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Why Your Income Has Very Little to do With How Happy You Are

There's a reason why most of us have entertained the notion of winning the lottery, pulling the winning pull at a slot machine or bringing home the grand prize at any number of other sweepstakes. That extra $5 million, or even $5,000, holds the promise of an easier, happier life, right?

As it turns out, the old adage that "the best things in life are free" was right after all. The widely held belief that money brings happiness is an illusion, according to new research published in the journal Science.

Money Happiness

"The relationship between money and happiness is pretty darned small," says Peter Ubel, a professor of medicine at the University of Michigan.

Higher Income Doesn't Lead to More Happiness

The researchers used a series of surveys to find out that income has very little effect on moment-to-moment happiness. The first, conducted in 2004, asked over 900 employed women to record their mood throughout the previous day's activities.

They then correlated the percentage of time each woman spent in a bad mood each day to income. While it was thought that those who earned under $20,000 would be in a bad mood 32 percent more of the time than those who earned $100,000 or more, it turned out that the low-income group was in a bad mood only 12 percent more of the time.

In 2005, a second survey recorded women's overall satisfaction with life, along with their satisfaction from moment to moment. They found that a higher income was less related to momentary happiness than it was to overall life satisfaction.

However, the researchers say people may risk placing more emphasis on income when looking at overall life satisfaction simply because they are focused on that individual factor when the question is posed, and are evaluating their life based on conventional achievements.

"People do not know how happy or satisfied they are with their life in the way they know their height or telephone number," said the authors. "The answers to global life satisfaction questions are constructed only when asked, and are therefore susceptible to the focusing of attention on different aspects of life."

Unrelated studies have found similar results, including one by Ed Diener, a University of Illinois researcher, who found that extremely wealthy individuals on the Forbes 400 have the same level of happiness as the Maasai herdsman of East Africa.

More Money? Less Free Time

Think of the rich and you'll probably picture days spent lounging by the pool, playing golf or zipping around town in a new Ferrari. But, in reality, those who earn more tend to have less time to do what they want.

In fact, the researchers conducted a nationwide survey and found that those with higher incomes devoted more time to:

  • Work

  • Compulsory non-work activities (shopping, child care, etc.)

  • Active leisure (exercise, etc.)

Meanwhile, they spent less time engaging in passive leisure activities such as relaxing or watching TV.

"When someone reflects on how more income would change subjective well-being, they are probably tempted to think about spending more time in leisurely pursuits such as watching a large-screen plasma TV or playing golf," the authors pointed out. "But in reality, people should think of spending a lot more time working and commuting and a lot less time engaged in passive leisure and other enjoyable activities."

"If you want to know why I think poor people are not that miserable, it is because they are able to enjoy things that Bill Gates has not been able to enjoy, given his schedule at Microsoft," said Alan Krueger, a professor of economics and public affairs at Princeton University and an author of the study.

Money Happiness

When you do spend money, research shows that you'll be happier overall if you spend it on life experiences rather than material possessions.

"Things" Don't Equal Happiness

"People grossly exaggerate the impact that higher incomes would have on their subjective well-being," Krueger points out.

Part of the problem is that people associate more money with more things -- but those things, while increasing happiness in the short-term, will not impact your overall happiness.

When it comes to winning the lottery, for instance, "they focus on all the things they would buy, without recognizing that does not contribute all that much to their well-being," Krueger said.

How to Create More Happiness, Regardless of Income

If money doesn't lead to happiness, then what does? People receive more enduring pleasure and satisfaction from investing in life experiences than material possessions," says Leaf Van Boven, assistant professor of psychology at the University of Colorado at Boulder.

So if you have to choose between an expensive piece of jewelry or a vacation to Italy, you'll be better off in the long-run with the latter. Meanwhile, creating more time to do whatever it is that you love is a must to being happy, as is making time to be with those you love. In a past article we've compiled a list of 21 no- or low-cost things you can do to put a smile on your loved one's face, which is guaranteed to leave you feeling happy inside too.

Recommended Reading

Spending Your Money on Doing Things vs. Owning Things Will Make You Happier

Married Men Really are Healthier & Respond Better to Certain Treatments


Science June 30, 2006: Vol. 312. no. 5782, pp. 1908 - 1910

University of Michigan News Service June 29, 2006

Washington Post July 3, 2006

Forbes: Now it's a Fact: Money Doesn't Buy Happiness June 29, 2006

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