Money and Happiness

The old adage of “Money Can’t Buy Happiness” has been tested in several high profile academic studies—the first major study was in 2010, when a paper was published that showed a correlation between higher household income and increased levels of satisfaction (happiness). That original study showed happiness levels plateauing at about $75,000 of annual household income ($90,000 in 2021 dollars)—and actually concluded that past that income level, negligible happiness was attained with more money.  That study ended with sort of a “more money, more problems” conclusion, which prompted many comments along the lines of Françoise Sagan’s famous quote: “Money may not buy happiness, but I’d rather cry in a Jaguar than on a bus.”

Recently, that study was slightly validated as well as upended a bit.  A comprehensive study, spanning over 30,000 participants, and capturing over 1.7 million data points via the Track Your Happiness app was published in January 2021. This study reported that both experienced well-being (a person’s mood and feeling throughout daily life) and evaluative well-being (someone’s perception of their life upon reflection) were higher for those households with higher income.


The study not only demonstrated higher levels of daily happiness and overall life satisfaction at higher income levels, but also lower negative feelings like fear, anxiety, and anger:

This led the authors of the study to conclude that  “the current results show that larger incomes were robustly associated with greater well-being” (that money does buy happiness?).

However, from talking to many families and working through hundreds of financial plans, at Meridian, we have come to the conclusion that “happiness” or “satisfaction” are not exactly the right translations for what we think money provides. When we talk to families, what we hear is that money actually buys freedom.

Money buys the freedom to choose how you want to spend your own time. It gives you the freedom to choose a lower paying job, go to part-time work, retire early. It gives you the freedom to pursue hobbies and interests, to travel the world, to donate your time or money to causes you believe in. So, we think that perhaps happiness is simply a poor descriptor of what money can provide.

In a book called The Money Code, United Capital founder Joe Duran posits that money is only valuable when it can provide you with personal security, enjoyment, or stability/opportunities for your family.  In our eyes, taking it back one step, money actually provides the freedom to not have to choose between those things… not having to choose personal safety and health, and also enjoyment. Or between protecting your family and leaving them a legacy of opportunity…

And so, we are thankful for the opportunity to help our clients pursue freedom. Even more importantly, in world where freedom is often challenged (and the news can be disheartening to watch), we are so very thankful for the freedom that we inherently have as Americans, and grateful to those who fought to provide it to us.

Categories : Financial Planning

Leave a Reply

Your email address will not be published. Required fields are marked *