The Price of Happiness

The Price of Happiness

How much money does it take to be happy? That question was the focus of a recent survey by Princeton economist Angus Deaton and psychologist Daniel Kahneman. What they found flies in the face of the notion that money can’t buy happiness.

Sort of.

In their study, Deaton and Kahneman found that, as people earn more money, their happiness does increase, but only to a point. Once you hit the “magic number” of $75, 000/year, additional money has no detectable effect on their daily mood.

At the same, increases beyond the $75k threshold do have a positive impact on “overall satisfaction” – i.e., the general feeling that you have a better life.

Of course, $75k is a very specific number for a highly variable nation. I’d be interested in seeing a geographic breakdown of the numbers, as I suspect the answers vary by region, primarily due to differences in cost of living.

I would think that another important consideration would be your family status. As the dad of four boys, I can say with certainty that our basic lifestyle is significantly more expensive than for couples with no kids.

What do you think? What’s your price for happiness? $75k/year? More? Less?

6 Responses to “The Price of Happiness”

  1. Anonymous

    Money can buy security, and a lack of security can reduce happiness. I make less than this amount, but I am a bachelor in a low-cost area so it takes less. I can’t buy anything I want, but with planning and frugality I can have most of what I want in it’s proper time and still save some for a rainy day and retirement. It would be nice to be debt free in a year instead of 5, but my debts do not cause me great stress or cost me all that much in interest.

    Different people have different levels of stress and security. Most Americans in my financial position would be looking for ways to spend their excess, while others would consider me to be irresponsible for my choices.

  2. Anonymous

    I need more than that. What I need to be happy is enough money to sustain a comfortable lifestyle without having to work, and enough reserve to be able to deal with any imaginable contingency. That’s true independence, and then I would feel really secure.

  3. Anonymous

    Kris — I think your definition fits well with what Kahneman and Deaton found. It seemed like $75,000 isn’t so much when we get happy, but rather the point at which we stop having to worry so much about money and expenses.
    Kahneman gave a fascinating talk about happiness and how the way our minds make memories contributes to our satisfaction and happiness at a TED conference. He talks about the difference between satisfaction with life, which is about how we remember and what we remember, and being happy in the moment, and how little the two have to do with one another.
    You can find the video at their site, but I also have it here if you’re interested: http://portfolioist.com/2010/08/19/behavioral-finances-daniel-kahneman-speaks/.
    If you watch it you’ll see that in that talk he puts the price of happiness at $60,000. After the full study came out with the final $75,000 I wrote him to ask if we’d all changed for some reason (economic stress/worries?). He responded that it was simply better data slicing that got to the final figure.

  4. Anonymous

    For me, it’s hard to put a number on it. But my answer is “enough to live without debt, and with the freedom to buy what I need when I want”. How’s that for a philosophical answer?

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