Money, according to the wise words of Homer Simpson, it can be exchanged for goods and services. If you have a lot of it, you can buy almost anything you want. If you don't have a lot of it, life can be far more difficult. But does having more of it make us happier? I grew up in a home where we weren't rich, but in retrospect, we certainly weren't poor. Perhaps because of that, we rarely spoke about money. There were no talks about how much it takes to survive or how to manage it. And there were no discussions about how much it takes to make a person happy. However, that wasn't the case for my friend Clara, and recently I gave her a call to talk about it.

Hello?

Sa ka fete!

Yeah! Good!

Let's just start off. Why don't you tell me your living situation as a child? Where, where did you live? And did you have to work in order to help support your family?

I'm from the eastern Caribbean. We live in a what you call a small village in a farming community. So I was fortunate person because we had a lot of land and we had cows. We had pigs.

When you say that you were fortunate, I mean, you have it seems like you had enough to survive. But was that everybody on board working to help support the family?

One thing I need to point out, despite all of that, money was tight. We literally had no money. And sometimes we literally had no shoes. The shoes -- we'd have the shoes in our foot, it had the wholes in it, because parents couldn't afford to buy everybody a pair of shoes.

Do you think money can buy happiness?

I know a relative of mine, they have money. They have about two houses renting, plus they live in a mansion. Husband works, wife works and the kids work. Guess what? They are not happy. Life is chaotic. Money can not buy happiness. But money can solve a lot of problems and troubles. Money and happiness is almost like a knife. It can bite you, but also it can cut the fruits and vegetables for you. Very fine, but it's not as easy as many people think.

My friend isn't alone in feeling this way. One recent study indicates that only about one in five Americans believe that money can buy happiness. That means the majority of us don't think we need money to be happy. But when you look at our behaviors, money and happiness are clearly correlated. Studies also show the vast majority of Americans have either spent money on things that would make them happier or believe that earning more money at their job would make them happier. So maybe deep down, we do believe that money can buy happiness. Which raises the question how much money do we need to be happy? Should we move heaven and earth to earn six figures? Or can we be just as happy with less? My journey to answer this question took a lot of twists. Ultimately ending in a high flying trapeze ride.

Holy s**t. I'm good. We're good. I'm happy like this.

Stick around. We'll get to that later. I'm Harry Enten, and this is Margins of Error. So when I started doing research for this episode, I asked you listeners, what's the minimum salary? You need to be happy. And what's interesting is a lot of you came up with the same number.

Hey, Harry. I would say the minimum salary to be happy as a single adult living in California would probably be about 60k a year.

Well, highly dependent on where you live, but 60,000 in New York City.

I would be very happy if I made anything more than probably 60,000 a year. That would probably be enough for me to do everything I want and more.

What's even more interesting is that this salary isn't too far from the one outlined in a 2010 study from Princeton University, which suggests that once we reach an annual salary of $75,000, our day to day happiness or what the study calls emotional well-being, doesn't increase much. Of course, that $75,000 estimate might differ when you adjust for inflation and cost of living. But ultimately, researchers found that your day to day happiness increases as your salary increases until about 75,000. Then it plateaus. Now the study found that your life satisfaction or how pleased you are with your life overall, that continues to increase after 75,000. But your day to day happiness, it doesn't. One explanation for why this happens is hedonic adaptation. The idea is that even after a big, positive or negative change in your life, you tend to return to your baseline of happiness. So after you get that fancy promotion, you feel great for a while, but it's only a matter of time until you return to the level of happiness you had before that promotion. Another explanation is that the more money you get, the more you think you need to keep up with the Joneses. But ever since that Princeton study was published, when people wrote articles like "how much money do you really need to be happy?" this $75,000 estimate from Princeton was the go to answer. That was until 2021.

I'm Matt Killingsworth, and I'm a senior fellow at the Wharton School at the University of Pennsylvania. When you look at the data, it's not clear that all of the things that we work so hard to achieve necessarily pay off in terms of the happiness they deliver. One of the things that I tried to do in my study is not only collect these real time measures of people's happiness, but also closely match the measures themselves.

Matt's happiness study turned that $75,000 number from Princeton upside down.

Lo and behold, what I see is this really beautiful linear relationship, basically, where every increment in income is associated with a bit of an increment in people's happiness. And I don't see a point where there's two different dimensions of well-being or happiness sort of diverge.

