The Stats Guy: Turns out money really can buy you happiness
If you’ve spent any time scrolling through pop-psychology newsletters or read a single self-help book over the past decade, you’ve certainly come across the claim that “you don’t need to earn more than US$75,000 a year to be happy”.
The income ceiling for contentment is a lovely narrative that is at the same time surprising and intuitive – the Bible told us a long time ago that money isn’t the path to salvation.
“It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.” Matthew 19:24
The US$75,000 happiness myth traces back to a 2010 study by two giants of behavioural economics, Daniel Kahneman and Angus Deaton of Princeton University.
They analysed survey data from hundreds of thousands of US Americans to see how income related to happiness.
Their conclusion seemed delightfully simple: emotional well-being rose with income, but only up to about US$75,000 per year (that equated to roughly in buying power to US$113,000 in 2025 buying power or $174,000).
Beyond that, people reported no greater day-to-day happiness.
It was an irresistible headline. The idea that money can’t buy happiness (beyond a modest threshold) fits perfectly into our moral sensibilities. Newspapers, podcasts, and airport-bookshop authors all ran with it.
The nuance of the research was lost in translation. There is more to work than pay, meaning and purpose matter too. Bosses liked the idea of getting better performing staff without having to increase pay by simply telling a better story about their businesses.
You might like
What the study really said
Kahneman and Deaton didn’t claim that life suddenly stopped improving at US$75,000. Their data distinguished between two kinds of happiness.
First there was emotional well-being (self-reported feeling of yesterday: stress, joy, anger, sadness). Secondly there was life evaluation (self-reported overall rating of your life).
The study found that emotional well-being plateaued around US$75,000, but life evaluation kept rising with income. In other words, more money continued to buy people a higher sense of life satisfaction, even if it didn’t make them smile more each day.
The difference matters. You might be just as cheerful earning $80,000 as $180,000, but at higher incomes you’re more likely to say you live a good life. That might be because you can afford better or more stable housing, achieve higher education, or simply maintain the ability to plan for the future.
The research was retested
Fast forward to 2021, when psychologist Matthew Killingsworth used smartphone-based surveys to track people’s feelings in real time. His data showed that both emotional well-being and life evaluation continued to climb well beyond $75,000.
The “happiness plateau,” it seemed, might not exist.
Kahneman initially disagreed, but the two researchers did something rare in academia: they teamed up for an “adversarial collaboration”.
In 2023, they published a joint paper reconciling the findings that for most people, higher income does indeed correlate with higher well-being.
That was true even for incomes over US$100,000. However, for a smaller group of people with low emotional well-being, the effect does plateau, and more money doesn’t fix deeper sources of unhappiness.
In short: money helps, but it’s not a magic cure – you of course knew that from celebrity biographies and interviews.
Stay informed, daily
Why this matters
The US$75,000 myth persists because it’s comforting. It reassures us that happiness is within reach even if we don’t earn high incomes, that the rich aren’t necessarily happier than the rest of us.
The fuller picture is more interesting and more human. Money does buy freedom from misery, from stress about bills or unexpected shocks. If a problem can be solved with money, is it even a problem?
Before his passing last year Kahneman reminded us why this research matters. He wasn’t trying to preach an anti-money gospel. He was trying to measure the messy intersection between psychology and economics.
Kahneman’s goal was to quantify, however imperfectly, what makes life worth living. Pop-psychology books and self-help bloggers dumbed the findings down and distorted them in the long-run.
What Australian data tells us
Now let’s see what the data shows us in the Australian context. The US$75,000 from 2009 translate to $146,000 as of August 2021. Why go back in time? Because that’s when we held our last Census.
The last Census asked for the first time about chronic health conditions. We therefore can draw conclusions about happiness or life satisfaction by looking at medically diagnosed mental health conditions by personal income bracket.
The result is clear. Even beyond the threshold of $146,000 we see fewer poor mental health diagnoses. The very low annual incomes of under $15,600 can largely be attributed to young people working part-time during their education or people who choose to do a little work on the side despite not needing an income.
In an environment of geopolitical uncertainty and escalating costs of living, money frees you from worrying about your housing future, provides you with mobility if needed, purchases better education for your kids, and turns high grocery and electricity costs into a mere nuisance rather than an existential crisis. In general, money allows you a more worry-free life.
That’s why our national government should see affordable housing and lower energy bills not just as economic issues but as tools for national wellbeing.
Every dollar shaved off rent or power costs has the same effect as raising incomes for those who need it most. When essentials are affordable, stress declines, resilience rises, and happiness becomes less dependent on luck or inheritance.
In short, smart policy (like money) can buy happiness – not by making everyone rich, but by making life less precarious for those at the bottom.
Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, or LinkedIn.
