The relationship between money and wellbeing is one of the most frequently examined questions of our age. New research from Wharton examines the topic via a huge 1.7 million strong dataset containing over 33,000 participants, each of whom provided frequent snapshots into their feelings each day.
The paper reveals that money does indeed influence our happiness, and contrary to previous research suggesting that its impact plateaus at around $75,000, this latest study suggests no such upper limit applies. The researchers believe their approach is robust because it’s based upon experience sampling, which asks us to complete regular surveys at random moments during the day. This contrasts with evaluative wellbeing, which tends to look more at our overall life satisfaction.
Tracking our happiness
The researchers developed an app, called Track Your Happiness, through which participants recorded their wellbeing several times each day, while also being asked how satisfied they were with life in general.
“This process provided repeated snapshots of people’s lives, which collectively gives us a composite image, a stop-motion movie of their lives,” the researchers say.
They then calculated the average wellbeing for each volunteer, before attempting to examine the relationship with the income of each person. They were in part trying to examine the hypothesis that money does boost our wellbeing, but only up to a point.
“It’s a compelling possibility, the idea that money stops mattering above that point, at least for how people actually feel moment to moment,” the researcher explains. “But when I looked across a wide range of income levels, I found that all forms of well-being continued to rise with income. I don’t see any sort of kink in the curve, an inflection point where money stops mattering. Instead, it keeps increasing.”
Buying happiness
The results reveal that higher earners do indeed appear to be happier, due in large part to the additional control their income gives them over their life.
This has been evident during the Covid-19 pandemic, which has seen those on lower incomes more likely to either lose their jobs or placed into roles that are precarious, both due to the uncertain income they provide and the health risks they present to workers.
“People living paycheck to paycheck who lose their job might need to take the first available job to stay afloat, even if it’s one they dislike,” the author explains. “People with a financial cushion can wait for one that’s a better fit. Across decisions big and small, having more money gives a person more choices and a greater sense of autonomy.”
What wasn’t so clear cut, however, was the connection between money and success. The data suggests that people who equated money with success were actually less happy than those who did not. People who earned more also tended to work longer and felt more time-related pressure.
The authors is at pains to point out that while the findings do suggest there is no upper threshold of money’s impact on our happiness, that should not mean we should focus on money at the expense of everything else. Indeed, income is a relatively modest determinant of happiness.
“If anything, people probably overemphasize money when they think about how well their life is going,” they conclude. “Yes, this is a factor that might matter in a way that we didn’t fully realize before, but it’s just one of many that people can control and ultimately, it’s not one I’m terribly concerned people are undervaluing.”