Wait, so people who earn more money actually are happier on a day to day basis, even beyond that threshold of $75,000 a year. Well, before we can talk about Matt's results, we need to talk about how we executed this study, because it might give us a clue as to why he arrived at a different conclusion than Princeton did. Back in 2009, Matthew launched an app called Track Your Happiness.

The fundamental premise is measuring happiness in real time. So instead of conducting what I might call an ordinary survey, like measuring people once a year, where you ask them something like "how happy are you in general?" Instead, the way this app works is that I ping them in real time repeatedly so people get a notification on their phone at a random time several times a day over a period of several weeks, and each time they get pinged, I then ask them a bunch of questions about their experience at the moment, just before that ping. I might ask them things like how they were feeling, how happy they were, what they were doing, who they were with, what they were thinking about, lots of other factors. And that basically kind of gives me a little snapshot of that moment of their life. And then I do that across a whole bunch of moments. And I get this kind of, you know, composite image of what the moments of their life are like.

Over the course of seven years, Matt gathered data from tens of thousands of people across a wide range of incomes from folks earning minimum wage to those making over 500 grand a year. Now I want to point out two important factors about Matthew's methods. He measured happiness, one in real time, and two, on a continuous scale. When it came to tracking day to day happiness, part of the Princeton study, on the other hand, asked participants yes, no questions about the past, like, did you smile or laugh a lot yesterday?

One of the advantages of this sort of way of measuring happiness is that I'm simply asking people, "how do you feel right now in this very moment?" And I think at least most scientists would agree that's sort of the highest fidelity measure we can collect, whereas if we ask people how they felt at some point in the past, then there's some extra degree to which people could be wrong. So I have them answer that question on this continuous sliding scale with a really infinite number of possible points almost. So I get this really sensitive measure of how they're feeling.

As you now know, Matt found that day to day happiness does not plateau after $75,000, but there is a small catch. Matt says that he found a linear relationship between happiness and the logarithm of income. I know some of you haven't heard the word logarithm since high school algebra class. So I'll pass the mic back to Matt.

What that basically means is that each dollar buys a little bit less happiness. So if someone earning $20,000 a year gets a 10% raise, someone earning $200,000 get gets a 10% raise, these data predict that that will deliver the same increment in happiness. So kind of proportional differences have the same effect.

Proportional differences have the same effect. So winning a $5,000 cash prize will mean a lot more to someone earning $20,000 a year than someone earning $200,000 a year. Because the more money you make, the less you value each individual dollar. Now, let's talk about the big question here. Why does making more money make us happier? Why would someone making $250,000 a year be even happier than someone making $100,000? Isn't the fact that they're both making six figures enough?

Maybe it's the case that, you know, someone earning $250,000 really can exploit a broader range of opportunities in life than someone earning $100,000. And you know that that frankly makes sense to me. Another thing that I see is explaining this relationship in my data is simply that the less money people earn, the more trouble, concern, difficulty they have just paying their bills.

As you might expect, once you pass the poverty line, your life satisfaction goes up sharply, a.k.a. your overall life happiness is much higher. But your momentary well-being or how you feel day to day, well, that doesn't change as dramatically. It just consistently improves the more you earn. So does this mean we should just make as much money as possible? Well, not exactly.

It's not always better to earn more money because of the way you're going to earn that is going to cost you in other ways, it could actually reduce your happiness. So my message isn't everyone should really just be making a whole lot of money. That could easily be bad advice.

It's simple. If you focus too much on making money, then you won't have time to just enjoy life. Matt also cautions against defining your personal success by your salary.

So the the more people said that they actually defined their personal success in terms of money, they tended on average to be less happy. You wanna have it but you want to not care too much about it. But another perhaps wrong way to think about it, especially based on the findings from my study that we're talking about today, is to say money doesn't matter at all. I do find the more money people are earning, their lives are a little bit better. They're not radically better. But there don't seem to be a lot of, you know, negative trade offs either.

Instead, Matt suggests that we think of money as one piece of our overall happiness portfolio. Making more money would be nice, but we can't always control when we get a raise or strike it rich on the stock market. So after the break, I'll talk to a happiness researcher about what we can do to squeeze the most happiness out of every dollar we already have.

