Personal Finance vs. Happiness

There is a positive correlation between income and happiness, which means that as income increases, so does happiness. However, this relationship is not linear, and the correlation becomes weaker as income increases.

One of the most notable studies on this topic is the Easterlin Paradox, first proposed by economist Richard Easterlin in 1974. The study found that people in higher-income countries reported higher levels of happiness than those in lower-income countries, but there was no significant difference in happiness levels between people within a country with different income levels.

This suggests that while income does have an impact on happiness, it is not the only factor. Factors such as social support, life satisfaction, and overall well-being also play a role.

Additionally, a meta-analysis study published in the journal Social Indicators Research in 2010 which analyzed data from 158 countries and over 1.7 million individuals found that, on average, income and happiness are positively correlated, but the correlation is not very strong, and the relationship becomes weaker as income increases. (Diener, E., Oishi, S., & Lucas, R. E. (2010). Well-being for public policy. Oxford University Press).

It’s worth noting that some studies found that there’s a point where money stops buying happiness, after a certain threshold of income, the correlation between income and happiness seems to be insignificant.

Overall, while income can contribute to happiness, it is not the only factor, and it’s not the most important factor. A balanced life with good social support, healthy relationships, and a sense of purpose and meaning can bring happiness regardless of income level.