“Money buys happiness right up to about $10,000 per capita income, and after that point the correlation disappears.” – Bill McKibben Deep Economy

There is a reason why we think money buys happiness. Turns out that it actually does. Recently I spent a week camping in south Texas, living mostly off of trail mix and power bars. After a week of that stuff, my brother and I stopped at a Mexican restaurant. It was the best Mexican food I had ever had. And it made me very happy.

If you are living in poverty, having a new something-or-other really does bring you joy, real joy. For those who are poor, material possessions do make a difference, they do bring happiness. We cannot just say, categorically, that possessions do not matter. That’s a naive view of those of us in the affluent West.

There is a threshold, however. In Deep Economy, Bill McKibben points out that after your income exceeds about $10,000 a year, more money isn’t going to make much of a difference in terms of making you happy. Most of us know that, but we still get caught in the cycle of thinking that a bigger/nicer house will make us a bit more satisfied. Or that a better entertainment center or new car or new wardrobe, etc. will add significantly to our happiness. Yet if we stop to think about it, to answer direct questions about the kinds of things that make us happy, statistics show that most people talk about non-material things.

$10,000 probably seems low for most of us. It certainly seems low to me. But maybe that’s just because we are so conditioned by advertising to think otherwise.

Money buys happiness, but not for those of us in the West. In fact, for most of us, we have so many things, so much stuff, that it takes a good deal of energy just to keep up with it all. So, one might say that not only does more stuff not make us happy, but at a certain point, I would suggest it actually makes us less happy.

12 thoughts on “When money really does buy happiness

  1. I’ve been thinking, too, about how hard financial things are making this divorce stuff — not even like $$ stuff that we are fighting over, at all, really. Just hard financial stuff. I know, beyond a shadow of a doubt that $ doesn’t buy happiness but I’m convinced that it gives you a lot more physical, emotional, and mental space to figure the rest of your life out!

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  2. I’m not interested in getting rich, I am a public school teacher, so it’s really not an option, but I do read a financial blog that had an interesting post on this topic. It sites a study made public at the National Academy of Sciences by Angus Deaton that puts the magic number at $75,000. Here is the article. I don’t mean to advertise this blog…but it is a good one. http://www.getrichslowly.org/blog/2010/09/16/how-much-is-enough-on-average-about-75000-per-year/

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  3. Nick,

    Great link. Thanks for passing that along. The cited Princeton article, as well as the blogger, seem to agree that the $75,000 – 80,000 range allows for some luxury items. (“Luxury” at least as far as most of the rest of the world is concerned.)

    One thing I certainly agree on is that the blog points out that what we are spending our money on is important. While most people kind of assume that they are investing in things that they desire/want, it just doesn’t actually seem to be making them happier. I think it is more difficult than we believe, to figure out what we really want out of life or to understand what really makes us happy. Advertising and marketing tend to convince us that there is one more next thing that we need to buy to make us happy. I’ve scaled back significantly in the last few years, I’ve essentially eliminated television (and therefore much of the advertising), and I still feel that tug to buy the next thing.

    Personally, I tend to be suspicious of luxury items. In my opinion, I think that they drain us of happiness. So, I tend to favor being closer to the $10,000 a year mark rather than $75,000.

    Perhaps a good deal of this is personal. What do you think is an ideal amount for happiness?

    Thanks again for sharing the link.

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  4. The $10,000 is per capita, and the $75,000 is per household. Claire and I are thinking of a family of four, so that would be $40,000 or $75,000. Both of these incomes are in the same tax bracket at 15%. So it is really $32,000 or $63,750. I’m committed to eating healthy food, owning my home, woodworking, teaching, etc… I don’t see how this can be done with a family of four on an income of $32,000, so I guess I lean more towards the $75,000.

    I feel now more than ever that I don’t know what it means to live simply. I know that it is what I want. But does living simply mean eating local food that supports a farmer you might know or eating generic mac and cheese because its costs less and you can live off a smaller income? Owning costs more than renting, but who is getting paid in the end. You, or a multi-state corporation exploiting their hourly workers.

    Again, I’m confused, but I think making money in a profession that doesn’t exploit people, allows your to live a life where you can support more sustainable practices.