What you do with your money may matter just as much as the amount of money that you've got.

Some of her methods may surprise you. Stay with us.

It'd be great to bask in a swimming pool full of cash and live happily ever after. Because, as we just learned from Matt Killingsworth, the more money you make, the happier you tend to be. But unless you're a tech billionaire, making endless amounts of money just isn't realistic, right? Well, I talked to a happiness researcher who assured me that all is not lost.

What you do with your money may matter just as much as the amount of money that you've got. So making really good choices with your money, like using it to benefit others in meaningful ways, can make you really happy, even if you don't have a ton of money.

This is Elizabeth Dunn. She's a psychology professor at the University of British Columbia and the chief science officer at Happy Money, a financial technology company that helps people acquire personal loans.

As a happiness researcher, people always want me to, like, write down the secret to happiness that a slip of paper and hand it to them. And there is no one secret to happiness.

The same is true for the relationship between happiness and money. There's no one size fits all answer, but Elizabeth has discovered five strategies that generally work for people. The first isn't to buy things, but experiences.

Experiences often connect us with other people that we care about. So, you know, if you're going on a trip or going out for a special meal, usually it's not going to be by yourself and that it's going to help to enrich your relationships. So that's one reason. Another is that experiences seem to be more deeply connected to our sense of self. So when people look back on their past experiential purchases, they tend to feel that, you know, this is really more about who they are. Whereas, you know, even if people really like their couch, they tend not to feel like the couch is relevant to who they are.

Next, Elizabeth recommends taking a break from your regular purchases.

I think a great strategy can be to think about your habitual purchases that you started, things you started out buying because they made you happy, but that you no longer really even notice and say -- and at least try just taking a break from those purchases because taking a break from the things that we like can kind of enhance our enjoyment of them.

That makes a lot of sense. Almost like buying tickets to a baseball game. If I go twice a season, that will actually give me more joy per visit than buying tickets to all the baseball games and going to every single one. The third strategy is to buy time.

People sometimes struggle with the notion of buying time because it feels frivolous. It feels like, well, I could clean my house, so it's not a good use of money to pay somebody else to do this for me. Well, let me tell you, as a happiness researcher, the data are in, and it is very clear now that buying time is a good strategy for, for promoting happiness. So just to give you one stat, when Happy Money surveyed 15,000 Americans right in the midst of the pandemic, we found that people who reported things like paying for house cleaners, ordering takeout to save some time, they exhibited 10% higher life satisfaction compared to people who didn't.

And I take it that 10% is a lot. I mean, you know, sometimes 10% can be small, but you're making it seem like a 10% increase in happiness is a lot -- is a large increase.

A 10% increase in life satisfaction is pretty hard to get, like life satisfaction is quite stable, it's difficult to move. So the fact that we see these time saving money choices linked to greater life satisfaction, a difference of 10% is is pretty considerable.

Maybe you think buying time is a strategy for rich people, but Elizabeth says it's more accessible than you think.

If anything, it seems to be a more robust effect at the lower end of the income spectrum. So, you know, you might not be able to buy your way out of everything or buy your way out of the thing you most would like to stop doing. But even just creating that little bit of free time for yourself, I think can be really valuable. And, you know, the step two, that I would suggest, is if you're going to buy your way out of that time, think about using that time to then do something that really makes you happy.

The examples that I sort of think about are sort of shortening my commute. I pay a little bit more rent to live a little bit closer to my work, and so I'm able to buy myself a little bit more of time. And I guess the other thing is, you know, maybe substitute out something that otherwise you didn't really want to do, maybe like watching less television or something along those lines so that you're able to concentrate on the activities that you kind of want to do more. Number four was pay now, consume later. What's an example of that that you really think is a good one?

Well, I put this idea into practice when I was planning my destination wedding in Mexico. So we really encouraged our guests to pay for their stay at the resort quite some months ahead of time before coming to our wedding. And so this meant that they could enjoy the experience as though it were free. And we also spent a lot of time just anticipating it. You know, long before the trip, I would look at pictures of the resort and kind of fantasize about it and think about it. And so, you know, taking advantage of this free source of pleasure in the form of anticipation, I think is a really great way to squeeze the most happiness out of every single dollar.

