Do you believe that money can buy happiness? I reveal how much money in 2022 dollars you need to make annually in order to be happy.
The answer as to whether money makes you happy is debatable since happiness is highly subjective. Also, it will vary based on your personal experiences, such as what your money conceptions are and how you were raised with which money stories in your family or neighborhood.
We also have different lifestyles where some like to live lavishly while others embrace financial minimalism. Your cost of living definitely affects your happiness.
Some studies have determined minimum annual income levels in order to be happy.
Since these studies were done many years ago, I’ve updated the figures for 2022 by adjusting the minimum salary amounts per person per year based on the high inflation we’re seeing and I used an inflation rate of 9% for all of the American states in the union.
It’s important that we know what respectable levels of income are correlated with our happiness generally so we can better advocate for ourselves in the next jobs we get. We should recognize what we’re worth and demand the pay that we’re worth because we all contribute a lot of value to the organizations we work for.
This is especially critical that we get paid fairly because the gap between a typical worker’s compensation (wages) and productivity gains has been widening since the 1970s.
One popular study that’s frequently cited by articles is Princeton psychology professor Daniel Kahneman who in 2010 published that yes, money does buy happiness, but to an extent.
This study found that the minimum amount of money that a person needs to make every year in order to be happy is $75,000 in 2010 dollars, which in 2022 dollars is actually now $100,500 of a yearly individual salary. You need to make $25K more now than a dozen years ago to be even close to happy at the minimum.
A lot of Americans are not even earning nearly enough to make $100K a year because the median income in the US was only $67,500 in 2020, which is down by 2.9% from 2019 when it was $69,500.
Considering that, most people are making $30K below what they need in order to be happy. And this doesn’t reflect what a household needs to be happy, these income to happiness figures are on an individual basis.
If we think about how much inflation is taking away our purchasing power, CPI (Consumer Price Index) inflation was about 8.5% from March 2021 to March 2022. Incomes during that same period have only risen by 4.5%, so our wages have not grown nearly enough to stay in line with the rise in inflation. Everyone is getting shortchanged significantly by inflation.
This likely explains part of the Great Resignation movement we’ve been seeing. There’s popular advice that if you are staying with the same job for more than 2 years, you’re not earning enough as you may be getting paid up to 50% less than what you could be earning if you jumped ship to another job. Check what better pay opportunities are out there because maybe there’s greener pastures for you.
An updated 2018 study that was done by Purdue University using 2016 Gallup World Poll data measured happiness and income satiation/satisfaction around the world.
Purdue measured the minimum income levels per person per year to reach two categories of “happiness” across: 1) emotional well-being and 2) life evaluation AKA life satisfaction.
For emotional well-being, Purdue found that you needed to make in 2016 dollars at least: $60,000 to $75,000 per year, which in 2022 dollars is $73,000 to $91,000 per year.
For life satisfaction, you needed to make in 2016 dollars at least: $95,000 to $105,000 per year, which in 2022 dollars is $116,000 to 128,000 per year.
The more that you live in wealthier regions of the world, the higher levels of income you need in order to be satisfied.
I liked how the Purdue study included a simple tool for assessing life satisfaction, which is called the Cantril Ladder where 10 represents your best possible life and 1 represents your worst possible life. See where you stand on this ladder and if you’d like to improve your self-assessed score.
The Purdue study also looked at satisfaction x income levels across region, gender, and education. It’s interesting how women generally needed to make more money than men to be satisfied, and how you needed less income if you had low education levels compared to higher education levels requiring higher income to be satisfied.
The price of happiness in countries ranges widely, so I compared the happiness rank and minimum salary levels to be happy in 3 countries as an example.
In Germany that is the 13th happiest country as of 2021, you only needed to make $90K, whereas in the United States as the 19th happiest country, you needed to make $105,000. But in the 11th happiest Australia, you need to make a whopping $135,000 to be happy and yet Australia is happier than the US and Germany. So interestingly with the US having the middle salary of the two, Americans are the least happy compared to Germans and Australians.
I updated GoBankingRates’ 2021 minimum annual salaries you need to be happy in every state to reflect inflation of 9% in 2022. For example, in the state where you needed the least amount of salary to be happy, Mississippi, it was $87,465 in 2021 but in 2022 I estimate it to be $95,337. In a middle-of-the-pack state like North Carolina, in 2021 it was $101,325 and now it is $110,444 in 2022. In the most expensive state to be happy, Hawaii, you needed $203,070 in 2021 and now $221,346 in 2022!
The West Coast and East Coast tended to have the highest cost of living and required higher salaries to be happy in places like California and New York.
In summary, to be happy in the US, in 2021 you needed to make $110,000 on average, and now in 2022 you need to make at least $120,000 on average to happy throughout the United States with inflation raging.
So now that you’re equipped with this knowledge, go and make some money, and be happy! 🙂
If you’re interested in learning how to take control of your finances and start becoming an investor like Warren Buffett, check out my free PDF guide.
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