Does Money Buy Happiness? What the Research Shows

For a decade, one number stood in for an entire body of research on money and happiness: $75,000. Below that annual income, according to a widely cited 2010 study, more money reliably bought more happiness. Above it, extra income barely moved the needle. The number was memorable, it fit a comforting story about how little you actually need, and it turned out to be only part of the picture.

The number everyone remembers

In 2010, the psychologist Daniel Kahneman and the economist Angus Deaton analysed more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily telephone survey of US residents. They separated two things that get lumped together as "happiness". One was life evaluation - how people rated their life overall on a ladder from worst to best. The other was emotional well-being - how much joy, stress and worry they reported feeling the previous day. Life evaluation kept climbing steadily as income rose, with no ceiling in the data. Emotional well-being also rose with income, but the increase levelled off at around $75,000 a year (in 2008-2009 dollars). Above that point, a bigger paycheck stopped buying better daily moods, on average.

That plateau was the detail that stuck. It travelled into commencement speeches, personal-finance columns and a great many arguments about ambition. It was also, as it turned out, incomplete.

A phone in your pocket says otherwise

Kahneman and Deaton relied on people remembering yesterday. In 2021 the psychologist Matthew Killingsworth tested the same question with a different method: an app called Track Your Happiness that pinged people's phones at random moments and asked how they felt right now. Drawing on more than 1.7 million of these in-the-moment reports from over 33,000 employed adults, Killingsworth found something else: happiness kept rising in a straight line with the logarithm of income, at the same rate for high earners as for everyone else. No flattening near $75,000, and no flattening at the top of the range either.

Two careful studies, two respected authors, two incompatible answers to the same question. That is an uncomfortable place for a field to be, and to their credit, the two researchers did not leave it there.

Two rivals, one dataset

Kahneman and Killingsworth agreed to what psychologists call an adversarial collaboration: instead of each defending their own paper in separate journals, they combined forces with the decision scientist Barbara Mellers acting as an arbiter, and reanalysed Killingsworth's experience-sampling data together, looking specifically for the plateau Kahneman and Deaton had found. Published in 2023, the result explained why both earlier studies had looked right.

The flattening was real, but it did not apply to most people. It appeared only in the least happy 20% of the sample. For this group, emotional well-being stopped rising with income past a certain point - more money did not make their worst days better. For the other 80%, happiness continued rising with income across the entire range measured, with complementary patterns that, averaged across everyone, cancelled out into what looked, from a distance, like one smooth line - which is what Killingsworth's original analysis had shown, and part of why Kahneman and Deaton's plateau, driven by a fifth of the sample, had been easy to miss in a different kind of analysis eleven years earlier.

Why an unhappy fifth stops responding to money

The paper does not fully explain why the least happy group stops benefiting from extra income, but the pattern is suggestive. People in serious, ongoing distress - a painful divorce, chronic illness, bereavement, a mental health crisis - are dealing with a kind of unhappiness that money cannot easily fix. A bigger income can remove some financial stress, but it does not repair a marriage or cure an illness. For people without those disasters, more money removes more everyday frictions and buys more of what they value, and it keeps doing that further up the income scale than researchers had assumed. It's also worth flagging that all three studies drew on US samples, so the exact dollar figures are unlikely to transfer directly to other countries or costs of living, even if the broader shape of the pattern probably does.

What this means for you

None of this is a reason to chase income at any cost, and none of it is financial advice - it is a description of an average statistical pattern across very large samples, not a guarantee about your own particular life. What it does suggest is that the popular idea of a happiness ceiling was too simple. For most people, earning more is likely to keep nudging day-to-day mood upward, not because money buys joy directly, but because it buys options - the ability to avoid a long commute, skip a stressful chore, or take a day off without financial fear. If you are going through a genuinely difficult period, though, this research is also a caution against assuming a raise will fix what is actually a different kind of problem, and a reminder that a therapist, doctor or financial counsellor is a better resource for that than any amount of extra income. If you want to look at your own relationship with money more closely, our financial wellbeing and money attitudes tests are a starting point, and our materialism test looks at a habit of mind that research links to lower satisfaction regardless of income.