You can’t have too much money, according to new Brookings Institution research that finds the relationship between wealth and happiness has no limits.
Higher income leads to greater happiness, according to new Brookings Institution research that debunks popular notions of wealth and personal satisfaction.
The widely accepted Easterlin Paradox – a theory put forward by Richard Easterlin in the 1970s – posits that individuals with income sufficient to meet their basic needs do not experience greater happiness when their income rises above a certain threshold or satiation point. Brookings researchers find no support for this and similar claims.
The relationship between wealth and well-being is linear and “does not diminish as income rises,” according to the study authors, Betsey Stevenson and Justin Wolfers, of the Gerald R. Ford School of Public Policy at the University of Michigan. The two analyzed data on income and happiness among rich and poor people across nation’s and within individual nations and found, “While the idea that there is some critical level of income beyond which income no longer impacts well-being is intuitively appealing, it is at odds with the data. “
Populist ideals support the notion that money cannot buy happiness, and even the most affluent Americans seem to buy into the idea. Only 20 percent of Millionaires surveyed in February by Spectrem’s Millionaire Corner believe that greater wealth brings greater happiness. Yet, high net worth Millionaires also report significantly higher levels of satisfaction in every aspect of life compared to less affluent Americans.
“Most Americans – even the wealthiest – are uncomfortable with the idea that wealth is linked with happiness, but it’s important to acknowledge the sense of well-being that comes with financial security,” said Catherine McBreen, president of Millionaire Corner. “That awareness can lead to increased financial literacy and the first steps toward personal financial planning.”
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Less than 25 percent of investors with less than $100,000 in investable assets rated themselves as “very happy,” compared to 44 percent of high net worth Millionaires - those with $5 million up to $25 million in investable assets. Investors at all wealth levels rank a happy marriage or committed relationship as the most important component of happiness. More than 70 percent of high net worth Millionaires indicate they are “very satisfied” with their marriage or committed relationship, compared to 45 percent of individuals with less than $100,000 to invest.
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