Positive Psychology and Income: Can Money Buy Happiness?

Article: High income improves evaluation of life but not emotional well-being.

Researchers: Kahneman D. & Deaton A. (2010).

Review 

Can money buy happiness? Many great thinkers throughout history have attempted to answer this question. Their answers have been inconclusive, which have left many still wondering if money can truly buy happiness, while others assume that it is the case. Consequently, millions of people spend their lives seeking wealth as a pathway to happiness. Nobel prize winner, Daniel Kahneman, through his research has added some interesting perspectives that relate to the role of financial resources in subjective well-being.

The $75,000-dollar study 

In a nutshell, Kahneman´s study determined that enough financial resources to afford life´s basic needs are crucial to avoid emotional distress. However, once a person passes certain income threshold, more money doesn´t necessarily add to higher levels of happiness of the individual. In the United States, the income that seems to satiate the money-happiness relationship is about $75,000 per year. At such point, higher income increases life satisfaction, which refers to how people think about their lives. But wellbeing or how life feels, stays the same.

Pleasure vs. Happiness

The life of the rich and famous with all its extravagance, from the outside, does seem pretty enticing. Last model luxury cars, mansions, vacations and different types of accounts with plenty of cash, appeal to many as an example of the ultimate lifestyle. However, making a clear distinction between pleasure and happiness makes it easier to understand that, although money can buy pleasure, it doesn´t necessarily mean it can buy happiness.

  • Pleasure: is excitement that is short-lived and is associated with being exposed to a pleasurable stimulus. The sensation that the stimulus evokes soon becomes neutral or unpleasant.
  • Happiness: comes from a more lasting sense of well-being that can be enhanced by outside conditions but doesn´t depend on them. It often arises from “being” and not from “doing”. 

“Getting Used to…”

Do you remember that new car, phone or house? At first, the acquisition of desired objects can make us feel high levels of pleasure. That new car smell, taking the new smart phone out of the box or moving into a new house, might seem so exciting.  But the truth is that through the process of hedonic adaptation, we just get used to things, people and circumstances and go back to feeling the way we felt before the new experience.  A high income or a luxurious lifestyle doesn´t escape the process of hedonic adaptation, and don’t add well-being to the life of the person. After a while, these also become things that people get used to. 

Going back home to ourselves

No matter how exciting life seems at a given moment, or how many pleasant experiences somebody’s money can buy, sooner or later everybody needs to go home to their inner reality. Everyone needs to face the ups and downs of life with all its suffering and deal with the consequences of their decisions. Those equipped with emotional resilience and equanimity will be the ones that bounce back faster and have the potential for a happier life, regardless of what car they drive or how much money they have in the bank. That explains why many of those who seem to have everything end up with miserable lives, while many others who seem to have very little seem so happy.  

Finding the Middle Ground

Although emotional resilience and equanimity are important to happiness, Kahnmans study concludes that being able to afford life´s basic needs and a little more is a great way to ensure some level of happiness. However, as previously stated, the happiness-money connection satiates quickly. That implies that neglecting other areas of life, such as personal relationships for the sake of making money, can decrease your levels of well-being. This points to the fact that finding balance between finances and other life-domains is a key aspect to achieving happiness.  

Where to find happiness?

If happiness can’t be bought with money, then where can it be found? According to Martin Seligman, the father of positive psychology, PERMA (positive emotions, engagement, relationships, meaning and accomplishment) is the answer. Well-being largely depends on the following five areas:

Positive Emotions: experiencing beneficial emotions can make individuals and those around them happier.

Engagement. This is the degree to which people feel excited and drawn into the activities that they undertake.  

Relationships. Human beings are by nature social. Positive interpersonal relationships have been shown through numerous studies to play a pivotal role in many aspects of wellbeing. 

Meaning. This relates to how important we think our contribution is. A lower income from a meaningful job can result in more happiness than a high income from a meaningless job.

Accomplishment. the ability to set goals and successfully achieve them.

A good approach to working towards happiness can be as simple as deciding to develop one or two of these areas at a time by coming up with specific action steps and monitoring the results. Fortunately, working towards true happiness is accessible to everybody and can be a lot easier than spending your life trying to chase expensive short-lived pleasures. However, that doesn´t mean you should not strive to find financial stability and a deep sense of prosperity, regardless of your income level.  

References

Auerbach, J.E. & Foster, S.L., (2015). Positive psychology in coaching. Pismo Beach, California: Executive College Press

Kahneman D. & Deaton A. (2010). High income improves evaluation of life but not emotional well-being, PNAS September 21, 2010 107 (38) 1648916493; https://doi.org/10.1073/pnas.1011492107

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