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Want to be happy? More money won't tip the balance.

By Carolyn Butler
Washington Post Staff Writer
Tuesday, September 21, 2010; HE02

Perhaps it's a function of being in my 30s with small children to support or of being a freelance journalist in lean times or of living in the relatively expensive D.C. metro area, but if I had a dollar for every time I thought my life would be just a little better if we had more money, well, I'd be rich. But would I be any happier?

Not necessarily. A new study from Princeton University shows that money can help buy happiness, but only up to a point -- about $75,000 in annual household income, to be exact. Above that amount, more cash has no effect on "emotional well-being," or how elated, sad or stressed you feel on a day-to-day basis, according to the research. Clinical psychologist Robin Haight, for one, says this finding backs up what she sees in her clinical practice in Tysons Corner: "There is no shortage of misery among the middle and upper middle classes and even the well-to-do who live in this particular area," she says. "We might have our own sources of stress that people in other parts of the country wouldn't necessarily experience, but there is certainly no correlation between income and mental health, for sure, and happiness or contentment, in particular."

In a place like the Washington area, with its high housing costs and exorbitant private school tuitions, it's hard to imagine that a $10,000 windfall -- much less $100,000 -- wouldn't produce at least few more smiles by the end of a day. But the study did not find significant geographic differences, says psychologist and Nobel laureate Daniel Kahneman, co-author of the Princeton study, which analyzed data from the Gallup-Healthways Well-Being Index, a collection of 450,000 Americans' responses to a range of questions about financial and emotional issues, from 2008 and 2009. "There were indications of a small effect in the direction you'd expect, but there isn't a large effect based on where you live," he explains. "$75,000 is the average for the U.S., and we think that is pretty representative."

Other experts warn not to fixate on that figure as a means to maximize happiness. "[$75,000] is not a magic number; in this case, it represents the concept of a threshold," says James Maddux, a psychology professor at George Mason University. "People have a threshold of financial security and material well-being that, after you reach it, there's a point of diminishing returns when it comes to the contribution money makes to their day-to-day emotional well-being, and then a point of no returns at all."

Yet, it's important to know that while a little extra cash in your pocket may not add more joy to your day, it can make you more satisfied overall with your life: The study, which appeared in the Proceedings of the National Academy of Sciences this month, also found that the higher your salary, the greater the level of "life evaluation" -- a more objective, big-picture assessment of well-being that is "less dependent on your experience of the moment, and more about looking at how your life stacks up relative to your goals and the expectations of society," says Kahneman. "We don't see any evidence that life satisfaction levels off [as income rises], at all."

Looking at these two distinct measures of well-being marks a major shift for researchers. "Over the last 30 years, there's been a lot of controversy over what happiness is, exactly," says Maddux. "This study drives home the point that it really matters what we ask people when we ask about happiness, and that asking them how they feel emotionally on a day-to-day basis is different from asking them to make a more objective evaluation of how life is going."

For example, says Kahneman, on any given day you can be wildly upset and stressed about an argument with a significant other, but still feel pretty good, more generally, about the direction of your life: "What we have done in the past, in research and in life, is to confuse happiness, which is part of the picture, with well-being, which is a much broader concept."

So what's going on above that $75,000 mark -- which is just slightly higher than the average U.S. household income of $71,500, according to the Census Bureau -- that prevents us from being happier day to day? The authors aren't sure, but Kahneman theorizes that above that point, all of your basic needs are met and social, emotional and other circumstances can play a larger role in determining well-being.

Kahneman makes another important point: There's a big distinction between changes in wealth and differences in wealth. "What's clear is if you got a raise, the change would make you happier, but the question is how happy you would be after you had time to get used to the new income and found ways to spend it and so on," he says. "When we try to imagine what it's like to be very rich or very poor, we are very prone to think about what it's like to become much richer and become much poorer, and those changes evoke much stronger emotions than actually being richer or poorer. But you can have a large emotional response to change and then after you adapt, there are absolutely no effective differences."

Still, while mo' money may not make us any happier day to day after a certain point, it's clear that not having enough of it is tied to much higher levels of emotional pain: The Princeton study found that low income is often associated with both low emotional well-being and low life evaluation.

"What really struck me was the extent to which being poor makes everything worse -- unemployment, of course, but also divorce, asthma and [having] a headache; even the weekend, which is emotionally a very good time, is less good if you're poor than if your income is higher," says Kahneman. "When you keep score of your life, overall, the higher income the better. But when it comes to emotions, my summary is that it's not so much that money buys you happiness, but that a lack of money below $75,000 buys you increasing misery."

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