Having a higher income doesn’t mean you also have enough of the other things that make you feel truly happy and wealthy (relationships, hobbies, time).

The age-old question of whether money can buy happiness has perplexed philosophers and economists for centuries. While conventional wisdom states that money, beyond basic needs, cannot purchase a person’s search for happiness, the research paints a more nuanced picture.

I grew up frequently hearing the biblical phrase, “The love of money is the root of all evil.” This warns that prioritizing money above all else corrodes the soul because money becomes one’s god. However, now that I’m in my 60s, after raising five boys and accumulating 15 grandchildren, I believe the greater danger lies in worshipping money by surrendering your autonomy to its lure and becoming enslaved to the growth of money over the pursuit of wealth (happiness).

In this context, “money” is an object or commodity, something to be controlled, whereas “wealth” is having enough: enough love, friends, hobbies, time and money. Therefore, money is a subset of wealth, not the other way around.

Happiness plateaus at $75,000?

Foundational research in 2010 by economist Angus Deaton and psychologist Daniel Kahneman discovered that, up to a point, higher incomes correlate with greater day-to-day contentment. But this effect disappears at an annual salary of about $75,000. Beyond that level, more money does not seem to move the needle on happiness.

This research supported the paradigm of my early years. The scoop from high school and university educators was that money buys happiness to the point that basic needs are met. Think Maslow’s hierarchy of needs. After that point, increased revenue has diminishing returns. Therefore, the initial research was a rule of thumb in philosophical conversations regarding the theme of happiness and money.

Matthew Killingsworth from the Wharton School at the University of Pennsylvania recently presented findings that challenge the plateau theory. His research reveals that there is no monetary threshold at which money’s capacity to improve well-being diminishes. On the contrary, its positive impact appears to persist and even increase across all income levels.

One explanation for this lies in perceived control. Money enables choices and freedoms that are hard to attain otherwise. As income grows, so do available options for how to live. This expanded autonomy and opportunity, in turn, boost well-being.

Money and subjective well-being

A collaborative analysis by scholars from the University of Pennsylvania and Princeton University unveils a complex relationship between money and subjective well-being. Their research delineates how increased earnings relate to enhanced day-to-day mood for most individuals while also identifying a subset for whom higher incomes fail to boost happiness.

Three key findings merit consideration. First, there’s the notion that beyond a certain threshold, additional money ceases to significantly impact well-being. Second, an opposing perspective suggests that there is no discernible limit, with money consistently enhancing quality of life as income grows, affording greater autonomy and opportunities. Last, researchers have identified a segment for whom the level of income appears to have little bearing on happiness, regardless of how much they earn.

A constructive collaboration

Seeking to reconcile their contradictory findings, the researchers collaborated with the addition of Professor Barbara Mellers as an impartial, third-party arbitrator. Their adversarial collaboration integrated rigorous statistical analysis of previous data on both earnings and happiness levels.

Additionally, their investigative approach encouraged the direct questioning of underlying assumptions between the two camps. Through this constructive back-and-forth engagement, powered by substantial data review and a debate of ideas amongst the whole team, the aim was to reach an elevated synthesis.

So, which is it? Does the money-happiness connection fade out or keep strengthening? Killingsworth summarized it.

“For most people, larger incomes are associated with greater happiness. The exception is people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help. But for everyone else, we found increased income related to feeling happier across income levels, even into wealth.”

This aligns closely with my own findings about prioritizing money over purpose and people. When we view money as the scorecard of success or when we sacrifice too much to pursue it, our joy quickly crumbles. As Killingsworth notes, “Those equating money and success ended up unhappier despite higher pay.”

The bottom line

Surrendering one’s soul or sanity chasing dollars and glory doesn’t work. True prosperity fuses financial stability with meaning, relationships and service. If money leaves you feeling empty inside, no amount will ever fill that void.

There are currently 58 million Americans age 65 and older, and about 10,000 individuals are joining them daily. Despite this trend of more people retiring from the accumulation phase, precious little is being done to address their transition into a new lifestyle. Financial planners and their clients would benefit from shifting focus away from rates of return and concentrating on developing strategies for utilizing the accumulated money to secure a fulfilling lifestyle called wealth.