Money Does Buy Happiness - Just Not the Way We Thought

I can’t remember the exact year I first came across the claim that happiness supposedly peaks at $75,000 a year, but I remember the effect it had on me.

It became one of those small, mental safety nets I pulled out during stressful moments: the late nights wondering whether Female Invest would make it, or the periods when I felt overwhelmed by the uncertainty of entrepreneurship in general.

The idea that happiness maxed out at a relatively ordinary income felt strangely reassuring.

It implied that the people earning far more weren’t necessarily living more joyful or emotionally richer lives.

For years, that thought lingered in the background, offering a bit of perspective at times when everything else felt unpredictable.

Like many others, I repeated the $75k idea often.

It sounded tidy and logical. Make enough to live comfortably, and beyond that, money becomes emotionally irrelevant.

Except it turns out this widely shared idea wasn’t actually true.

Why Some Ideas Spread Even When They’re Wrong

The $75k “happiness plateau” ended up in the same category as other cultural facts that spread with surprising ease despite being inaccurate: that sugar makes children hyperactive, that goldfish forget everything in three seconds, or that humans swallow spiders in their sleep.

These ideas travel not because they are correct but because they are simple, memorable, and easy to retell.

The Kahneman study, where the $75K number came from, had an additional advantage: credibility.

Two Nobel laureates, a massive dataset, and a single number that looked like it captured a universal truth.

Journalists amplified it. Self-help books cited it. Employers used it to justify pay structures. And countless articles repeated it until it entered the cultural bloodstream.

But the study behind it had important limitations.

What Kahneman’s Study Actually Found

The 2010 paper by Daniel Kahneman and Angus Deaton separated well-being into two categories: life satisfaction, which rose steadily with income, and emotional well-being, which seemed to flatten around $75k.

That apparent plateau is what went viral.

But the way emotional well-being was measured matters.

Participants answered simple yes or no questions about whether they felt enjoyment, stress, sadness, or happiness the previous day.

Someone earning $40k could check the same box as someone earning $400k, even if their emotional lives differed in meaningful ways.

The data relied on memory rather than real-time feeling, and the scale wasn’t sensitive enough to detect subtle changes at higher incomes.

Its conclusions were solid within their scope, though the scope was far narrower than the myth that grew from it.

The Real-Time Data That Changed Everything

A decade later, economist Matthew Killingsworth approached the question differently.

Instead of asking people to recall how they felt, he asked them in the moment. Through an app, tens of thousands of participants received prompts throughout the day:

• How happy are you right now?
• How satisfied do you feel in this moment?
• What are you doing?

This method generated more than 1.7 million real-time mood reports, creating the most precise emotional dataset ever gathered at this scale.

The results were clear. Happiness increased with income, continued increasing, and did not plateau at $75k or any nearby number. There were diminishing returns, but no sudden flattening.

The famous ceiling began to unravel.

The 2023 Collaboration That Closed the Case

To resolve the contradiction, Killingsworth joined forces with Kahneman and psychologist Barbara Mellers.

By combining datasets and correcting for methodological differences, they produced the clearest picture to date.

They found that:

1. For about 80 percent of people, happiness rises steadily with income.
2. For the least happy 20 percent, happiness rises until roughly $100k, then stops.
3. For the happiest individuals, happiness increases even more sharply at higher incomes.

In short, the $75k number was never a psychological limit. It was an artefact of how the emotions were measured.

Why Money Influences Happiness More Than We Thought

The new research does not suggest that money buys joy directly.

Instead, it clarifies the ways money shapes the conditions in which well-being can flourish.

1. Money reduces daily stress

Financial instability fuels constant, low-level anxiety: bills, medical costs, surprise expenses, lack of safety nets, no margin for error.

Removing these stressors improves emotional well-being dramatically.

2. Money increases autonomy, one of the strongest predictors of well-being

Autonomy means having control over your life.

It shapes how we feel far more than most people recognise.

The ability to leave a toxic job, protect your time, or avoid situations that undermine you has enormous emotional consequences.

This mirrors something we teach constantly at Female Invest: the value of a F*** You Fund.

A few months of savings is not just a financial cushion. It is a psychological stabiliser. It lets you make decisions from confidence, not fear.

3. Money creates a sense of security

Humans are tuned to scan for risk.

When financial insecurity fades, so does a huge portion of that background vigilance. In its place often comes presence, creativity, and the ability to connect more deeply with others.

This isn’t about indulgence. It’s about stability.

What Money Doesn’t Do

Even with better tools and the latest data, money’s influence has limits.

Happiness rests on several pillars: relationships, health, purpose, belonging, and time for rest and curiosity. Money can support these; it cannot replace them.

When I think back to the most stressful moments of building Female Invest, no salary figure would have taken the emotional weight away. What mattered most were the people around me, the mission behind the work, and the resilience we found in challenging times.

But money played a quieter role too. Especially since becoming a mother, I’ve realised the peace that comes from knowing that if the company ever failed, my family would have room to figure out what comes next. We wouldn’t be in crisis.

That kind of security helps me sleep at night, keeps fear out of my decisions, and allows me to choose from a place of strength rather than scarcity.

Money doesn’t guarantee happiness, but its absence can make happiness harder to reach.

The Paradox: When Wanting Money Undermines Happiness

Interestingly, research also shows that while having money supports well-being, overvaluing money often harms it.

When financial success becomes a dominant identity, the things that actually sustain happiness - connection, leisure, community, meaningful work - get pushed aside.

Money works best as a resource, not as a definition of who we are.

How to Spend Money in Ways That Increase Happiness

Certain spending choices consistently deliver more well-being than others.

1. Spend on experiences

Experiences deepen relationships and create lasting memories.

2. Buy time

Outsourcing tasks you dread or that drain your energy is one of the most reliable ways to increase well-being.

3. Spend on others

Generosity reliably increases emotional well-being. Humans are built for connection and contribution.

Why Money Matters Most When You Have the Least

One insight is consistently clear across decades of research: the emotional impact of money is greatest for those with the least of it.

A small increase for someone living paycheck to paycheck can transform safety, health, and opportunity.

Money does not have equal emotional value for everyone.

Does Money Buy Happiness?

After years of contradictory headlines and oversimplified narratives, the evidence now points to a more nuanced truth.

For most people, money does increase happiness, and well beyond $75,000. But it increases happiness indirectly, by funding stability, easing stress, widening choices, and giving us the margin to build more meaningful lives.

The research shows that money affects happiness far more than we once thought.

But it also shows that the upper limits of well-being come from choices, relationships, and meaning, areas where money’s influence fades.

Beyond that point, something else is clearly at work.