“If you’re already unhappy, money alone can’t fix you.”
Nevertheless, what I thought was most interesting about this study was it found that if you surpass these thresholds, your life satisfaction and emotional well-being can actually start to decline. Once you hit your ceiling, you start to fixate on things like social comparison (i.e., how you stack up next to the Joneses) and acquiring more material gains (e.g., more money, more stuff). In other words, you become propelled by the belief that others are doing better than you, so you need to get more to keep up, making your life satisfaction recede.
What’s the link between finances and wellbeing?
In a related 2023 study by psychologists Daniel Kahneman and Matthew Killingsworth, they pitted their opposing theories against each other in an adversarial collaboration to see if happiness did, in fact, plateau at a certain income level.
In 2010, Kahneman famously theorized that emotional well-being did not increase above an income of $75,000 a year, whereas a decade later, Killingsworth argued that it could. After surveying a new crop of participants, they ended up discovering together that although happiness could increase with more money, there was a ceiling for fending off unhappiness.
If you’re already unhappy because of heartbreak, bereavement, clinical depression or “other miseries,” such as trauma or experienced discrimination, money can diminish your suffering only up to $100,000 a year but not much beyond that.
As Killingsworth shared about these findings, “this suggests that for most people larger incomes are associated with greater happiness . . . [but the] exception is people who are financially well-off but unhappy.
For instance, if you’re rich and miserable, more money won’t help. For everyone else, more money was associated with higher happiness to somewhat varying degrees.”
What’s the takeaway from all these studies about money and happiness and stress?
Here’s what all these studies tell me: First, no matter what, if you don’t have enough to cover your basic needs, more money is undeniably the solution to that problem. This always reminds me of a classic Friends exchange where Ross says, “I just never think of money as an issue,” to which Rachel responds, annoyed, “That’s because you have it.”
When you have enough money, it stops being an issue. It can, however, move the spotlight over to your other issues. As Vitug put it in his book, “money fixes money problems, but it isn’t the answer to life problems.”
As I said at the start of this book, there’s a reason why there are so many miserable millionaires and billionaires out there. There’s also a reason why I’ve met so many people in the FIRE community who successfully amassed a seven-figure nest egg, only to realize they were still unhappy after they retired early.