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    1. Yeah. That’s a good clarification….the “per capita.”

      I agree with you, in that I’d rather spend more money on things that support local businesses, real people (rather than machines), and ethical companies.

      I was thinking while I went for a run just now that “sustainability” is also an important factor in these financial equations, which is where you are going with this comment. Is my money being spent to buy services and products that support real people? Or machines and fossil fuels? We can get our food cheaper (in some cases) by purchasing in at the grocery store. But that money will support farming that relies heavily on machines that are run with fuel. Then there’s more fuel to transport the food a few thousand miles (the average is about 1,500 miles from what I’ve read) to the grocery store.

      In other words, we need to think about what makes us happy as individuals but also what our dollars do environmentally and politically. “Happy” can become a very individualistic thing. For me, I feel more happy if my dollars are working toward creating a more sustainable world. I would assume that this is probably true of most people…at least most people who have seriously thought about sustainability.

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  5. Another thought… Making $75,000 might put you in a position where you can help others, more than if you made $10,000.

    Cliche yes, but I agree with the sentiment in the phrase, “Living simply, so that others may simply live.”

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  6. In my experience, living on an income of less than $10,000/yr may seem impossible to some, but I kind of see it as a blessing. It forces one to be more creative in your approach to living, what you value, how you spend your time/entertainment, etc. I believe it also creates a stronger sense of community and humbleness from the perspective that often I have to rely on others for help. All this said, it’s just me living in this income bracket. I have no kids. But I imaging that could change my feelings of joy for being able to live comfortable on less than $10k/yr to stress if I had to care for a child.

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    1. Hey Nicole!

      So glad to have you leave a comment. So true! So true. Money often leads to rather boring entertainment and approaches to life because you basically just buy what the mass market makes for everyone.

      The $10,000 a year figure, as Nick reminded us, is for each person in the household. So, if you added a little bundle of joy (and by the sounds of things you may be???), then the amount of money would go up by $10,000. A household of three would be $30,000, etc.

      Your life is an inspiration of creativity.

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  7. When I was at college at Grace I worked fulltime and made $9-11K. I drove a car that cost me about $1,000 and it was paid for – I lived in an apartment that cost $200/month. I paid for my own gas, auto insurance, food, clothes, and utility bills – and let me tell you, I ate alot of velveeta cheese sandwiches, potatoes, spaghetti and eggs back then. No cell phone, no cable, and no internet. Not a smoker or drinker because who can afford that?

    The govt said I “made too much money” to qualify for Pell grants, so I took out loans for my tuition and paid for my own books.

    I, quite frankly, do not know how someone is not living on welfare of some kind on $10,000/yr in the U.S. – be that utility assistance, medicaid, food stamps, child care assistance, something.

    I have married an attorney and left behind lack, but I will say those lean years made their impression, and because of that, no matter what my station in life, I am grateful to this day EVERY time I can pull up and fill my tank with gas and not have to dig under the seats for change or care what it is per gallon. No more having to lift the hose up to make sure I get every drop, thankful every time I need new tires I don’t have to drive over to the junkyard to get a less bald set.

    I get the premise of the articles, and I certainly agree that what many Americans think are necessities these are far from it. You can go to the library for books and internet – you don’t actually NEED Blockbuster movies, cable and internet. You can survive without being accessible by home when you aren’t at home and work. You don’t NEED cigarettes, or a drink or that tiny pop they sell for $1.49 at the gas station that could buy a 2 liter for for 99 cents at the grocery. Vacations were camping, not a trip to Disneyworld. Nobody heard of Tommy Hilfiger and would pass out if you told them you spent $89 for your 13 year old daughter’s pair of jeans or $189 for her Uggs…yeh, that’s boot that you aren’t supposed to get wet.

    I love your posts, Erdman. I like that people are attempting to contemplate living on less – and considering that it might be a good thing – because frankly, I figure we better get used to it from the looks of things.

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    1. Kristi,

      Interesting.

      Hey, what would you say is the point of diminishing returns, for you personally? What is the amount of income where you are making just enough to be happy, but no more? I’m curious.

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