They say money can’t buy happiness. However, the newest studies suggest money actually can bring happiness. In fact, one study suggests the more money you have, the happier you are.
And as we dug deeper, we found it’s actually true — as long as a couple key elements are in play. Studies have historically shown that money can bring happiness, but only up to a point.
In the 1970s, economist Richard Easterlin argued that money does indeed buy happiness. But once you have enough money to buy your basic needs — food, shelter, and the like — you are as happy as you’ll ever get. More money won’t push the happiness needle one inch higher. His claim even became known as the Easterlin Paradox. Studies since then seemed to confirm Easterlin’s thesis.
A 2010 Princeton study found that day-to-day happiness rises as people earn more money. However, their findings also suggested that once people hit $75,000 a year, they don’t get any happier. Adjusted for inflation that would be about $86,000 today.
At the oracle.com blog they say that more recent similar studies put the “happiness” figure at $105,000 for a single individual, or $210,00 for a household. New studies that dive deeper now seem to show that happiness can actually continue to increase right along with your growing wealth. For example, University of Michigan economists Betsey Stevenson and Justin Wolfers examined data from more than 150 countries. They used sources including World Bank data and the Gallup World Poll.
Their findings were surprising to many. The more money people have, the happier they are, regardless of whether they’re rich or poor. And contrary to earlier studies, there isn’t a cutoff point.
They say it doesn’t matter if you’re making $20,000 a year or $200,000 a month. Their findings suggest that making more money can always lead to more happiness, no matter how rich you become. The biggest reason these studies come to different conclusions is based on how happiness is measured.
Earlier studies measured day-to-day moods. Later studies gauged overall life satisfaction. But they all tried to measure an incredibly subjective term, “happiness.” The monetary boundaries of happiness in the studies were also arbitrary. For example, people in rural settings reported more happiness on less money than those living in expensive places like New York City, California, or Hawaii.
At aee.net they state that another factor is that the economists who engineered these studies were most interested in studying broad societal patterns (the macroeconomic effect) rather than an individual’s prosperity, freedom, and happiness. During our research we found this study that ties together all the pieces and confirms what we’ve known and taught all along.
It’s not the money itself that brings the happiness — or even the amount of money, says inc.com. It’s what you do with the money that makes all the difference. The biggest boost in happiness comes when people use their money to create more free time. More space. More freedom. That’s what our philosophy of Economic Independence is all about.
Most entrepreneurs and small business owners didn’t grow up in a wealthy household. Most of us grew up in middle-class neighborhoods and were influenced by commonly-held financial values handed down by our parents and the education system.
We were taught that proper money management was to accumulate money for some future reward. So we learned how to be frugal. We became experts at cutting back. We were told it’s cool to be the superheroes of scrimping and sacrificing.
Therefore it’s no surprise that “doing it yourself” was also viewed as a great way to save money. After all, that allowed you to accumulate more for the future. That’s why in the last study cited, they found that people who increased their wealth through frugality and penny-pinching continued their miserly ways even after they had become wealthy.
For these people, more money didn’t bring more happiness. But for those who learned how to use their wealth to hire people to do their taxes, or mow the lawn, or do the housework — these are the people who reported being the happiest.
Economic Independence is more than just having enough money to be considered “financially free.” It’s about having the tools, the framework, and the financial philosophy that focuses on cash flow over accumulation. It’s about living wealthy along the way because you know the real value of your life, your family, and your own personal capital. It’s about investing in yourself — in your health, your wealth, your knowledge, your inner peace. It’s about discovering your Investor DNA and your Soul Purpose so you can live the life that you were meant to live, investing only in things that make sense to you and that mirror your values.