Can Money Buy You Happiness? It Depends

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Can Money Buy You Happiness? It Depends

New study finds income does not determine happiness unless you have a certain personality characteristic. And money can buy happiness if you know the right recipe for spending it.


“One man cannot sincerely help another without helping himself.

--Ralph Waldo Emerson

The relationship between money and happiness seems destined for lively debate in perpetuity. There are as many recipes for happiness as people to ask, with some economists even regarding happiness as the best indicator of the health of a society.

This is exemplified by Bhutan—the only country in the world that measures its national health annually with the Gross National Happiness Index.[1]

Regardless of one’s views about the importance of happiness, just about everyone would likely prefer to spend more of their time feeling happy. But the question remains, how much does money have to do with it? Science is finally providing some answers.

A new British study[2] examined the relationship between life satisfaction and income changes among more than 18,000 adults over a nine-year period. Researchers found that changes in income do not affect most people’s happinessmost of the time. Income increases do not affect life satisfaction, but income losses do, and these effects are far greater for those with “highly conscientious” personality types.

How much income is required for happiness? According to a 2010 study[3] at Princeton, happiness correlates with annual incomes of about $75,000, although some variation is seen based on geography and cost of living. But above that threshold, no increase in happiness was found.[4]

The reason for this is really no mystery. Our income buys the peace of mind that our most basic needs will be met. Low income often comes with feelings of financial insecurity related to the anticipation of not being able to handle life’s unexpected twists and turns—medical emergencies, sudden job changes, etc. However, once you reach a certain threshold, this financial insecurity generally disappears.

Another study[5] confirms that a six-figure salary is not necessarily your ticket to happiness. Life satisfaction ratings were gathered for 260 occupations, and several lower-paying professions boasted happiness rankings substantially above expectations. Case in point: fitness instructors rated happier than lawyers, despite the fact that they typically earn one-seventh of a lawyer’s salary.

In spite of the fact that wealth doesn’t guarantee happiness, research shows happiness is influenced by how we spend our money. In other words, money can buy happiness if we spend it the right way.

How to Channel Your Money for a More Satisfying Life

If you have a comfortable income and you’re still not happy, perhaps the problem lies in how you’re spending it. There are three ways to spend money that have actually been shown to make people happier:

1.    Spend it on others, especially those you care about, AND witness the impact

2.    Spend it on experiences rather than things

3.    Buy back your time

In a substantial study, Elizabeth Dunn and colleagues found that individuals who were directed to spend a small amount of money on others (“prosocial spending”) reported greater happiness than those directed to spend it on themselves.[6] This finding appears to hold true worldwide. Upon analyzing data form 136 countries, another research team confirmed the association between prosocial spending and greater happiness.[7] This phenomenon has proven true for all age groups—even toddlers!

Why does spending money on others make us happier than spending it on ourselves? As it turns out, we humans are hardwired for giving.

Philanthropy appears to give your brain a “happiness cocktail.” Brain MRIs show that even thinking about giving activates pleasure pathways (the mesolimbic system), releasing a flood of dopamine, oxytocin, and various endorphins to instill a sense of peaceful euphoria. This is referred to as the “Giver’s Glow” or “Helper’s High” and occurs whether people are doling out money or volunteering their time.[8] The degree of happiness is not determined by the dollar amount given, but by the perceived impact of the donation.

Giver’s glow is thought to be an ancient reward system that evolved some one to two billion years ago to strengthen communities and ensure a survival advantage.

In terms of spending money on oneself, spending it on experiences rather than things produces greater happiness. Experiences create memories that are more significant for our identity than material objects. We readily adapt to material purchases, watching them fade quickly into the mundane, whereas experiences become an integrated part of who we are. Shared experiences connect us more deeply to other people than shared consumption.[9]

When you buy things for yourself, it’s recommended that you invest in financial security and products you will enjoy greatly on a daily basis. Be wary of lifestyle inflation—meaning, the tendency to keep increasing your spending every time you increase your income.

Time is also something we CAN buy, in a matter of speaking. Time is a precious resource that for many is in short supply. You can invest in services that give you more time to do the things you love. For example, hiring someone to clean your house may give you an hour or two to play catch with your kids in the yard. Paying someone to change the oil in your car may afford you lunch with an old friend. Consider what your time is worth and spend accordingly.

Spending Money on Others is Good for Your Health

Did you know that generosity is not a selfless act? Spending money on others has been shown by science to offer numerous health benefits for the giver. Below are my top 10:[10] [11] [12]

1.    Reduced stress

2.    Improved immune function

3.    Better lipid profile, blood pressure and overall heart health

4.    Improved sleep

5.    Higher motivation to exercise

6.    Improved self-worth and self-confidence

7.    Increased sense of purpose

8.    Elevated mood

9.    Stronger interpersonal relationships, reduced isolation

10. Greater longevity

In the first research of its kind, a PhD student from the University of British Columbia performed a study looking specifically at the health benefits of donating money. Her findings may have cardiologists switching from writing drug prescriptions to prescribing charitable donations instead![13] The study involved 128 older adults. Participants were given $40 per week for three weeks. Half were instructed to spend this money on themselves, and the other half to spend the money on others. Their blood pressure was monitored throughout. Her findings were hugely significant:

·      Among those with a history of hypertension, spending money on others significantly reduced blood pressure over the course of the study, but those who spent the money on themselves showed no improvement

·      The magnitude of the blood pressure effects was comparable to anti-hypertensive drugs and exercise

·      Tentative evidence was found that the participants who benefitted the most were the ones who spent the money on people they felt closest to

These results are not entirely surprising when you consider that gratitude has been shown to significantly reduce stress and heart attack risk. Generosity builds gratitude in both the giver AND the receiver—so there are benefits all around. The next time you hear folks recite the old adage, “Money can’t buy happiness,” you may want to engage them in an alternate point of view. We have far more control over our happiness than you might imagine!

Happiness is not a place you reach and rest at. Instead, imagine it like a garden, as it takes constant upkeep and care. As soon as you stop watering and pulling weeds, it can go away. So while it may be true that money can't make you perpetually happy, it can certainly be a quick watering that your plants so desperately need every now and again".~ Patrick Allan [14]


[1] Gross National Happiness, Bhutan

[3] Kahneman D and Deaton A. High income improves evaluation of life but not emotional well-being. PNAS September 7, 2010 PMID: 20823223 DOI 10.1073/pnas.1011492107

[5] Hall, A. Here's Proof You Don't Need A 6-Figure Salary To Be Happy. Huffington Post February 23, 2014

[6] Pennock SF. How Spending Money on Others Promotes Happiness. Positive Psychology Program April 5, 2014

[7] Dunn EW, Aknin LB, Norton MI. Prosocial Spending and Happiness

Using Money to Benefit Others Pays Off. Psychological Science July 1, 2015 26 1038-1045 DOI: 10.1177/0963721413512503

[10] Firestone L. Generosity – What’s in it for you? Psychology Today November 24, 2010

[11] Holmes L. How Gratitude Can Benefit Your Physical Health All Year Long. Huffington Post November 23, 2015

[12] Swalin R. 4 Health Benefits of Being Generous News & Views December 2, 2014

[13] Whillans A. Want to Do Something Good for Your Health? Try Being Generous. Washington Post January 1, 2016

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