Wealth and Happiness 

A recent report from Harvard Business School (“The Happiness of Millionaires”) explored how wealth impacts happiness. The report looked at information relating more than four thousand millionaires across two extensive studies. The researchers addressed two questions:

• Does increasing wealth beyond a certain point lead to greater happiness?
• Does the source of that wealth (earned vs. inherited) affect happiness?

The findings offer insights into the complex relationship between money and happiness. 

More Wealth Brings Only Modest Increases in Happiness: Contrary to the popular belief that further accumulating assets gradually boosts happiness, the study found that individuals report greater happiness only at very high levels of wealth compared to their less-wealthy peers. Moreover, the study revealed that happiness levels tend to plateau after a certain point. In the first study, participants with a net worth above $8 million were slightly happier than those with $1.5 to $2.9 million. In the second study, this threshold was $10 million. Even then, the increase in happiness was modest. For most millionaires, additional wealth did not significantly improve life satisfaction once they had achieved a net worth of several million dollars. Many millionaires believed they would need two to five times their current wealth to reach what they considered “perfect happiness.” This reflects a common psychological pattern: the persistent desire for more, even when people already have plenty.

The Source of Wealth Matters: Another finding was that how millionaires acquire their wealth affects their happiness. Those who earned their wealth reported being happier than those who inherited it. The effort and personal achievement associated with earning wealth might contribute more to well-being than simply receiving it. This finding supports a long-standing theory known as the “Carnegie Conjecture,” named after industrialist Andrew Carnegie, who believed large inheritances could reduce motivation and happiness. According to the study, earning wealth helps one develop a stronger sense of control and purpose, key factors in overall well-being. 

The Use of Wealth Matters: The study also highlights that the way wealth is used can affect happiness. Research has shown that spending money on experiences, giving to others, and supporting meaningful causes brings greater satisfaction than spending on material goods. Wealth alone may not be enough to guarantee happiness, but using it to improve one’s life and help others can enhance well-being. 

Income and Happiness: Happiness showed only a limited relationship with income. In the first study, high personal incomes were linked to lower life satisfaction, while the second study showed no significant relationship between household income and happiness.

Lessons for Everyone: This research offers valuable lessons for people at all asset levels. It challenges the common assumption that greater levels of material abundance lead to greater happiness, emphasizing instead the nuanced ways wealth interacts with personal fulfillment and life satisfaction.

It seems clear from these studies that wealth accumulation is not as fulfilling as pursuing purpose, relationships, and experiences. Happiness is more likely to be found by finding meaning and contentment in what we already have.

Jeff Buck