Happiness Peaks At $1 Million
Happiness Peaks At $1 Million
Past the million-dollar-threshold, happiness peaks...Unless you are ultra wealthy
Happiness doesn't increase endlessly with wealth.
A 2018 research paper looked into whether having a lot of money makes millionaires happier and whether it matters how they got their money.
To do this, they surveyed two groups of millionaires from 17 different countries. The first group had at least $1.5 million in net worth, and the second group had at least $1 million. They asked these millionaires about their total wealth, their income, and how they got their money. They also asked them to rate their happiness and overall life satisfaction on a scale.
The results tell us a lot about how wealth accumulation impacts happiness.
Happiness peaks at $1 million…and then again at $8 million .
In the first study, the researchers discovered that millionaires with a net worth over $8 million showed a noticeable increase in life satisfaction compared to those with “less” wealth.
(It’s important to remember this is a study of millionaires so “less” wealth is a relative term here.)
On a 7-point happiness scale, those with a net worth of $8 million+ had their average satisfaction score go up from 5.79 to 5.97. It's not a huge jump, but it tells us that beyond a certain point, more wealth does contribute to a slight boost in happiness.
In the second study, the researchers looked at ultra high-net worth individuals, people with more than $10 million.
These people reported higher happiness levels, with their scores going from 7.81 to 8.03 on a 10-point scale. Again, the increase isn't massive, but it reinforces the idea that having substantially more money does correlate with higher happiness.
But people who had $1 million or $2 million reported the same levels of happiness.
What we can take from this is that once we have amassed enough wealth that we don’t need to worry about day-to-day money problems, happiness plateaus. But, once we have a stupidly high net worth—and you don’t even think about money anymore—happiness begins to increase again.
If you earn it, you’ll be happier than inheriting it
In a very unsurprising result, the researchers found that millionaires who earned their wealth were happier than those who inherited it.
In the first study, satisfaction scores varied based on how much of their wealth was unearned. Those with a high percentage of inherited wealth had satisfaction scores as low as 5.22, while those who earned their wealth had scores as high as 6.02.
Similarly, in the second study, happiness scores ranged from 7.38 to 8.05, with those who earned a greater proportion of their wealth reporting higher happiness.
This confirms a widely held belief that earning money on your own, feels better than having someone hand it to you.
That being said, if anyone has a few million laying around that they want to give me, I am more than willing to test this theory.
Final thoughts
The biggest takeaway from this research is that if you can manage to build a million-dollar net worth—and you do it without a big fat inheritance your likely going to be as happy as you’ll ever be.
Or, at least as happy as money is ever likely to make you.
Lots of people become millionaires…A tiny fraction of those people ever amass a fortunate greater than $10 million where money really starts making us happier again.
Another thought that kept creeping into my mind as a I read this research paper, is that becoming a millionaire is probably a good time to reflect on what you want to do with your life.
We know from past research, that happiness is about increasing the amount of time in each day you feel good. If wealth gains past $1 million aren’t going to increase happiness, then that might be a great time to audit your schedule and start asking yourself how you can start spending more time doing things you enjoy—and less time doing things you hate.
Remember, it is not the money that buys happiness—It’s the security and ability to make more choices that money provides us that makes us happy.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
The last point is the key point here.
People say money makes happy, but it depends on what you spend it.
It makes us happy when we spend it on security, freedom and what we love.
Not the value of money stated on the bank account makes us happy.
Great article as always!
I always tell my daughter that money buys you choices. Where to live, who with, where to work …