Does money buy happiness? – MoneySense

What does happiness mean to you?

Articulate what it looks and feels like for you. For many Canadians, it’s difficult to clearly define happiness. A study from the American Psychological Association found that those who make “happiness” the primary goal often end up being less happy. Why? Because they become overly fixated on achieving happiness as an objective rather than engaging in the activities that actually contribute to their happiness. In other words, they’re too focused on being happy as a future goal that they forget to engage in activities that bring them happiness in the present moment. 

How to be happy regardless of money

So, do we just forget about being happy? No, I don’t think so. Instead, look to “positive psychology.” It offers insight into what it means to live a flourishing life. It’s important we understand the “why” behind what we’re striving to achieve and the direction we are moving toward. Just saying “I want to be happy” isn’t enough. And, having a ton of money doesn’t seem to be enough either, according to research. We need to know our goals and the destination we’re navigating towards.

What is positive psychology? Why does it matter for our finances?

Positive psychology is the scientific study of the things that make life worth living. Researchers in this field have demonstrated two main ways in which people report subjective happiness: evaluative and experienced happiness.

Evaluative happiness involves rating life satisfaction overall. It can include a person reflecting back on life to rate their level of happiness on a scale from 1 to 10, or thinking about whether they are generally satisfied with their life. It is also called “emotional well-being.”

Experienced happiness involves daily experiences. It can look like a person rating their happiness levels during a specific activity or event, or describing a recent experience that made them happy.

However, combining these two components still doesn’t give us a straightforward answer to “Does money buy happiness?”

At what salary does happiness plateau?

In 2010, a classic study by Nobel Prize-winning economist Daniel Kahneman and economist Angus Deaton had the press hyper-focused on the idea that happiness doesn’t increase with household incomes that exceed $75,000 ($104,000 in 2022). (Figures referenced from the study are in U.S currency.)

While that was partially true, the findings of the study did show that life satisfaction (evaluative happiness) does improve after $75,000 in 2010, but emotional well-being does not necessarily improve with higher income. Emotional well-being, or evaluative happiness, refers to the quality of a person’s emotional experiences day to day, including feelings of happiness, sadness, stress and other emotions.