The Complex Relationship between Money & Happiness: How Much Is Too Little, Too Much?

The Complex Relationship between Money & Happiness: How Much Is Too Little, Too Much?  

By Thierry Malleret, economist

MONEY, FINANCIAL WELLNESS AND HAPPINESS:
An obvious link exists between money and subjective wellbeing (happiness), but only up to a certain threshold which economists and psychologists have a hard time precisely identifying. Anyone without money will corroborate that financial wellness is the conduit to other forms of wellness, for it is impossible to feel physically and mentally well while in a state of financial deprivation. That said, the correlation between money and happiness is much stronger at the bottom of the income scale, with diminishing returns as we move up the income ladder. About ten years ago, two Nobel Prize winners in economics (Angus Deaton and Daniel Kahneman) found that $75,000 ($100,000 at today’s prices) was the amount that optimized an individual’s daily life, with any extra amount unlikely to reduce negative sentiments such as anxiety or stress. Others, like Jan Emmanuel De Neve (director of the Wellbeing Research Centre at Oxford University) estimate that the money-happiness “satiation point” stands at about $120,000-144,000, with a flattening of the curve beyond it.  

Estimates vary, with scientists disagreeing about the point where happiness no longer goes up with money. Some even suggest that a full flattening of the curve exists beyond a certain threshold, and there is even a point when the curve starts going downwards.  

Why would this be? Because happiness, or a general sentiment of wellness, is both about experiencing positive emotions and avoiding negative emotions. Those who have a lot of money (and sometimes an awful lot of it) know that it cannot buy what we truly value (“things” like friends, love, or time, for example). They also know that a lot of money (whatever this means) changes the nature of our relations with others by sometimes infecting it with a certain “toxicity.” In short: the relationship between money and happiness is not linear and varies between individuals.