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How Much Money Do You Really Need To Be Happy?

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So many of us work long, hard hours to provide for our families and children-often long hours away from home, maybe taking on extra jobs at times or hoping to get a raise in an effort to make our lives richer financially–working harder at the expense of sleeping and taking good care of ourselves in order to have extra money. It seems so many of us just aren’t content with what we have now. But is there a point at which striving to earn or acquire extra money can be counterproductive? Or, in other words, when having extra money just doesn’t make us “happy” anymore?

In a recent column in the the Sunday Review of the New York Times, Elizabeth Dunn and Michael Norton attempt to answer this question and by doing so create a perfect opportunity for us to reflect about the limitations of how the desire to accumulate money can ultimately affect our happiness.

There certainly is a relationship between your salary and happiness; people who earn a good living are often happier than people who live in poverty. Having extra money can certainly enhance our lives by providing extra food, objects and creature comforts in our homes.

But the irony is that earning additional income will actually not lead to extra happiness, once you have already attained a “comfortable standard” where you have what you need to function and be content. The “comfortable standard” can be quite variable based on the city, state or country you live in. Here in the US, according to Dunn and Norton, the standard falls around $75,000. Researchers at Princeton examined Gallup poll data from nearly 500,000 US households and found that higher family incomes were related to better moods on a day to day basis. However, the positive effects of money had no effect on people’s happiness and moods after a level of $ 75,000.00 was attained.

The issue then arises why we work so hard after we have reached an income level that is able to make us happy. Beyond a strong work ethic engrained by family values, or the desire to excel and compete with others, it appears that our ideas about money and happiness have gone awry. Dunn and Norton explain that based on their research with a national sample of Americans, the thought that life would be happier with double their salary (from 25K to 55K) did not translate into any measurable happiness. (Twice the money did not lead to twice the happiness). But according to Dunn and Norton’s data, people who earned 55K were only 9 percent more content than those making $25,000.00. 9 percent happier may be difficult to quantify, and better than 0 percent, but not the 100 percent you may be expecting from the extra income.

However the true take-away from all of these mental exercises with money and happiness is that what we do with our money is more important than the money we earn. The thought that making more money can allow us to have bigger houses and fancier cars to nicer digital televisions-more for ourselves- is ultimately ineffective at turning money into happiness. Research has demonstrated that if you are going to spend money on yourself, you may want to switch from buying material objects (TVs or cars) to buying experiences (trips and special events). Based on additional research by Dunn and Norton, while buying more “experiences”, you will be better off by just buying less in general and instead buy for others.

As an extension of this concept, Dunn and Norton refer to the concept of “underindulgence”- indulging a little less than you typically do- may lead you to a place where you achieve more happiness for your money. The concept is that by denying yourself the excess that you may ultimately desire may allow you to savor and appreciate the finer things in life. Dunn gives the example of indulging in chocolate sparingly -instead of in excess- may actually make you appreciate the taste and texture much more.

An extension of the underindulgence concept also relates to the ban on oversized regular soda that New York City recently proposed. In many areas of the country, the childhood obesity crisis has led to a ban on regular soda in a number of schools and campuses. According to research, restricting access to sugary sodas only at particular times of the day may actually have the ability to improve taste, while having a beneficial effect on limiting consumption. In fact, research from Arizona State University has shown that individuals enjoy the taste of soda much more when they can’t have it immediately. Food experts have previously recognized that the first sip or the first bite is often more enjoyable than the 30th bite or sip.

A more extreme but scientifically proven means of increasing the happiness you derive from your money is a bit more radical-not spending it on yourself. It turns out that people who spend money on others rather than themselves are actually happier in the long run. They derive a greater feeling of reward and satisfaction and this helps to enrich their inner feelings of sharing and contentment.

So instead of buying that extra watch or TV the next time you have some new found money, consider the alternative: indulging less and offering others the opportunity to share in your wealth.


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  • “The world moves pretty fast, if you don’t stop every once in a while to look around, you might miss it!” – Ferris Bueller. On a serious note, entrepreneurs work hard to create businesses that provide jobs in the economy. Their reward is the sense of achievement and job creation could be seen as a form of ‘sharing the wealth’ so to speak. For others, I agree that financial balance is key and that ultimately experiences will always mean so much more than material goods.

