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Whoever said money doesn’t buy happiness just might want to retract that statement. Seventy-five thousand dollars a year seems to be the magical number. A recent study from Princeton University’s Woodrow Wilson School suggests that money truly does play a crucial role in how happy we feel.
The study conducted by economist Angus Deaton and famed psychologist Daniel Kahneman surveyed 450,000 Americans. The results suggest that people encounter two forms of happiness: day-to-day contentment (emotional well-being) and overall “life assessment” contentment which is essentially a gauge of our broader sense of satisfaction; how we feel about the way our lives are going. Researchers found that not having enough money paves the way for emotional pain and unhappiness. It also suggests that an annual salary of approximately $75,000 is a tipping point; beyond that, extra income basically provides the opportunity to buy more “stuff” but not much in way of additional day-to-day happiness.
We each possess our own personal expense structure but the study suggests that at $75,000 worries about money are generally no longer an issue for most people. Having greater residual income allows us to navigate the numerous adversities and misfortunes that life continually hurls in our directions. More expendable cash also afford us opportunities to engage in activities that yield a greater sense of fulfillment such as traveling, dinner with friends, or the peace of mind derived from having a five or six-figure savings account.
Another remarkable finding is that increasing income has an equal effect on all individuals regardless of which rung they exist on the income ladder. So raising one’s income level by, say, 20% tends to increase his/her assessment of life satisfaction by an equivalent percentage, 20%, whether that person’s income is $50,000 or $150,000. Additionally, incomes above $75,000 do not result in more daily happiness but rather in a life that we perceive to be better overall.
Relative wealth or status also matters significantly. In an unrelated study, people were asked which of the following they would prefer: (a) to live in a 2,500 square foot home where every neighbor’s home was larger than 3,000 square feet or (b) to live in a 2,200 square foot home where very neighbor’s home was smaller than 2,000 square feet. Most respondents choose the latter. What this demonstrates is that, to a large extent, what we have in absolute terms is less important than what we have in relative terms.
So while $75,000 appears to be the magical number, one cannot help but wonder: While $75,000 may go a long way in Tennessee it certainly does not get one very far in New York. Perhaps there is room for upward adjustment.
John Brigantino is a graduate student in the Master of Science in Business Management & Leadership Program at the CUNY School of Professional Studies. He enjoys writing, non-fiction books, traveling and the many cultural and leisure experiences Manhattan has to offer.