Is happiness linked with money?

In spite of all progress in science and living standards in last 100 years, mankind is still elusive of the answer of what is happiness!

Numerous research has taken place in this subject over long periods of time. While these researches did not invent any universal formula for happiness, they did debunk few myths.

One common myth is that more you earn, more happy you become. Well, it is true up to a certain point. Extreme poverty does make people very unhappy but once the basic necessities (and even few luxuries) are met, further income no longer improves happiness level. This is illustrated by following diagram.

Happiness against monetary earning

There have been studies of at what income level optimum happiness occurs. A study by Princeton University in 2010 pegs the number as $75,000 for USA. If you adjust this number of inflation and geographies, you can calculate this for anywhere in the world. Effectively, it states up to this earning level you happiness will grow almost linearly but after you attain this level of earning, your happiness will rarely grow at same pace. In fact after a certain amount of high earning, you happiness level may even fall. This is because with increased earning people start spending money on luxury items (i.e. depreciating assets), indulges in show offs, make new rich friends and they start to measure themselves against new benchmarks etc.

Very rich individuals (e.g. industrialists, film stars, politicians etc.) have different level of problem like threat of attacks, lawsuits, not being able to lead a life away from public scrutiny, fear of losing (game, election, industry etc.) – which leads to unhappiness.

Can we delink happiness completely from money? Well, why not? Happiness is a state of mind. Money can buy utilities which can buy comfort but happiness is not entirely guaranteed with comfort.

Having a loving family, friends, spare time for hobbies etc. – all contribute to happiness even though these are not something money can always buy.

I have come up with a simple formula for happiness – uses only one parameter – the time!

Happiness index = number of hours you do things you like / number of hours you do things you have to do

So if you spend 2 hours in your hobby which you enjoy but to do that you need to spend 8 hours at work (assuming you don’t enjoy that) and 4 hours at household chores, then your happiness index is = 2 / (8+4) = 0.17

You can discard your sleeping time for a consistent approach. More sleeping reduces denominator value which increases happiness. This matches with our real life observation, unhappy people usually can’t sleep well.

Wish you all the happiness you deserve.


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