An article was published this week in the Proceedings of the National Academy of Sciences by Princeton University professors Daniel Kahneman and Angus Deaton titled High income improves evaluation of life but not emotional well-being. In the study the authors examine the issue of whether or not money can buy happiness.
There are two aspects of well-being (or happiness) that they study:
- Emotional well-being refers to the emotional quality of an individual’s everyday experience—the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one’s life pleasant or unpleasant.
- Life evaluation refers to the thoughts that people have about their life when they think about it.
The study looks at the influence money has on these two aspects of well-being. Emotional well-being can be seen as day-to-day happiness, and life evaluation can be seen as how a person sees their life overall.
For emotional well-being the authors found that more money does make for brighter days, but levels out at $75,000.
For life evaluation, however, with every doubling of income people are more satisfied with their lives, and that continues well above $75,000.
“Giving people more money beyond $75,000 is not going to do much for their daily mood…but it is going to make them feel they have a better life” said Deaton in an interview with the Associated Press. For every doubling of income people continue moving up the happiness “ladder” in terms of life evaluation.
As you might expect the authors found that those who didn’t have enough money to meet their basic needs experience emotional pain and unhappiness in both areas.
There are a number of life lessons that students can extract from this study – we will examine just three.
First – when you are looking at career choices be sure to find something you are passionate about – something that helps you be happy day-to-day. I have known a few people who chose high-paying careers but found that they were miserable because they hated their jobs. I even had a friend who was drafted into the NFL with a very high-paying contract and confided in me that he hated playing football and he was miserable – his dream was to retire as soon as possible and open a fly-fishing shop.
Second – while not having enough money finds you unhappy in both areas day-to-day happiness can be found in many areas – family, your faith, continuing education, a good book, friends, a walk on the beach – or any number of other areas.
Finally, the amount of money you earn has little to do with the financial peace you have in your life. Personally, I believe that financial peace can be found by living below your means, having some money set aside for a rainy day, saving for the future and being debt-free. There’s an old saying that goes something like this: Income five dollars and expenses six dollars: misery. Income four dollars and expenses three dollars: peace. Perhaps we could update that to say “Income $50,000 and expenses $60,000: misery. Income $40,000 and expenses $30,000: peace.”
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