Would more money make you happier?

If I gave you $100 and said you had to spend it immediately, what would you buy? What about if I gave you $1,000? 

The answers to the above questions should give you an insight into what really makes you happy. I doubt anyone immediately thought ‘I want to pay off my credit card bill’, or ‘I will save it for a rainy day’, but rather ideas of spending it on something or someone special came to mind, perhaps treating your family to a nice dinner or a holiday. If you did think about buying that handbag or weekend getaway, then chances are you have enough money. The fact that the money was to be spent on something enjoyable, rather than removing a stressful element from your life is a good indicator of having enough.

A lot of us assume that more money will make us happier, but a study in 2010 by Daniel Kahneman and Angus Deaton showed that while ‘emotional wellbeing’ was generally higher for those with a $75,000 income compared to $50,000, the effect of more money after $75,000 was negligible, and that those with a yearly income of $100,000 had roughly the same ‘emotional wellbeing’ as those with $75,000. In light of this study, would more money make you happier? 

Not having enough money

We all know that not having enough money can be incredibly stressful. Poverty affects people’s health in a variety of ways. It creates a lack of access to healthcare, affects people’s diets, their education and overall access to opportunities in life. It also affects communities and countries, as poverty is linked to increases in crime, social divide and unrest in a country.  

Worldwide, The World Bank estimated in 2015 that over 700 million people (10% of the world’s population), lived in extreme poverty ( less than $1.90 per day). Unfortunately, due to Covid19, they now estimate another 40-60 million will slip into extreme poverty in 2020. In today’s world, humans need money to survive, but if you are able to put a meal on the table, have a safe place to sleep every night and some savings, then you are already closer to having enough money than not enough. 

The price of happiness

In 2015, tech millionaire Dan Price realised his staff at his company, Gravity Payments, may have been struggling financially, so he put everyone on a salary of $70,000 overnight, and he took a million dollar pay cut. Although he faced a lot of backlash from critics, the value of payments that Gravity processes has increased from $3.8bn to $10.2bn in under 5 years. Gravity’s Director of Sales, Rosita Barlow, explained the concept best, “when money is not at the forefront of your mind when you’re doing your job, it allows you to be more passionate about what motivates you“.

All of Gravity’s staff have similar stories of the quality of their lives and their work improving as a result of the pay rise, but for many of them it also freed up time outside work for activities that contributed to their ‘emotional wellbeing’. Increasingly there have been trends with companies offering opportunities to ‘buy’ extra vacation days in exchange for less pay. Other trials of 4 day work weeks are showing increased productivity and reduced running costs for companies. These are all examples that once you reach an income that covers your daily living costs and offers a buffer for saving, additional money does not necessarily contribute to more happiness, but extra time does.

The pursuit of more

While we always hold wealthy people up as success models, in reality, they have sacrificed a lot of their time, energy and social and family life to attain money. What is rarely discussed is that higher incomes may also bring more stress, longer work hours and a negative effect on ‘emotional wellbeing’. 

Bill Gates famously quipped, “I can understand wanting to have a million dollars but once you get beyond that, I have to tell you, it’s the same hamburger.” As one of the richest people in the world, he is the perfect example of how money is not everything. He spent the first half of his life creating technology, and was driven by curiosity, passion and a sense of purpose, not by money. And when he was the richest man on earth, he created the Giving Pledge, an effort to give most of his wealth away, and inspire 200 other billionaires to do the same. 

Many of us would love more money, but we need to start measuring success and happiness by metrics other than income. For many of us, more time with family or on hobbies would benefit us much more than extra money. A 2019 study into materialism showed that wealth as an indicator of happiness takes time and energy away from other life satisfaction domains.

So perhaps the question to ask is not “would more money make you happier?” but rather, “what could you do right now to improve your emotional wellbeing?”