On this blog I write a lot about how much money you need to save for retirement and how to make the most of the money you earn by living frugally. But one question I haven’t been able to answer is how much money you need to be happy – whether it’s $100,000 or a $1,000,000 how much do you really need to help you live a happy life?
Turns out it doesn’t take millions of dollars to make most people happy. Princeton economist Angus Deaton and Nobel Prize winner Daniel Kahnemen conducted a U.S. study linking human behaviour and finance. According to their findings there is a specific dollar amount or income plateau after which earning more money has no measurable impact on your level of contentment.
The magic number: $75,000 a year.
Every dollar you earn up to that point makes you happier while every dollar over that amount is worthless on the happiness front. Same goes for six figure earners – those earning $160,000 a year are no more satisfied than those earning $120,000.
The message here – money can’t buy you happiness. So if you’re thinking of taking a job that will pay you significantly more than $75,000 you might want to carefully consider your priorities. Is it worth it? And what are the tradeoffs if you do take the new job? Longer hours and more stress might not be worth it when it comes to helping you live happily.
Now, this study only looks at people living in the U.S. – I wonder if that number would be different in Canada. And whether or not it makes a difference if you’re living in an expensive city like Vancouver or Calgary or if you’re living in a smaller community with a lower cost of living.
What about you? What salary do you think would make you happier? Or do you think we should base our happiness on something other than money and what we earn?
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