How much money do you really need to be happy? A new study has answers.

ByJames Dennin

Are rich people happier? The answer is complex. Some research shows having more cash decreases sadness, likely since it helps you combat adversity, ensuring you have food, housing and health care. Yet other research finds thinking too much about money makes you enjoy life measurably less. Ideally you strike a balance: Earning enough to be free of financial stress, without getting chained to a desk or becoming overly materialistic.

For that reason there’s a particular fascination among economists with finding exactly how much money is needed to maximize happiness. Different from investigating the living wage, this line of study poses questions like: At what salary does life satisfaction peak? Is there an ideal income level for day-to-day emotion? Is there such a thing as earning too much money?

Popular previous research suggests that for those in the United States, an ideal figure might be $75,000 per year to optimize day-to-day “emotional well-being,” while for a different kind of happiness, life satisfaction (how you feel about your personal standing in the world), there might be no ceiling: More money could increase that kind of satisfaction without limit. And an international study of that life evaluation measure showed similar results.

Yet these assessments might not tell the whole story, according to a new paper from researchers at Purdue published in January. On one hand, the latest findings generally affirm prior global estimates of ideal earnings for emotional well-being — between $60,000 and $75,000 annually for individuals, depending on whether you’re trying to bump up day-to-day happiness or avoid negative feelings — with figures likely higher for households with big families.

But most notable is a new insight about how people of different incomes worldwide evaluate their lives. The Purdue study found a life-satisfaction satiation point: specifically at $95,000 per year.

In other words, the case that you need to be super rich to maximize happiness just got even weaker. “The importance of money is partly, if not largely, illusory,” said Andrew Jebb, the lead author of the Purdue study, which used a slightly different methodology from previous research.

Mic/Nature Human Behaviour, 2018 Macmillan Publishers Limited, Springer Nature

As you can see in the chart above, your ideal income may vary depending on where you live, your education and even your gender. In North America, the life-evaluation satiation point is actually $105,000, for example, while in the Balkans and Eastern Europe it’s $45,000.

Perhaps most surprisingly, the researchers found that globally, further income increases beyond the $95,000 number actually are “associated with reduced life satisfaction and a lower level of well-being.” In other words, at a certain point more money really might mean more problems.

Jebb said it’s important to ask about “life evaluations” separate from daily emotions: “You can eat a good sandwich and you’ll feel good for the rest of the day,” he explained. “But you wouldn’t necessarily say your life is better.” For that reason the Purdue authors looked specifically at questions around how close people feel to achieving their goals and how they perceive themselves relative to others.

The case that you need to be super rich to maximize happiness just got even weaker.

Now, neither $95,000 nor $105,000 is a small chunk of change — the median U.S. household income is roughly $59,000, a figure that includes millions of households with more than one source of income. It makes sense, then, that making nearly twice as much as the typical U.S. family would be enough to be able to afford a pretty darn good life.

But if $95,000 annually buys more happiness than $90,000, it’s less clear why a high six figure income wouldn’t be even better... right?

The Purdue paper explains that after your particular satiation point, any extra money you make is likely to be counterproductive, by indulging your sense of materialism or making you stress about how you stack up against others. Those activities can actually end up reducing your sense of well-being.

So, other than getting a raise to whatever your satiation point may be, how do you personally squeeze more happiness out of every dollar?

“It’s... about how you spend your money,” Jebb said. “People tend to be better off when they spend their money... in service of other people.”

Indeed, other researchers also suggest putting money toward relationships — buying time with loved ones and experiences you’ll cherish in retrospect — is a far better bet than simply filling your home with fancy stuff.

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