According to Kahneman (2011), higher incomes may impair people's ability to savor and enjoy the small pleasures of life, which may help explain why well-being does not continue to rise with income beyond a certain point, even though higher incomes could otherwise fund vacations, expensive automobiles, and larger homes.

Higher Income May Impair Savoring of Everyday Pleasures

In a study of over 450,000 U.S. residents surveyed by the Gallup Organization, Kahneman and Deaton (2010) found that self-reported well-being rose with annual income only up to \$75,000; above that level, the average increase in well-being was null.

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Extensive research confirms a correlation between money and happiness, although the relationship is complex. Generally, residents of affluent nations report higher happiness than those in poorer countries. Within a given country, wealthier individuals tend to be happier than their less affluent counterparts, but this association is less pronounced. While increased income can boost happiness, especially when it enhances purchasing power, this effect is not limitless and tends to diminish after a certain income level is reached.

Money's Correlation with Happiness

Spielman, R. M., Jenkins, W. J., & Lovett, M. D. (2020, April 22). Psychology (2nd ed.). OpenStax. https://openstax.org/books/psychology-2e/pages/1-introduction

OpenStax Psychology (2nd ed.) Textbook

Although a nation's per capita GDP level is associated with its residents' happiness levels (Helliwell et al., 2013), changes in a nation's GDP over time bear little relationship to changes in happiness, in part because GDP is a less certain index of household income (Diener, Tay, & Oishi, 2013).

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