The last method for happier spending is actually something that Clara shared on our phone call at the top of the episode.

If you have money, always share it with the less fortunate. And do not waste it.

Here's Elizabeth again.

What we've discovered in our work is that there does seem to be this like intrinsic joy that's kind of baked into human nature that that stems from from helping others. So the remarkable thing is that we see, even in children under the age of two, we see that using their resources to benefit others, giving away, for example, some goldfish, actually makes them happy. What we've discovered is that people who use money to help others by, for example, donating to charity are happier than those who do not.

Mm hmm. And I guess my my question is, is there a correlation, therefore, between how much money you spend on someone and how much happier you are as a result? Is that like a clear correlation that you see?

You know, I would say it's more about the way you spend money on others than exactly the amount of money that you spend. So in particular, we're more likely to get an emotional boost from spending money on others when we can really see the impact that we're having. And of course, you know, if you spend a bunch of money on somebody, you might be more likely to see the impact that it's had on them than if you just spend a trivial amount of money. But sometimes we just spend a little bit of money on someone and it really makes a big difference for them. And that can fill us with joy to the same extent as if we'd spent, you know, a whole bundle of money.

Why does giving away our money make us happier? Didn't we just learn from Matt Killingsworth that we're happier when we have more money?

If we're able to give our money away, right? It can give us the sense that, hey, if I can help others, I must be doing okay myself. So whether we're giving away money or giving away time, it can make us feel like we ourselves must be doing okay because we're able to help others. Of course, human happiness is complicated. That's why I've managed to devote my whole entire career to studying it. There is nothing, not Pilates, not winning the lottery that makes everybody happier, always, all the time, perfectly consistently. Instead, human happiness is a much more complicated and fluid thing. And so to some extent, we just have to experiment with our own happiness.

So it turns out that not even scientists can tell us what to do to be happier. They can give us suggestions. But ultimately, we need to figure out what works for us. Like Elizabeth says, we need to experiment. After the break, I'll do some experimenting of my own. Elizabeth said to buy experiences instead of things, right? So I'm going to try an experience I never thought I'd do in my entire life. Coming up.

Lord, oh lord, oh lord. I think I found Jesus even though I'm a Jew.

Before the break, we learned that when it comes to money and happiness, the way you spend your money can matter just as much as the amount of money you have. And Elizabeth Dunn shared five strategies for happier spending. Now, I'll admit that one of those strategies I was on the fence about.

Let's talk about the buying experiences, because I must admit, I am very skeptical of this as someone who does not buy experiences really at all.

This is so interesting that you're you're skeptical of this one, because this is usually, of all five principles, this is the one that people are like, "oh, yeah, that's definitely true. But let's talk about some of these other weird ones."

But after hearing that the memory of experiences gives us more enduring joy than a material gift does, I decided to try it out. When I first discussed this idea with my producers, I suggested getting dinner at a fancy restaurant or going to a baseball game. But they wanted me to think bigger. So we chose a hot air balloon ride over upstate New York. That seems scenic, right? I could imagine myself being whisked away in the air, taking in the beautiful vistas, like in that song. Up, up and away.

Up, up and away, in my beautiful, my beautiful balloon.

We didn't go up, up and away. Our trip got canceled when a surprise storm dumped eight inches of snow on our launch location. Still, I wanted to try a new experience and getting in the air seemed like the way to go. So we executed plan B: trapeze school.

Oh, shouldn't that net be wider. I feel like I can fall further.

The New York Trapeze School is perched on the roof of a building on Pier 40 in Manhattan. On one side is the beautiful Hudson River. Straight ahead, One World Trade Center and below us--

I do not like this at all. I feel like we're high up and I don't like being high up. I do not like heights.

Now you're probably wondering why I would sign up for a trapeze class if I'm afraid of heights. Well, one of the reasons we buy experiences is for the memories. Right? And what's more memorable than facing your fears?

So flying trapeze is the physical activity. We will be using our bodies as we move through space. We might ask you to put your body in positions that feel unfamiliar. This is a new activity. But nothing should hurt.

There were a lot more rules to trapeze than I expected.

The first commands that you're going to hear from Tanya up there is the word "ready." Now, it might seem like she's asking you if you are ready. She is not. She is telling you to get ready. And how we get ready to leave the platform is just by bending our kneesa little bit. So let's try that out. Stand tall. Awesome.

