Association of Military Banks of America

Turns Out, Money Can Buy Happiness, But Only to a Point

By Amanda Mitchell, AFC®

Name something that you do that does not have anything to do with money. It’s ok; I will wait. If we are being honest, that list consists of maybe breathing. Even so, you still need sustenance to maintain life functions. Sustenance costs money. And it turns out, happiness does too.

Pump the brakes! The saying goes, “money can’t buy happiness!”

“Money can’t buy happiness” should be digested as more of an Aesop’s fable with a deeper meaning than a literal interpretation. Studies have shown that the amount of money you make does directly correlate to levels of happiness or “life satisfaction.”

To illustrate, we all have basic needs such as food, shelter, and clothing. So when your income is very low, the basic needs eat up a more significant chunk of income. There’s less, if any, money left to meet other needs, cover an emergency, or save. Just barely scraping by can be really stressful. Lower levels of income are linked to emotional pain. High stress coupled with emotional pain is not great for your mental health. The money/mental health loop comes into play. Mental health difficulties make it harder to earn and manage money which causes financial difficulties. Financial difficulties increase stress and cause anxiety, depression, and other mental health struggles. It’s a vicious cycle that some get caught in.

Where is the income sweet spot?

There is no one size fits all number. Income and happiness levels follow a positive linear trajectory until you hit about $75,000. At that point, things plateau, and more money added doesn’t increase life satisfaction. Once you cross this threshold, there’s actually evidence to suggest that this is where a reduced ability to enjoy small pleasures begins. So, money can buy happiness, but there are limitations. Those who are incredibly rich are not guaranteed happiness; it just means that money likely isn’t causing them high levels of stress.


A long time ago, I got the chance to student teach in a class full of second graders. I spoke to them about what they wanted to be when they grew up, and a surprising amount said something along the lines of being rich and famous. At the time, I didn’t think much about it. But, after knowing what I know about the link between money and happiness, I can’t stop thinking about those kids. While it is true that money can buy happiness, there are limitations. Some people just don’t have the option to earn $75,000. No matter what, there will always be the haves, and the have nots. As a single personal finance professional, I cannot change that. But what I can do is share my knowledge to help others improve their station in life. I think that our attitudes surrounding money needs to change. We need to shift our goals from income accumulation to goals that will bring us the most happiness. I think that focusing financial planning on mental health is even more important for military families because so much of our lives comes with a whole heap of stress. Deployments, cross country moves, new schools, and making new friends every few years is hard. It’s easy to get short-sighted and focus only on what is in front of you because you don’t know what tomorrow brings. So, I challenge you to start dreaming about tomorrow. Start planning with your happiness in mind.