I’d like to build on the last week’s blog post and talk about money vs happiness. I recently learned that scientists did quantify the ‘money vs happiness threshold’. Actually seeing the number somewhat has shaken my conviction that ‘to be happy, one needs to be rich’. I am definitely re-evaluating this belief along the lines of ‘actually, perhaps one first needs to know what they are doing with their life (as in, have meaning), then get more money if they can to enable this further’. Lack of money, perceived or not, will not stop someone who is really driven from achieving their dreams.

Can you guess how much one needs to be happy, before their level of happiness flatlines despite of income increases? For the first time on this blog, let me present you with a chart. We are getting all serious over here.

Positive affect, blue affect, stress, and life evaluation in relation to household income. Positive affect is the average of the fractions of the population reporting happiness, smiling, and enjoyment. “Not blue” is 1 minus the average of the fractions of the population reporting worry and sadness. “Stress free” is the fraction of the population who did not report stress for the previous day. These three hedonic measures are marked on the left-hand scale. The ladder is the average reported number on a scale of 0–10, marked on the right-hand scale.

$75,000 per year. This chart is from the often cited study by Daniel Kahneman and Angus Deaton (full source here). In their study, they found that while “life evaluations rise steadily with income,” emotional well being (in industrialized countries) drops off at about $75,000 a year.

Beyond $75,000, money is important for life evaluation, but does nothing for happiness, enjoyment, sadness, or stress. Both factors are important; it is good to have high emotional wellbeing, but it is also good to think your life is going well.

As Sonja Lyubomirsky, the expert in studying happiness, puts it, it’s not how rich you are, it’s what you do with the money.