How Much Salary Do You Need to Be Happy?
Every now and again, a new study comes out about your annual salary and your happiness. Researchers have found your daily emotional well-being increases up to a certain salary, and after that it plateaus. (In these studies, “emotional well-being” means your day-to-day emotions, meaning whether you feel happy, excited, sad, mad, etc.) Is there a magic number for happiness? Well, it depends on a lot of different factors.
At the start of the decade, a study by Princeton economist Angus Deaton and psychologist Daniel Kahneman found that the salary at which you reached your top day-to-day happiness was $75,000 per year. (Deaton and Kahneman also reported that people feel more satisfied with their lives as their salary continued to go up, but it doesn’t have any further effect on their daily mood.) A few years later, another study by Advisor Perspectives’ Doug Short adjusted the $75,000 amount to line up with each state’s cost of living. The new numbers ranged from as little as $65,580 in Mississippi to a whopping $122,175 in Hawaii, where everything costs an arm and a leg. (Florida’s magic number was almost identical to the original one -- it came in at $74,775.)
The latest study comes from a group led by Andrew Jebb, a doctoral candidate in Purdue University’s Department of Psychological Sciences. The research by Jebb’s group was released in the January 2018 edition of Nature Human Behaviour and extended the work Deaton and Kahneman had originally done. First, they found the ideal salary for emotional well-being to be somewhere between $60,000 and $75,000, lower than the original amount. Second, their research determined that the optimal salary for happiness was only for an individual, and the number was higher for families. This makes sense, as families have more expenses than one person.
Third, they set up another category called “life evaluation.” This is basically how you feel overall about your life, maybe influenced by goals you’ve set and people you compare yourself to. The group found that a salary of $95,000 led to the highest scores in life evaluation. Beyond that salary, when covering basic needs and paying all your bills was no longer a concern, their research said people began focusing on more material goals and comparisons to other people, which could actually make them less happy.
There’s another possibility the research didn’t cover. Could the extra effort it takes to earn such a high salary make you less happy because you don’t have time to enjoy it? Sure, you might make $150,000 a year as a vice president, but is it worth it if you work 70 hours a week and your social life gets taken over by dinners and travel and schmoozing? For some people, the prestige and the ability to fulfill their lofty ambitions make this a trade-off well worth making. Others may prefer a different work-life balance and discover the executive life isn’t for them. Your “magic number” salary all depends on what you want for yourself.