Can Money Buy Happiness?

Every day we're bombarded by television and tabloids that put the rich and famous on display. We see them and they seem to be tremendously happy in their chauffeur-driven limousines, their private jets, and their multi-million dollar homes. In our own lives, we keenly observe the homes and cars of our neighbors, the paychecks of our bosses, and the material wealth our rich relatives. We feel a strong sense of envy and malcontent with our own worth. We tell ourselves that the only way to be happy is to have it all. That’s the formula for happiness, right? Not so, say countless researchers.

In polls taken by the National Opinion Research Center in the 1950s, about one-third of Americans described themselves as "very happy." The center has conducted essentially the same poll periodically since then, and despite more Americans having more wealth, the percentage of those who are happy remains almost exactly the same today as in the past.

According to a research study by Stony Brook University School of Medicine Professor and Vice-Chairman of the Department of Psychiatry Arthur Stone, Princeton economist Alan Krueger, Nobel Prize-winning psychologist Daniel Kahneman, and other colleagues, once you reach a certain income level, more money does not contribute significantly to well-being and may actually result in more stress and less bliss.

Findings, published in Science, reveal that "The belief that high income is associated with good mood is widespread but mostly illusory," and that "people with above average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense and do not spend more time in particularly enjoyable activities."

In a TIME poll, when people were asked about their major source of happiness, money did not even rank in the top ten.

According to a survey conducted by Ed Diener, a University of Illinois researcher, there is virtually the same level of happiness between the very rich individuals on the Forbes 400 and the Maasai herdsmen of East Africa.

Surveys conducted with lottery winners found that they tend to return to their pre-winning level of happiness within five years, and in many cases become unhappy after winning.

And, going back to the rich and famous celebrities, even with their obscene bank accounts, they still have to wrestle with relationship problems, stress,
and basic human misery.

That money never satisfies is also suggested by this telling fact: polls show that Americans believe that, whatever their income level, they need more to live well. Even those making large sums said still larger sums were required. We seem conditioned to think we do not have enough, even if objectively our lives are comfortable. Fixated on always getting more, we fail to appreciate how much we have.

That's not to say that increased income doesn't matter at all. There is a very small correlation between wealth and happiness--accounting for about 1% of the happiness reported by people answering surveys.

How much money buys happiness? A wide body of research suggests the number is approximately forty thousand dollars a year. Daniel Gilbert, professor of psychology at Harvard University, says once you have enough money to meet basic needs – food and shelter, — incremental increases have little effect on your happiness.

Why doesn't wealth bring a constant sense of joy?

"Part of the reason is that people aren't very good at figuring out what to do with the money," says George Loewenstein, an economist at Carnegie Mellon University. People generally overestimate the amount of long-term pleasure they'll get from a given object.

Sometimes, Loewenstein notes, the way people spend their money can actually make them less happy. For example, people derive a great deal of pleasure from interacting with others. If the first thing lottery winners do is quit their job and move to a palatial but isolated estate where they don't see any neighbors, they could find themselves isolated and depressed.

Other trophies simply don't bring the payoff one expects. Says Loewenstein, "If you're a single male driving around in the Ferrari with nobody next to you, it's a glaring omission."

The central problem is that the human brain becomes conditioned to positive experiences. Getting a chunk of money registers as a good thing, but as time passes, the response wears off. An expected paycheck doesn't bring any buzz at all--and doesn't contribute to overall happiness.

However, there may be at least one important relationship between money and happiness, according to Ed Diener, the researcher who surveyed the Forbes 400 and the Maasai, happy people tend to have higher incomes later on in their lives. So, while money may not help make people happy, being happy may help them make money.

Psychology and sociology aside, there is a final reason money can't buy happiness: the things that really matter in life are not sold in stores. Love, friendship, family, respect, a place in the community, the belief that your life has purpose--those are the essentials of human fulfillment, and they cannot be purchased with cash. Everyone needs a certain amount of money, but chasing money rather than meaning is a formula for discontent.