For decades, people have viewed money as the key to happiness. The more you have, the happier you’ll be. But is this really true? Recent research suggests that money and happiness aren’t as closely related as we once thought.

In this article, we’ll explore some of the latest findings on the relationship between money and happiness.

1. The Happiness Plateau

One of the most surprising findings is that there’s a point at which money stops influencing happiness. In other words, after a certain point, more money doesn’t equal more happiness. Researchers call this the “happiness plateau.”.

According to a 2010 study conducted by Princeton University, the happiness plateau in the U.S. starts at an annual income of $75,000. Beyond that point, people’s emotional well-being doesn’t tend to improve much with additional income.

This may seem counterintuitive, but the researchers speculate that after a certain point, money becomes less of a concern and other factors become more important for overall well-being.

2. Spending and Happiness

An important distinction to make is the difference between spending money on material possessions and spending money on experiences.

Research has consistently shown that spending money on experiences (like vacations, concerts, and meals with friends) tends to bring more happiness than spending money on things.

According to a 2016 study published in the journal Social Psychological and Personality Science, people who spent money on experiences (compared to those who spent money on material possessions) reported higher levels of happiness and felt that their money was better spent.

This may be because experiences tend to create lasting memories and social connections, whereas material possessions can become old and boring after a while.

Even if money itself doesn’t directly bring happiness, social comparisons based on income and wealth can have an impact on our happiness.

This means that seeing how we stack up to others in terms of income can affect how happy we feel about our own financial situation.

A 2018 study published in the journal Social Science & Medicine found that people who perceive themselves as being relatively worse off (financially) than their peers tend to report lower levels of happiness and well-being.

This effect was even larger for people in the lowest income brackets.

This suggests that social comparisons can have a powerful influence on our perception of happiness, even if money itself doesn’t play an important role.

4. Generosity and Happiness

Another interesting finding is that being generous with our money (either through charitable donations or giving gifts to others) tends to bring more happiness than spending money on ourselves.

A 2017 study published in the journal Social Science & Medicine found that people who spent money on others (compared to those who spent money on themselves) reported higher levels of happiness and felt that their money was better spent.

Additionally, a 2017 study published in the Journal of Happiness Studies found that participants who were instructed to spend money on others (rather than themselves) experienced greater feelings of positive emotion and greater well-being.

5. Income Inequality and Happiness

Lastly, it’s worth touching on the topic of income inequality.

While money itself may not be the key to happiness, living in a society where income inequality is high (meaning there’s a big gap between the wealthy and the poor) can negatively impact overall well-being.

A 2019 study published in the journal Social Problems found that higher levels of income inequality in a given country are associated with lower levels of happiness among its citizens.

This is thought to be because income inequality can create feelings of resentment, lower levels of trust, and greater stress in daily life.

Conclusion

The relationship between money and happiness is complex and multifaceted.

While having a certain level of income is certainly important for basic needs and survival, beyond a certain point, money doesn’t seem to be as closely related to happiness as we once thought.

Instead, factors like spending on experiences, social comparisons, generosity, and the context of income inequality all play important roles in overall happiness and well-being.

By understanding these factors, we can make wiser choices about how we spend our money and how we value our own financial situation.