Show Me the (Latest Study on) Money!

By David Geller   |   March 28, 2018

You’ve no doubt heard us say that above a certain threshold, additional money doesn’t generate a corresponding boost in happiness. But now, there’s a new study that drills down a bit more to explore what that means.

The seminal 2010 Princeton study, co-authored by two Nobel laureates[1], concluded that income and happiness are correlated, but only up to a point. Intuitively, that makes perfect sense because if you’re worried about paying for necessities, like having enough money to put a roof over your head or feed your family, or you’re stretched thin and stressed out by unexpected expenses, like fixing your car—happiness can be pretty elusive.

The correlation between wealth and what psychologist Ed Denier calls subjective well-being (“SWB”) begins to break down at incomes above $75,000 per year.[2] That level of income doesn’t fully satiate us, but once the “happiness threshold” is reached, it increases at a noticeably reduced rate—the yield curve becomes flatter the richer you become.

New Research differentiates between Happiness and Life Fulfillment

Now a new study authored by four psychologists[3] at Purdue University and the University of Virginia seeks to differentiate between day-to-day happiness and overall life satisfaction. Echoing, but modifying the original study’s conclusion, this new study looks at the relationship between happiness and wealth on three distinct metrics.

The correlation between happiness and income dissipates at lower levels than previously believed

The correlation between happiness in the moment and income flat-lines at lower levels than previously believed. The 2010 study concluded that happiness flat-lined at about $75,000 of annual income. In this new study, researchers separated the broader “happiness in the moment” into two distinct categories and concluded there was no appreciable increase in either above certain yearly income levels:

  • $65,000 for positive affect (happiness, enjoyment, smiling and laughter)
  • $95,000 for negative affect (stress, worry and sadness)

That conclusion aligns with what we’ve learned from behavioral science. We feel our investment losses more acutely than our gains, and it takes multiple positive experiences to overcome even one negative impression. We humans seem to be hardwired more for negative experiences than positive ones, so it makes sense that we’d need more income to stave off the worries about having enough money before we feel like we’ll be OK. Fear is a powerful emotion and it takes more to satiate those feelings.

There’s a drop-off in the correlation between life evaluation and annual income

The correlation between “life evaluation” and annual income also drops off, at $105,000 for those who live in the U.S. As contrasted with day-to-day happiness, life evaluation might include things like your assessment of your accomplishments and your personal situation. This conclusion differs from the original study which indicated life evaluation continued to increase with income. If that’s true, then this kind of happiness does not rise indefinitely with income.

While this is the first study we know of that looked at life evaluation satiation, it aligns with our clients’ experience. As wealth increases, there seems to be a point at which it doesn’t add much more to our lives. To create the life we want takes more than just money.

As income exceeds the satiation point, happiness can actually decrease

The third major conclusion in this study is that there is some evidence that as income increases beyond a certain point, happiness can actually decrease. Yes, you read that right.

For many wealthy people, this conclusion might be surprising—if not downright depressing. For all of us “Type A” personalities who strive to increase our income and wealth, it can be unsettling to learn that once we pass the “satiation point,” we might actually have a perceptible drop in our life evaluation. However, as the authors make clear, their conclusion is preliminary.

It’s also important to understand, as the authors suggest, that it might not be the higher income itself which is responsible for the decrease in life evaluation, but the trade-offs people typically make to achieve it. And there may be other factors at work as well, including “creeping materialism” (where the desire for more expands with income):

Theoretically, it is presumably not the higher incomes themselves that drive reductions in SWB, but the costs associated with them. High incomes are usually accompanied by high demands (time, workload, responsibility and so on) that might also limit opportunities for positive experiences (for example, leisure activities). Additional factors may play a role as well, such as an increase in materialistic values, additional material aspirations that may go unfulfilled, increased social comparisons or other life changes in reaction to greater income (for example, more children or living in more expensive neighbourhoods).

Keep These Caveats in Mind

There are some key differences between the original study and this new one and some limitations of the present study that bear discussion.

The annual income figures apply to individuals, not families

To generate comparable numbers for a traditional family of four, the numbers cited above would approximately double. (A typical method of deriving the answer and one used by the researchers here is to multiply the individual number by the square root of the household size.) So, if the figure for individuals is $105,000, a family of four would reach satiation at $210,000 per year, while a family of 3 would have a satiation level of about $182,000.

The new study was based on an international survey

The study was based on an international survey of 1.7 million people from 164 countries. A survey means the numbers were self-reported, not independently verified. Researchers calculated the average international annual optimum salary for life evaluation to be $95,000 per year. The figure for people living in North America is slightly higher than the average, at $105,000, while the figure for those in sub-Saharan Africa was just $40,000. Australia and New Zealand hit the upper range, where life evaluation correlates to income up to $125,000 per year. Of course, as the saying goes, your mileage may differ.

Money isn’t everything

As Andrew Jebb, lead author of the new paper, explained to Fast Company, money isn’t everything and there’s far more to achieving life satisfaction than numbers alone:

Expectations and social comparisons are important. We’re very finely tuned social creatures, so those social comparisons occur in most human domains including career, income, and the size of your house. Income is just one variable in the complicated equation of happiness. It’s not trivial, but there are other factors that are at least as important, such as meaning and significance and social relationships, family, and friends.

We couldn’t agree more. While keeping abreast of scientific developments in behavioral science is important and this study offers some interesting and novel conclusions, it doesn’t make sense to put too much stock into any one study or any one set of figures. Because we don’t live our lives by numbers alone.


We’re confident that there is a link between money and happiness, but it’s clearly an imperfect one. Today’s researchers can tell us that the correlation weakens as wealth increases, but studies cannot yet provide unambiguous guidance. But what we already know is that money alone won’t make us happy.

Behavioral science suggests that there are three keys to a joyful, meaningful life: (1) the quality of our personal relationships; (2) doing work that we find meaningful; and (3) making a difference in the lives of others. Money is just one of the six elements of wealth each of us has to build an extraordinary life, but it certainly isn’t the only one, or arguably, even the most important.


[1] Psychologist Daniel Kahneman (winner of the 2002 Nobel Prize for economics) and Scottish economist Angus Deaton (winner of the 2015 Nobel Prize in economics) co-authored “High income improves evaluation of life but not emotional well-being,” Proc. Natl Acad. Sci. USA 107, 16489–16493 (2010).

[2] While the original study stated that we begin to see diminishing returns in happiness somewhere between $60,000 and $120,000, the single figure of $75,000 was widely reported, perhaps most notably by Time magazine. JOYN also cited the $75k/year figure here and here.

[3] Andrew T. Jebb, Louis Tay, Ed Diener, and Shigehiro Oishi, “Happiness, income satiation and turning points around the world,” Nature Human Behaviour, Vol 2, January 2018, 33–38. Readers may recall that Ed Diener a/k/a “Dr. Happiness” also authored the popular book, Happiness: Unlocking the Mysteries of Psychological Wealth.

David Geller

About the Author

CEO David Geller co-founded the firm in 1991 and led the creation of Behavioral Wealth Management. Recognized on numerous prestigious "top financial advisor" lists, David is an in-demand speaker for professional groups and JOYN workshops. His writings have appeared in The New York Times, The Wall Street Journal and The Huffington Post.

Read More By David Geller >>

Join Us

When wealth advisors look and sound the same, how do you choose? A coin flip? Pick your neighbor? Why leave such an important decision to chance? Instead, join us at an upcoming workshop. Hear recent research, discover new insights, and experience JOYN’s transparency and expertise firsthand.

Get In Touch