How Does Your Income Determine Your Well-Being?

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Christy Matta M.A. is a trainer, consultant and writer. She is the author of “The Stress Response: How Dialectical Behavior Therapy Can Free ...Read More

How important is your income to your level of happiness?

It’s a question of interest to us as individuals, but also of interest to economists. If you make more money, are you happier?


In the past, economists had concluded that income had only a limited impact on your sense of well-being. What had a greater impact, the economists resolved, was your relative income-that is, what you make in relation to others in your social sphere and the society in which you live.

If relative income is what matters when it comes to happiness, then if your income rises (or falls) at the same time that the entire country’s income rises (or falls), you’re overall happiness won’t change.

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But, a new study in Emotion disputes these assumptions. This study suggests that greater income is associated with increased happiness and well-being because of the greater advantages you have. For example, people with more money are able to buy more of what they want, have more choices and are not as limited by the need to simply survive.

Does the Country You Live in Matter?

The short answer is yes.

In the study happiness and well-being were compared in wealthier countries and poorer countries across the globe.

The data showed a direct link between well-being, specifically that sense that people were living the best possible life they could, and GDP. More than half of the variations in well-being could be explained by a countries overall prosperity or poverty level.

Is There an Income Level at Which There is No Longer a Connection?

It’s fairly easy to imagine that living in poverty will have an impact on your level of happiness. When you’re life revolves around surviving from day-to-day, it makes sense that you have worries and other life circumstances that decrease your happiness.

But, once you’re beyond poverty level and are not faced with day-to-day survival, does the connection between happiness and income taper off?

The answer is no. In studies conducted in various countries with different cultures and languages, richer people, on average, reported higher well-being.

Are People Getting Happier in Nations that are Getting Wealthier?

If happiness is so closely linked to income, then people living countries that have become wealthier over time should be happier than their ancestors.

In 8 out of 9 European countries overall well-being was linked to changes in the country’s economy. But in the US, the connection wasn’t clear. The nations GDP has doubled since the 1970’s, but sense of well-being has decreased slightly. The reason is not entirely clear.

So, does your income impact your well-being? Overall, after analyzing data from a number of surveys, this recent study suggests that is does. And, this study proposes that happiness continues to increase with increases in prosperity, even after you are no longer worried about basic survival.

As much as income and well-being may be connected, it’s important not to give that link too much weight. How you live your live, the values you live by, the pleasures you take in the small moments of your life, your connections to the people important to you and your general outlook all have as much and likely more of an impact on your individual happiness.

Pursuing money at any cost with the aim of improving your happiness can have disastrous results. At the same time, deciding you are incapable of happiness because you lack money can also leave you feeling lower than you otherwise might.

So, although it’s interesting to understand the connection between money and happiness, it’s essential for individual’s at any income level to take responsibility for their own happiness and act in ways that will improve it. Improving your financial well-being is just one small facet in improving your overall well-being.

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