In 2016 I hit two major milestones: turning 30 and generating six figures in revenue. I’ve never been happier.
Well maybe once, about nine years ago. I had just graduated from college with a degree in drama and an unrelenting resolve to pursue my passion for performing. Within weeks I was given an opportunity to perform on the international tour of the musical Cinderella.
While traipsing around the Philippines, Singapore, Thailand and China, my small salary didn’t bother me. Between travel and performing, I was rich in fulfillment. That is until my grandfather died in the middle of my contract and I couldn’t afford to fly home.
In that moment, my happiness took a nosedive and I learned a valuable lesson: Money doesn’t matter, until it does.
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In the years that followed, a continuous cycle of artistic highs and financial woes reinforced the lesson that doing what you love is not the same as having a lifestyle you love. And that maybe money does play an important role in sustainable happiness.
“Money and happiness go hand in hand because of the freedom of choice that money brings,” says business coach Emily Williams. “No longer is life about just getting by or settling. It’s about happiness, feeling fulfilled, creating impact and making the most of this one shot you have.”
Princeton University’s famed 2010 study on money and happiness supports this notion of “bought” happiness—to a degree. Researchers identified an annual income of $75,000 as a happiness tipping point. The lower a person’s annual income fell below that benchmark, the unhappier he or she felt. Income gains above $75,000 however, did not result in greater reports of happiness.
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A more recent 2016 study from Case Western University also found a strong relationship between income and an individual’s emotional well-being and quality of life. According to the study, every dollar makes a significant difference in reducing negative emotions for people in the 20th percentile of household income ($27,000). Those returns fall off as income increases, specifically in the 80th percentile (around $113,000), and they disappear around $200,000.
In other words, the richer a household becomes, the less of an impact each additional dollar makes.
So can money buy happiness? Yes, to a degree. A rising salary can improve well-being by reducing negative emotions and satisfying basic needs. But after a certain point, how much money you make might not have as much impact on your happiness as how you use it.
In a study from Cambridge University, researchers found people who spent more money on purchases that matched their personalities were happier. Another study published in the Journal of Personality and Social Psychology found that spending money on experiences as opposed to material possessions increased happiness. Finally, researchers from Harvard Business School and the University of British Columbia found that spending money on other people makes us happier than spending on ourselves.
So although money can buy happiness, it’s not just the dollar amount that matters. How you spend your money might be as important as how much you earn.
This article originally appeared in the February 2017 issue of SUCCESS magazine.