We've all heard the saying "money doesn't buy happiness." But researchers know that income is indeed associated with happiness.
According to a recent study published in the journal Nature Human Behavior by Perdue University, people generally need about $65,000 to feel happy, but they need closer to $95,000 to feel financially secure. What may be even more interesting? Having more money than that threshold may actually decrease happiness.
What do the numbers say?
In 2010, a Princeton University study found that people are happiest with an annual income of about $75,000.
And this new study seems to confirm this — that people are emotionally at their best and happy on a day-to-day basis when making between $60,000 and $75,000. However, Perdue researchers found that $95,000 is the ideal income for life satisfaction when taking into account long-term goals and comparisons to others. They dubbed this overall assessment as "life evaluation." (The numbers are for individuals, not households.)
The amount varies by region and country
Researchers in the study used data from the Gallup World Poll, which surveyed 1.7 million people across the world. Unsurprisingly, the income needed for happiness depends significantly on where an individual lives. That's likely because cost of living varies widely from country to country and rural versus urban areas.
For life evaluation, ideal income ranges from $35,000 in Latin America to $125,000 in Australia and New Zealand.
In general, people in Western Europe, North America, Australia, New Zealand, East Asia and the Middle East need higher incomes for both emotional well-being and life evaluation, while those Eastern Europe, Southeast Asia, Latin America and Sub-Saharan Africa need less.
Happiness dipped with more money
Once individuals met their ideal income threshold, researchers found that having more money actually negatively impacts emotional well-being and happiness. That's likely because after housing, utilities, student loan payments and other basic needs are met, people might be more likely to pursue material possessions and compare themselves to others. Turns out, this makes you less happy.
“At this point they are asking themselves, ‘Overall, how am I doing?’ and ‘How do I compare to other people?’” Andrew T. Jebb, the study's lead author and Perdue psychological sciences doctoral student, said in a statement. “The small decline puts one’s level of well-being closer to individuals who make slightly lower incomes, perhaps due to the costs that come with the highest incomes."
As Jebb notes, this suggests that there's a limit to how happy money can make you and that there are other factors at play.
Now that we've looked at how our income correlates with happiness, check out our analysis of how personality can impact how much money you make.
Read more posts about Your Financial Future.