After working with affluent families for 25 years as a financial advisor, I am convinced that life satisfaction increases with affluence but happiness rarely does.
Life satisfaction is a survey where you ask people how satisfied they are with life. My sense is that when people are asked that question, it triggers a comparative analysis. Because many American’s view money and possessions as a way to keep score, the comparison often includes a large financial component. When folks reflect on their life satisfaction, they ask how does my life compare to the life of average American? From a financial standpoint, the answer is often very positive. The affluent live in nicer homes, drive nicer cars, take nicer vacations, and have better access to quality health care. It is no wonder they self report being more satisfied with life.
Happiness is how happy you are as you live your life on a day-to-day basis. In this case, folks do not get any happier as incomes rise above $75,000. Why? The answer may be surprisingly simple. Because, while happiness is built on the foundation of a stable lifestyle, there is more to generating greater happiness in our lives than having a particular lifestyle.
First, what makes a stable lifestyle? Enough money to provide secure housing. If you are worried about being foreclosed on or evicted, it is stressful and harder to be happy. Enough money to adequately feed and clothe you and your family, reliable transportation, and access to quality health care. If you have enough money for those lifestyle necessities and a little left over for fun, that is all the money you need to be happy. More money will buy you a nicer home, better clothes and the like, but likely does not increase happiness. What does?
Once you have a stable lifestyle, I believe that there are three drivers of happiness. The first is the quality of your most important relationships. The second is the amount of time you are engaged in high-challenge, high-skill activities that grab your complete attention. The third is the opportunity to make a positive difference in the lives of others. The wealthy may feel satisfied with what they have accomplished in life, particularly financially, but in most cases, I have found that the money they have accumulated does not directly impact the drivers of happiness.