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Science Changed Its Mind: Apparently Being Rich Really Does Make You Happy
Even since the famed economist Daniel Kahneman published a study in 2010 on the link between wealth and wellbeing, practically all sophisticated people suddenly thought they had an answer to the question: does being rich make you happy? The answer was yes, up to around $75,000 per year, and then no after that.
Interestingly, the $75,000 mark was about what the average academic earned, so the study effectively showed them that earning more probably wouldn’t help. They’d just have to accept that they had reached peak joy, despite their generally miserable state.
However, with more recent studies, that view of money and happiness has changed again. Now the science says that it depends on where you think poverty stops and wealth begins.
Naturally, this is a very person-specific approach to the problem. Some people think that incomes of $50,000 per year are extravagant, while others consider them wholly inadequate for allowing them to lead the lives they want to lead.
Researchers found that the effect of money on happiness related to what people thought being rich meant. Most people quoted figures of under $5 million as being rich. However, those whose incomes were above that, such as billionaires, thought seven-figure net worths were relatively small.
The research found something interesting: it’s not the absolute amount of money that counts when it comes to happiness; it’s how we perceive it. If we think that $75,000 per year is a small change, then earning it won’t make us happy. However, if we believe that incomes at that level are a sign that we’ve “made it” and we can do everything that we want to do in life with them, then they might increase our wellbeing.
This discovery has led some people to argue; therefore, that to be happy, we need to change our money perspectives. That might sound like a statement of the obvious, but it has taken science a long time to come up with that gem for us.
Of course, it’s hard to actually kick beliefs about money to the curb once they’re embedded in your personality. It’s hard to convince yourself that you can be happy with anything less than the figure that you set for yourself in your head.
Building Wealth Is The Antiodote
Fortunately, income comes in two forms: what you earn and what you receive from investments. You can’t always increase what you earn without limits, but you can certainly improve your investment income by investing every year.
That’s what wealth managers, such as Prio Wealth, want people to know. Even if you can’t have the lifestyle you want right now, you can put money away to build your investment income for the future. As it starts to accumulate, the amount of passive income you have each year increases, and the happier you should become. The bottom line is this: nothing in life is free. If you want to increase your income and happiness in the future, you have to make sacrifices today.