The Paycheck Next Door

Everyone views wealth in a very personal way. Life experiences often influence those views. Many studies have been done on the subject, and here are some of the findings.

Happiness

While the old saying says money can’t buy happiness, the National Academy of Sciences (PNAS) found that it can influence happiness. Those earning about $150,000 report 20% satisfaction with their lives and well-being compared to those earning $500,00, reporting 60% satisfaction.* Similarly, a Swedish study of lottery winners found that even years after winning, lottery winners had greater life satisfaction and mental health and were better prepared to face life’s challenges, such as divorce, illness, and being alone. Apparently, substantial wealth made those things less difficult to cope with.**

Effect of Raises

According to PNAS, at the low end of the earnings spectrum, a raise is more likely to squash negative feelings about well-being than produce positive ones. At about $80,000 earnings, raises begin boosting feelings of satisfaction and well-being.

People at all income levels are tempted to use raises and bonuses to splurge. Before you treat yourself, financial professionals advise you to consider using raises and bonuses for any outstanding debt, to increase retirement savings, and for other investments. Then, treat yourself.

Another Happiness Influencer

The National Library of Medicine houses data confirms that for some people, keeping up with the Joneses is important for happiness. This data presents a split conclusion on neighborhood wealth’s impact on happiness and satisfaction. Findings suggest that people are generally happier living in more affluent areas, and individuals’ well-being is lower if they have less wealth or think they have less wealth than their neighbors.***

Personal Factors

Your neighborhood, paycheck, raise or bonus, the net worth of your assets, or the amount in your retirement accounts can’t literally buy you happiness.

Happiness

is also highly influenced by personal factors, as the graphic illustrates. However, it turns out that wealth may be associated with some of these categories of “happiness,” specifically self-focused positive emotions such as pride and contentment. A more challenging, higher paying career may give you both contentment and pride. Confidence in how well you can care for your family financially may fuel your contentment and peace. Giving children and grandchildren access to better education and their consequent achievements may make you proud.***

*Well Being Depends on Social Comparison, 2021
**Long-Run Effects of Lottery Wealth on Psychological Well-Being, 2020
***American Psychological Association, cited by Psychology Today, 2024
****American Psychological Association, cited by Psychology Today, 2024