Would You Really Be Happier if You Made More Money?

There is a lot of debate about the correlation between money and happiness. The first question that needs to be answered is what is happiness? How do you operationalize happiness? Personally, I don't think you can but it is still an interesting topic to consider.

Some research defines happiness as experiencing positive emotions. This research indicates that Paraguay is the happiest country in the world. link  Having lived there for two years, my anecdotal evidence would agree that Paraguayans are a lot happier than those of us living in the U.S. Latin countries typically score higher according to this definition of happiness and I believe it is because they live close to their extended families and spend a lot of time with friends.  

Other research on happiness defines it as "well being" or "satisfaction". These studies typically show that happiness increases with income and also "the happiness value of the next dollar you earn is always worth less than the one you earned before it. link"  Or in other words when you are poor an extra dollar means a lot more than when you are rich. An oft cited study states that above $75,000 a year in the U.S. that more money doesn't bring more happiness. I tend to agree that once your basic needs and a few wants are met that more money isn't going to make you happier.

Even a proponent for the "money makes happiness" ideology wrote "Couples who say money is not important to them score about 10% to 15% better on measures of “relationship quality,” meaning they fight less and have more stable relationships, according to a 2011 study of 1,700 married couples by Brigham Young University and published in the “Journal of Couple & Relationships Therapy.” link

So I guess the questions you have to ask yourself are what does happiness mean to you and what do you really need?

Personally I'd love to find out what it's like to live on $75,000 a year (actually I'd really like find out what it's like to live on my current income without paying student loans), but I learned a long time ago "I'll be happy when...." only leads to not being happy in the present. It's great to have goals and some extra money might make life a little less stressful, but please try to find joy in the journey.

Here is a video of my cute kid laughing to help.

Now that makes me happy!

PS. This financial planner probably summed it up a lot better than I did, The Odd Relationship Between Money and Happiness