The phrase “money doesn’t buy happiness” is commonplace. You might have found it muttered by somewhat bitter or pessimistic people anytime life offers you a slice of good luck on the financial front. But what if it’s simply not true?
The Guardian reports combined research from Daniel Kahneman — a Nobel prize-winning economist and psychologist who coined the term “happiness plateau” — and researcher Matthew Killingsworth that posits that there is a defined link between increasing levels of wealth and happiness.
Here’s how much you might need to “buy” happiness and two simple ways to boost your wealth to benefit your emotional wellbeing.
Money does equal more happiness – with a few exceptions
It might seem an obvious statement, but more money can increase feelings of happiness. However, for the unhappiest individuals, this isn’t always the case.
In 2010, Kahneman published a study that showed people’s reported levels of happiness correlated with their respective levels of wealth, but only up to a point. Kahneman referred to this as the “happiness plateau” — the point at which more money no longer boosts a person’s respective emotional state.
In 2021, Harvard researcher Killingsworth published a conflicting study that determined there was no ceiling for the happiness boost provided by increasing levels of wealth.
This led to the two academics combining their research to produce a collaborative study in May 2022 — known as “Income and emotional well-being: A conflict resolved”. This posits that, for the majority of people, more money does correlate with increased levels of happiness, although, for the unhappiest, this isn’t necessarily the case.
The outcomes produced by increasing wealth differ depending on a person’s base emotional state. For example, if you are:
- Extremely unhappy in life, you are likely to reach a happiness plateau at around £82,000 of annual income — as there are simply some problems money can’t fix.
- Moderately happy, you are likely to experience wellbeing improvements that are linearly in line with increased wealth.
- Very happy, you may see the happiness boost produced by increasing wealth accelerate once you surpass £82,000.
The study didn’t look at subjects earning over £410,000, so there is no data to show if the wellbeing boost continues for high and ultra-high net worth individuals.
It’s all well and good saying “more money equals more happiness”, but how do you get there?
Working with a financial planner might help you make the right moves to generate growth on your existing wealth and help you tap into that associated happiness boost.
Seeking out professional advice might help assuage financial worries among the unhappiest individuals
Some problems simply can’t be fixed with more money. However, if your unhappiness is directly related to financial stress, seeking out professional advice might be a potential solution.
A study by Royal London found that individuals that received financial advice reported wellbeing improvements compared to those who didn’t receive any advice at all.
Individuals who received advice reported improved wellbeing outcomes compared to the unadvised, such as feeling:
- Less worried about being able to financially cope with retirement
- Less anxious about their household finances
- Better prepared to deal with life’s shocks
- More confident about their future.
The outcomes continued to improve for those who developed long-lasting relationships with their advisers.
Beyond that, the study found that individuals who received advice were up to 50% financially better off than those who received advice only once or not at all.
Sitting down with a financial planner to discuss your situation might help improve your happiness — as well as boost your income — leaving you better placed to tap into the happiness boost that more money might end up producing.
Get in touch
A long and happy life is a core goal for many people. If you are interested in finding out more about how financial advice and growth on your wealth might lead to greater overall happiness, you should reach out to us by email at helpme@aspirellp.co.uk or call 0117 9303510.
Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
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