Study: This is how much you need to earn to be happy

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Many people realize early on that money alone does not make you happy. Happiness depends not only on income, but also on things like loving relationships, good health, and time for the beautiful moments in life. Nevertheless, money gives us one thing above all else: security and independence. But how much do you need to earn to be happy? And is there a point at which more money can no longer increase our happiness? A study provides the answer to these questions.

More money makes those who have little happier than those who have a lot. For them, every increase has a greater effect than for the rich. That’s why many strive for a salary increase to reduce their worries and be able to afford more. But does it really make them happier? And at what amount does the difference become noticeable?

Nobel Prize winner Daniel Kahnemann and economics professor Angus Deaton have addressed these two questions. Their conclusion: happiness peaks at an annual income of €60,000 ($75,000). Although financial leeway increases with an annual income of €80,000 or €100,000, the impact on happiness remains low. The two economists refer to this as “diminishing marginal utility” because the added value decreases as income rises.

Further study: Higher salaries make people happier

However, there are doubts about the $75,000 threshold. In his 2021 study, psychologist Matthew Killingsworth concluded that life satisfaction continues to increase with rising salaries. To find out how salary and happiness are related, Killingsworth used the “experience sampling” method, in which participants filled out surveys at random times.

In contrast, Kahneman and Deaton asked participants in their study to retrospectively rate their overall life satisfaction, which led to a distorted picture. Killingsworth’s study showed that participants’ well-being increased with rising living standards and higher incomes.

Which study is right?

But what is the truth? Does a steadily increasing salary make you happier or not? In order to provide a meaningful answer to this question, the scientists, who had come to different conclusions, joined forces to develop new insights. This process is known as “adversarial collaboration,” in which researchers combine their data and reevaluate it under the guidance of a mediator.

In collaboration with psychologist Barbara Mellers, who acted as mediator, Kahneman, Deaton, and Killingsworth conducted a reanalysis of their data. The result: higher income leads to greater well-being for most people. However, there is one exception: people who are wealthy but unhappy would not become happier with a higher income.

What other factors play a role in happiness?

Even though the studies show that there is no fixed salary for happiness, they do prove that salary increases can certainly contribute to increasing personal happiness. But a higher income is not everything—other factors also play an important role in our well-being. These include, among others: