So! You know how people are always saying that money can’t buy happiness? It turns out they’re wrong!

I’ve recently seen not one but two studies that reveal some important findings on what cash can deliver in terms of quality of life. It’s a compelling topic these days—not least of all because the economy is forcing lots of us to confront the question of what we really need in order to have a good life.

The Price of Happiness

First comes a report from Princeton University published late last year in Proceedings of the National Academy of Sciences. Using data involving 450,000 Americans from the Gallup-Healthways Well-Being Index, the researchers analyzed the relationship between household income and each respondent’s self-reported emotional state (what the researchers call “day-to-day happiness”) as well as their overall feelings about their well-being and “satisfaction” with life.

Happiness has a price tag: The researchers learned that happiness climbed right along with income up to about $75,000 per year, after which more income didn’t predictably buy more happiness. But—here’s the interesting point—satisfaction with life overall did continue to rise right along with income beyond $75,000 per year. People who earned more…and more…felt that much better about the quality of their lives!

It’s About Choices…

And now we’ve just seen a second study, a meta-analysis (a study of other studies), that also is quite remarkable. Social scientists from the Victoria University of Wellington in New Zealand were looking to learn whether having money or having choices in life (“autonomy”) is more important for well-being. They examined data from a huge sample (420,599 individuals from 63 countries spanning more than 30 years)—some of these people were wealthy, some poor… some living in capitalist societies, some socialist… some in developed nations and others that can still be classified as “third-world” countries.

Result: Regardless of where respondents lived, they tended to report greater well-being if they felt that they had autonomy. And if money bought the ability to make more and better choices—as it does here in the US, for instance—it did indeed buy happiness. In situations where money did not correlate with autonomy—you guessed it—no correlation with happiness or a better life.

What’s New?

I put in a call to James Maddux, PhD, a psychology professor at George Mason University in Fairfax, Virginia, and asked for his help in putting this information into context. He told me that the real surprise is in the second study, that showed that across cultures, happiness depended upon having autonomy…no matter what their background, humans want to have the chance at independent accomplishment.

Dr. Maddux explained that “in broad strokes, previous research has demonstrated that in Western cultures, like those in the US, Canada and Europe, autonomy and individualism correlated with happiness, but not so in traditional Eastern cultures (such as Japan, China and India), where identity is collectivist, rooted less in personal identity than in what the group—your family, your community, your employer—has accomplished.” This is one example of how cultural differences matter.

Beyond that, said Dr. Maddux, the body of research studying the link between income and satisfaction with life has yielded some wisdom that is generalizable (and, frankly, familiar) to most people trying to find the correct balance between money and satisfaction in life…

There’s nothing magic about $75,000. The real point of that study, Dr. Maddux explained, is that it reinforces that being poor is no picnic. “It is important to have enough income to meet your basic needs,” he said. Cost of living varies greatly depending on many variables—where you live, how you are accustomed to living, whether you live alone or with a spouse or family, etc., so $75,000 represented a kind of a rough marker in the study.

After your needs are met, money counts for less. Once you’ve reached the point where you are comfortably able to pay your bills, earning more will make you happier…just not as much as you might guess. Dr. Maddux said that “additional income buys additional happiness to a point…then a bit more money buys a bit more happiness…and so on…but for everyone, there comes a point when extra money isn’t really going to add anything to your life at all.”

Personal development matters. Using money to expand your knowledge and understanding (for instance, putting your dollars toward travel, education, the pursuit of special interests or donating money to philanthropy) increases happiness, Dr. Maddux noted.

Possessions can make you less happy. In contrast, “the body of research suggests that if you want additional money so you can buy stuff—like cars, clothes and jewelry—with the goal of impressing or keeping up with others, these pursuits will actually diminish your happiness,” Dr. Maddux said, adding that “research shows that the pursuit of ’bling’ contributes to unhappiness because people probably are pursuing material goods at the expense of self-development and relationships.”

Personally, I am not surprised by these findings—they are entirely consistent with what I believe about every aspect of life. Having the opportunity to function as an individual, free to work hard and to be rewarded for it—emotionally and financially leads to great satisfaction. There is no better feeling than the feeling of accomplishment.

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