It’s a constant back and forth: some believe money can’t buy happiness, others see money as the only way to be fulfilled. As it turns out, both are right.
In his new analysis comparing salary to happiness, Doug Short, vice president of research at the investment group Advisor Perspectives, found that money can certainly buy happiness but only to a point.
A 2010 related study from Princeton (noted in the above analysis) said the magic number – the happiness benchmark – was $75,000. On average, an increase in salary aided in the increase of happiness until the $75,000 mark was hit, then people would stop seeing improvements in their lives and only see a bunch of tangible stuff.
Short’s research goes further, saying the salary cap is also linked to a person’s zip code and not a national average, mainly due to the different costs of living throughout the United States.
For instance, happiness in Hawaii stops at $122,175 but only reaches $65,850 in Mississippi. Naturally, other financial factors like health care, children and mortgages add to or subtract from the number, making it obvious that higher-cost areas would require a higher salary to be happy. However, the end result – that happiness becomes stagnant – is the same.
Even more interesting is the connection between disposable income and debt. According to the Federal Reserve, debt service payments on average are less than 10% of a person’s disposable income. What this suggests is that debt is not affecting happiness as much as we might think. People care more about the cost of living in their communities and how much they can compete with their neighbors.
Much of this research seems obvious, and to some superficial, but there is a silver lining. The Princeton study discussed “life evaluation,” – a term they used to describe how one feels about life and personal accomplishments – and found that life evaluations will continue to rise and fall, independent of income.
What are your thoughts on this research and the connections it makes between money and happiness?