“Money can’t buy happiness,” or so the saying goes. What, then, are we to make of the barrage of articles like these:

Does money buy happiness, then? Everyone seems to be reporting – over and over – that a new, groundbreaking, and surprising study shows that money = happiness. Is our common wisdom wrong on this topic – or is there perhaps some ideal income range that we should be seeking?

What in the hell is going on here? Let’s see if we can’t untangle the mess of overly-conclusive newspaper headlines and find the truth.

First, let’s think about how researchers gather their data. If you wanted to know whether an action or object made someone happy, what would you do? The easiest and cheapest method is, of course, to ask them. Most of the articles above are based on “research” that was more survey than science. The problem with asking people about what makes them happy is simple: what we think would make us happy and what would actually make us happy are rarely the same thing.

When you ask someone how happy they are now compared to 5 years ago, they’ll often start by thinking about their financial situation 5 years ago. If their financial situation has improved, they’ll probably say they are happier now. Things change if you ask someone how happy they are, and then ask them the same question 5 years later.

The way you survey people can dramatically alter your results. If you ask people how much money they make first, then ask about happiness, their answers will correlate more closely with income. If you ask people second, that correlation weakens. If you ask people about their friends and family first, the correlation weakens further. Coming to a definitive conclusion about what makes people happy is difficult when we ourselves aren’t reliable judges of our own happiness.

The second problem with the headlines above is a little more complicated. Whether money can bring happiness depends largely upon how one defines “happiness.” Is it life satisfaction? Well-being? A lack of misery and suffering? Researchers have historically asked people to rate their “satisfaction with life,” believing that “happiness” is a vague and ambiguous word. Surveying satisfaction with life tells us something, but “satisfaction” has a lot more in common with “contentment” than it does with “joy.”

Finally, journalists are largely to blame for misrepresenting scientists. Rarely will a legitimate scientific psychologist or sociologist push out a paper claiming to have proven that money buys happiness. The papers usually end with a line like, “our findings show that self-reported life satisfaction is positively correlated with income level, but more research is required.”

Reporters often change “correlated with” tp “caused by,” which is not at all what the scientists are saying. Sure, people who make more money say they’re happier, but why? Could it be that happier people are more motivated and optimistic, and thus more likely to take risks and tackle problems at work? Shawn Achor thinks that could be part of it. Could it be that there’s a third variable causing both happiness and higher income? Could something like high intelligence or confidence leads to both happiness and wealth? Could it be that the answer is some extremely complex concoction of factors?

The answer is most likely that happiness is some complex mixture of the above.

So, How DOES Money Impact Happiness

To really answer this question, we have to find a reliable method of measuring happiness and then track the same people over time in what’s called a longitudinal study. We’d then also have to adjust for variables that we know about, which is amazingly difficult for such a complex question.

We don’t currently have a way to objectively measure a person’s happiness, so we have to rely on self-reporting. This alone makes it impossible to come to definite conclusions about what makes us happy. Instead, we can only study how happy we think we are over time.

The fact is that right now, we’re still learning about money’s role in happiness. If anyone tries to tell you differently, they’re probably taking the research too far. Take, for example, the following premature conclusion from the brilliant Daniel Kahneman at TED. (Note that while I’m criticizing the premature conclusion, this is still one of my favorite talks ever. Make sure you watch it.)

“60,000 dollars a year, people are unhappy, and they get progressively unhappier the poorer they get. Above that, we get an absolutely flat line. I mean I’ve rarely seen lines so flat. Clearly, what is happening is money does not buy you experiential happiness, but lack of money certainly buys you misery, and we can measure that misery very, very clearly. In terms of the other self, the remembering self, you get a different story. The more money you earn, the more satisfied you are.”

The venerable Dr. Kahneman should be forgiven for using “happiness” instead of what they actually studied: self-reported life satisfaction. What we can say is that (on average) self-reported life satisfaction rises as income rises to meet basic needs (about $60k in the USA), and from there it falls flat. The answer might not be as satisfying, but it’s also a lot more honest about what we actually know.

Let’s look back at the

Does money buy happiness? 

People tend to say that they’re more satisfied with life if they can pay the bills, so $60-70k is probably a goal worth shooting for. That said, unless you think happiness is exactly equal to self-reported life satisfaction – and I don’t – we can’t really say yet. Let’s also keep in mind that money is just one tiny portion of life satisfaction. Long-term relationships and friendships definitely contribute more to your overall satisfaction in life.