The Truth About Money and Happiness

Americans are living more luxuriously than ever before, so why aren't we happier? Here's how to break out of the materialism cycle for better wellbeing.

The popular game show "Who Wants to be a Millionaire?" offers an intriguing question.

Of course, virtually everyone wants to be rich. But why? As Americans, we place a high value on money and physical possessions because we believe such things will make us happy. Have we always believed this? If not, when did money and happiness become so closely connected?

The Truth About Money and Happiness

Recent data show that materialism has risen in the last four decades. A 2005 study of American college freshmen revealed that 71 percent of those polled believed that it’s very important to be “very well off financially.” In 1967, only 42 percent of participants agreed with this sentiment. When participants were asked if it is very important to develop a meaningful philosophy of life, the results were quite the opposite. Although 86 percent of participants in 1967 agreed with this statement, just 52 percent of the 2005 participants felt that meaning in life was very important1.

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As Americans, we certainly seem to place a great deal of importance on money and possessions. Unfortunately, data show that this is especially true among women. A Gallup Poll from earlier this year showed that women aged 18 to 49 were the most likely to believe that they need an annual income of $100,000 or more to live comfortably.

However, the relationship between money and happiness is not so simplistic. Today, Americans live more luxuriously than ever before. And yet, violent crime has skyrocketed, divorce rates are higher than ever, and diagnoses of anxiety and depression are on the rise. If money truly does make us happy, why do these problems persist?

For the record, there is evidence that money and happiness are related. However, this relationship is weak and not nearly as powerful as people tend to think. Furthermore, money does not necessarily lead to happiness; the data indicate that it is just as likely that being happy leads to greater wealth.

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Of course, we all know that money is necessary to take care of basic needs like food, clothing and shelter. If these needs are not met, our wellbeing will diminish. However, beyond the satisfaction of fundamental necessities, money does not help us to become substantially happier. Indeed, a poll of the 100 wealthiest Americans found that they were only slightly above average in happiness2. If money makes such a minimal impact on our happiness, why do we value it so highly?

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1Pryor, J. H., Hurtado, S., Saenz, V. B., Lindholm, J. A., Korn, W. S., & Mahoney, K. M. (2006). The American Freshman – National Norms for Fall 2005. 2Diener, E., Horwitz, J., & Emmons, R. A. (1985). Happiness of the very wealthy. Social Indicators Research, 16, 263-274. 3Crawford Solberg, E., Diener, E., Wirtz, D., Lucas, R. E., & Oishi, S. (2002). Wanting, having, and satisfaction: Examining the role of desire discrepancies in satisfaction with income. Journal of Personality and Social Psychology, 83, 725-734. 4Nickerson, C., Schwarz, N., Diener, E., & Kahneman, D. (2003). Zeroing on the dark side of the American dream: A closer look at the negative consequences of the goal for financial success. Psychological Science, 14, 531-536. 5Lyubomirsky, S. (2011). Hedonic adaptation to positive and negative experiences (pp. 200-224). In S. Folkman (Ed.), Oxford handbook of stress, health, and coping. New York: Oxford University Press. 6Crocker, J., & Gallo, L. (1985, August). The self-enhancing effect of downward comparison: Paper presented at the meeting of the American Psychological Association, Los Angeles, CA. 7Diener, E., & Seligman, M. E. P. (2002). Very happy people. Psychological Science, 13, 81-84. 8Csikszentmihalyi, M. (1999). If we are so rich, why aren’t we happy? American Psychologist, 54, 821-827.

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