Are rich people happier than average? It may be a common misconception that having a more significant bank account leads to greater happiness, but are these assumptions true? In this article, we will explore the truth behind whether or not money can lead to true happiness and dispel any myths surrounding wealth and contentment.
We will examine conflicting studies around income levels, how they affect emotional well-being and research on self-made millionaires versus those who inherited their millions. By the end of this article, you’ll have all the answers you need to make an informed opinion about whether being rich makes someone truly happy.
So read on and discover if money is worth its weight in gold!
Money Does Increase Happiness Up To A Point
One study indicates that people are happier until they reach $75,000 in annual income. Kahneman and Deaton (2010) analyzed a sample of United States residents, finding that yearly income beyond ~$75K was not associated with any higher daily emotional well-being. Income beyond ~$75K, however, did predict better life evaluations.
This suggests that money does increase satisfaction, but only up to a certain level. This study dispels the myth that unlimited wealth will lead to total happiness.
What About Millionaires
Next, look at what people classify as “rich,” meaning millionaires. That is well above the $75,000 mark mentioned in the previos research.
Millionaires are happy but not extremely happy
Contrary to popular opinion, millionaires are not as happy as one might think. Despite what our culture may lead us to believe, research has shown that millionaires typically rate their happiness at only 7.81 out of 10, according to a recent Psychology Today article.
While they are undoubtedly pleased with their financial success, the reality is that it doesn’t necessarily lead to fulfillment or a greater level of satisfaction than most other people experience. It would appear that money can buy some happiness but much less than we generally assume when thinking about the lifestyle of the wealthy and famous.
The super-rich are slightly happier than the rich
It is a fact that money cannot buy happiness, but it is a surprise that the wealthiest people may only benefit slightly in terms of overall satisfaction. According to studies, millionaires with more than $10 million may experience only a marginal improvement in their happiness.
This suggests that material wealth does not necessarily lead to significant psychological or emotional benefits, which would be inconsistent with the traditional idea of being “rich.” Perhaps other aspects of life, such as relationships, health, and career satisfaction, can bring more profound and lasting fulfillment than mere wealth accumulation.
Those who earn millions are the happiest
It may be easy to assume that with financial freedom, those who have millions are all inherently happy. However, interestingly enough, there is a sense of satisfaction and contentment that appears only in self-made multi-millionaires. Studies have shown that those working day and night to ensure their financial success, instead of coming from an already affluent family, feel more fulfilled and proud when they reach their goals. This finding goes against what we would typically expect and speaks volumes to these individuals’ hard work in achieving a comfortable way of life.
So what about being rich makes people slightly happier?
Although being a millionaire can undoubtedly come with its advantages, recent studies suggest it is not exclusively money that contributes to improved happiness levels. In particular, the Netherlands-based study entitled “Time Use and Happiness of Millionaires: Evidence from the Netherlands” revealed two differences between two slightly different studies.
The first study revealed that millionaires are likely to engage more in active leisure activities (such as exercising and volunteering) rather than passive leisure activities (like television viewing or relaxing). This suggests the secret to sustained satisfaction may lie in our daily habits, regardless of income. Thus, although wealth may provide financial freedom, it seems even greater rewards can be found in how we spend our time.
The study mentioned above in the Netherlands revealed that millionaires experienced a slight improvement in their happiness levels due to more control at work. This finding highlights the importance of autonomy in workplace satisfaction, as it appears to be a significant factor for those with higher levels of wealth.
This suggests that entrepreneurs or business owners may benefit particularly from these results, although further research is required. This study also explored how millionaires spent their free time, with evidence indicating that they dedicated more time towards leisure activities than those who had lower incomes. This could suggest that individuals can experience increased happiness by having more money available to invest in activities they enjoy.
Having Wealth Does Help You Work Towards Self-Fulfillment
Having wealth can help a person to strive for self-fulfillment. Maslow’s Hierarchy of Needs indicates that basic needs such as food, shelter, and security must be met before one can adequately focus on higher needs like love and belongingness.
Those in the upper classes tend to have fewer needs in terms of subsistence, allowing them to pursue more complex personal objectives without the experience of anxiety and fear due to scarcity or lack. Even those who may not be considered part of the wealthy class can make considerable headway in their self-fulfillment journey by merely having access to adequate means of covering their basic necessities, as well as some discretionary amount available to pursue other aspirations.
Does Being Rich Actually Make You Happier?
As you can see, the two studies show a slightly different ways to look at this data.
Here are two key takeaways:
First, money and “being rich” only to a limited extent makes you happier, far less so than most people think.
Secondly, both studies pointed out that money only makes one happier to a certain extent, and it’s very subjective on where that breaking point is, whether it’s $75,000 or 1 million.
The danger in thinking like this is that it emphasizes an external source of happiness rather than an internal one.
While one can’t argue that extreme poverty can exacerbate your temporary circumstances, I like to think of it in terms of the book, ‘Man’s Search For Meaning”.
This analyzes his time in a Nazi concentration camp during WWII.
Very briefly, his argument is that true “happiness” comes from “He argued that life can have meaning even in the most miserable of circumstances and that the motivation for living comes from finding that meaning.”
This leads me back to the two studies about how millionaires spend their time—having more time in active leisure and more control over their work.
Referring back to Maslows Heirarchy of needs and looking at it through that lens, having wealth does meet your basic and psychological needs, and allows you to pursue self-fulfillment.
That is what we refer to as financial freedom on this website.
The money isn’t necessarily the goal, but rather the goal can be summed up by a colleague of mine who defined what financial freedom meant to them as, “The ability to do what I want, when I want, with whoever I want.”
That is truly the way to achieve happiness.
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