The other important command is the word "hep". H-E-P. It's a circus word that means go. As I waited for my turn and saw all the other fliers ahead of me with hep in their step, I started second guessing myself.

Now I would just go back to the studio. We'll talk some mid-term elections and we'll call it a day. That makes me far happier than this because I know what I'm doing. I can talk midterms in 3 seconds. This: I don't know what any of this is.

But I'm no quitter. So when it was my turn, I climb the ladder 23 feet into the air. And when Tanya said, ready, I got ready.

I am okay. I'm good. We're good. I'm happy like this. Thank you. We're going to stay. This is nice. Thank you.

I'd like to say I swung upside down on the second attempt.

But that was great.

Yeah, I'm fine.

Alrighty, cool.

Thank you.

Or even the third or fourth attempts.

Overtalk.

I just am not flexible enough.

You. You had it. You're definitely flexible enough.

Finally, it was time for my fifth attempt. The class was about to end. It was now or never.

Apparently, I'm a glutton for punishment. I don't know why I'm doing this again.

Go for it. Okay. Hang straight. Try it again. Let it go. Turn into a ball. Under, under, under (Cheers)

My pants are going to fall off.

No, you're not.

No, my pants. Not me.

And when I got out of my harness, I felt the sense of accomplishment. Sort of.

Thank you. Look, it only took about 2 hours to be able not to be so afraid as to be able to keep my eye open while I was doing it. But once I wasn't afraid, I was able to do it. I came, I saw, I did mediocre. And I do believe what this experience sort of lays the foundation for and is an example of, is that I will remember this. Right? People ask me, what's one of the craziest things you've ever done? I think taking a trapeze class would certainly go up alongside of it. So even if in the moment it didn't make me particularly happy, over time when I look back on and say, You know what? I actually didn't have that bad of a time, and it's something I will probably always remember.

So now we're a few days after I went trapezing through the air and I'm starting to reflect on my experience. I do so with an incredibly sore body, which is a clear indication that, well, I'm in horrible shape. Mentally, though my mind is clear. I will say I've watched that video of me trapezing a number of times over. I've gotten to share that clip with some of my friends and I've told the story of flying through the air to many. In other words, it's a gift that keeps on giving. I didn't just buy an experience. I bought a story. When you buy an object, I feel like the chance of that occurring is far less. Often, it's just a one and done deal. But it's more than that. I think that trapezing experience has gotten better, the further we are from it. This is something I was getting at when I was down at Pier 40 doing trapeze. Nostalgia. Given that I didn't break any bones, the feeling of fear is gone. The feeling of doing something absolutely ridiculous and surviving has replaced it. Now, to be clear, I'm not saying trapezing was a transformative experience for me. I'm not going to start becoming a daredevil, and I'm probably not going to go back trapezing on my own. But if a romantic partner asked me to do it, I probably would. I don't fear it. Even if I don't really want to do it. You're also perhaps wondering whether I'll change my spending habits. The truth is, well, I've never been one to buy fancy objects anyway. So this experience was less about changing my own life and more about demonstrating a theory in real life. I really do think buying experiences, on the whole, tops objects in terms of bang for your buck. Of course, you have to be in a financial position to do that. Not everyone is so fortunate to have the money to randomly go trapezing. There's no doubt in my mind that money does buy happiness, to a point. Whether that is getting to above the poverty line or the line at which your family is not living paycheck to paycheck, I'm not exactly sure. But to those who say money doesn't matter, that's not true. To those who say basically it's the only thing that matters, that's also not true. Perhaps like Clara always likes to say to me, the truth is somewhere in between.

On our next episode. My favorite soda in the world was A&W diet cream soda. But a couple years back, it got rebranded as A&W cream soda, zero gugar. So I want to find out. Did sero kill diet or was it something else? Next time the rise and fall of diet soda. Margins of Error is a production of CNN Audio and Western Sound. Our showrunner is Cameron Kell. Our producer is Savannah Wright. Production assistance and factchecking by Nicole McNulty. Misha Stanton is our mix engineer. Additional support from Tameeka Ballance-Kolasny, Dan Dzula, Allison Park and Alex McCall. Our executive producers are Ben Adair and Megan Marcus and me well, I'm Harry Enten.