a certain income, working harder simply to have more money to buy things is pointless, since we find that none of life’s biggest problems—which typically involve our relationships—are solved. Quite the contrary, as spending more time fruitlessly chasing well-being up the income curve often means spending less time on love.
You might be tempted to throw up your hands in exasperation at these findings. It’s easy to be discouraged by the fact that we are driven instinctively toward a goal that doesn’t actually satisfy us.
Luckily, there is a loophole. Research shows that how the wealthier among us spend their money makes all the difference for their well-being. Specifically, spending money to have experiences, buying time, and giving money away to help others all reliably raise happiness. Thus, if you have a little excess income, it’s best to use it on those three things.
The key factor connecting all those approaches is other people. If you buy an experience, whether it be a vacation or just a dinner out, you can raise your happiness if you share it with someone you love. Friends and family are two key ingredients in well-being, and fun experiences with these people give us sweet memories we can enjoy for the rest of our lives—unlike the designer shoes that will wear out or go out of style.
Likewise, if you pay someone to do something time-consuming that you don’t like to do (for example, cutting your yard), and don’t waste the time you gain on unpleasant things like doom-scrolling on social media, you can get a happiness boost by spending those extra hours with others. As an added bonus, you might be able to convert your excess capital into earned income for someone who is still climbing the well-being curve.
And if you use your money to charitably support a person or a worthy cause, your brain will respond with boosts in dopamine, serotonin, and oxytocin, elevating your mood. Charitable giving is also linked to higher earning, which you can then spend on relationships, experiences, and charity.
Left to our urges and natural desires, we can get stuck in a cycle of dissatisfaction, in which we work, earn, buy, and hope to finally get happier. But we don’t have to play that futile game. Anyone who acquires money can use it to buy some happiness, and do a little self-improvement in the process. If we don’t have much, we can spend any extra cash on removing some of the stressors in our daily lives. When we have enough to meet our basic needs, we can fight our materialistic impulses and spend time enjoying the people around us. And if we are lucky enough to have extra income, we can make it into a source of happiness, by transforming it into a means to share, and to love others better.