  • It is an extraordinary article, which shows in a few lines the real meaning of life. Money does not bring the happiness. It is the medium, which offers comfort and safety, but the true point is to appreciate the intangible things that life provides to us and we cannot them. A smile, an altruistic move, a warm conversation, helping other humans, all these offer an incredible and indescribable feeling that no material possessions can offer.

  • Deny D. Ritz Deny D. Ritz 2 years ago

    Hi Robert,

    “Turning money into happiness” is the best part of this article for me. It’s true that a lot of people get caught buying things instead of experiences. This I learned from some travelling friends of mine when they say: “People travel for two reasons: to buy stuff and to buy experiences”.

    The ones who buy experiences, come out richer, fuller, and happier.

    I also agree that “Twice the money did not lead to twice the happiness”. Or, in John Mayer’s words:

    “Twice as much, ain’t twice as good”.

    I’ll be looking for ways to under-indulge, and buy experiences for other people. Do you have any tips?


  • For me $ 556,000.00 is enough for my country and I was still dreaming. One time I was so rich. With this money, I could build my idea of doing business. The easiest is to make the boarding house. After getting my advantage to expand my business to other businesses. That’s my dream to be happy.

  • Human Protein Human Protein 2 years ago

    Can’t go wrong with at least 100m, you can at least buy treatment for any unhappiness + everything you’ve ever wanted + everything you’ve ever wanted to do.

  • Jason GilesMD Jason GilesMD 2 years ago

    Great review article. These data are well supported across various cultures and countries as well, not just the US. There is a point beyond which acquisition turns into a process of diminishing returns. Acquisition for its own sake, in any case.

    It is an interesting phenomenon that the same drive to “make it” and gain financial security and “freedom” so commonly takes a person into fear of loss. The happiest people I know are those who are curious about the world, see work as an opportunity for service to others, and who maintain their relationships to family, friends and the community. They also always seem to have enough.

  • grbradsk grbradsk 2 years ago

    I just don’t believe this article. Maybe for stupid people who just want a big house and car, money doesn’t buy happiness. For the intelligent, it does buy a lot of happiness — I earned and saved to get myself into the 1% with a purpose:

    First, I wanted freedom to walk away. Having any job is easier and more flexible when you can really leave it. It gives you control and control is a big part of happiness.

    Second, it gave me the freedom to start my own company (again, control, purpose) … and thereby earn even more money. As a techie, I’m really enjoying the business side of the equation and the power to change things and make impact. Boy would I be less happy at my age if that were not the case.

    Third. Children. Some do well, some not. You can’t just give them cash, that leads to disaster, but with a lot of extra money, you can arrange for them to be exposed to opportunities that they can excel in. You can hire people to help deal with the hard times.

    Forth. Age. Hey, I flew cramped econo-class for years. Didn’t bother me, I’m no wimp. Then I got past 50. Extra leg room, nicer settings. I don’t know if I’d travel so much without that. It helps avoid health problems such as deep vein thrombosis. Etc. Also, with extra money you can get doctor house calls, no lines, more advice/coaching that actually does keep you healthier. Health is happiness as you age.

    Fifth. Help. Having means and accumulated talent let’s you interact with and help up and coming young people, it gives you a wider social net. I can invest and be on the boards of startups, help them with their problems, vicariously relive those clutch business moves. This is gratifying, fun and often profitable. I can also help out causes I like more substantially. It makes one feel better that you can have at least some small effect on things. We can treat friends to dinner, trips, sponsor get togethers of old friends etc.

    Sixth. Respect. As you get older, people still listen to you since they presume you were wise to have the success you’ve had. There’s a bit of truth in that.

    Seventh. Experience. You can simply have a wider variety of experiences with money. Meet other famous people, bungi jump in New Zealand, sun rise on Masada, meditate at a Buddist resort, write a book that’s best selling in its technical niche, helicopter over flowing lava.

    I’d say I’ve more than doubled my happiness. BUT, I’m very different from many Americans who just want the big car and fancy house. My house is not fancy, it’s adequate, my car is old, I’d rather bike. I worked hard, I work even harder and still have a million things to accomplish. The money makes it more and more possible to do that. Will I buy a better home finally? Maybe, I might want a better setting to do serious writing. We entertain every week and the space is a bit cramped. But most of what I buy has a distinct purpose such as that. Otherwise, money is for freedom and flexibility.

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