Welcome back to The Happiness Files, Reader.

A few months ago, I wrote about how spending money wisely—especially through practices like thrift—can make us happier. That newsletter focused on how to use money well.

Today, I want to revisit the money question—one of the most talked-about questions in happiness research!—-from another angle:

How much money do we really need to be happy?

Because the truth is: Money does make a difference. But when it comes to our feelings about money, it's actually way more complex than we think.

Here’s the first thing. Big studies show that money only helps to a point. And I get it, most people think, “Well, let me get to that point–then I’ll figure it out!”

There was a big Gallup study (1.5 million Americans) that showed emotional well-being (like feeling calm, joyful, or less stressed) was higher for people with higher incomes—but only up to about $70,000/year. It also showed that life satisfaction went up with higher incomes, even well beyond $70,000, but the effect was small.

Quick note: The $70,000 threshold is dependent on lots of factors, such as the city you live in or the size of your family. But it’s important to realize that the amount of money it takes to meet basic needs is probably lower than we expect.

Here’s what often surprises people…More money keeps nudging happiness up, even at higher incomes. But the catch is that after your basic needs are met, each extra dollar moves the needle a little less than it used to.

When Money Makes a Big Difference

Money has the greatest impact when it helps people cover life’s necessities or avoid hardship. In a study by UBC psychologist Liz Dunn’s team, people were randomly given an unexpected $10,000 gift. Everyone felt happier, but—and this won’t shock anyone—lower-income participants experienced significantly greater gains in happiness.

That makes sense. When money eases uncertainty and reduces daily stressors, it makes room for dignity and personal choice. And, regardless, whether your annual baseline is $70,000 or $120,000, it’s important to be clear about what that number is for you and your loved ones (more on that in a minute).

But when our basic needs are already met, the relationship between money and happiness is not as clear as we’d expect. One of the main culprits is our brains’ natural tendency to get used to—and begin to take for granted—how much money we have (remember the idea of hedonic adaptation, from the newsletter about happiness myths).

Your Happiness Baseline Matters Too

There’s one caveat. Researchers discovered something fascinating—and not entirely surprising: Even people with high incomes become happier when they get a raise, but only if they are already relatively happy to begin with!

If someone is unhappy, more money doesn’t make much of a dent in their happiness. In some cases, it just adds more pressure.

That resonates. If your well-being is shaky, money won’t steady it. But if you’re feeling good overall, more cash can give you more ways to improve, savor, and support the life you’re already living.

The Downside of Wealth

We’ve all heard the phrase “more money, more problems,” and research shows there is a bit of truth to this. Wealth may shield us from some stressful parts of life, but maintaining a wealthy lifestyle comes with its own pressures:

• Greater fear of loss
• More worries about your kids
• More responsibilities and time pressure
• Lower appreciation of life’s small, everyday pleasures

That doesn’t mean wealthy people are necessarily more stressed than those in the middle. It just reminds us that money doesn’t eliminate emotional strain…It just changes its shape.

Your Turn

Money and happiness have a complicated relationship, but there are five simple practices you can begin to tip the balance in your favor:

1. Define Your “Enough”​
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What does financial security feel like to you? It’s less about a number and more about peace of mind. Take a moment to write down what “enough” means for you right now. What are basic needs and expenses you need to cover, and how does your income cover (or not cover) those each month?

2. Set Boundaries Around Spending Triggers

Pay attention to moments or emotions that lead you to spend impulsively or out of stress. Next time you notice an urge to spend, pause and ask yourself if it’s aligned with your values or just a reaction.

3. Resist Social Comparison

Comparing your financial situation to others is one of the biggest joy-stealers. Remind yourself that happiness is personal and unique. When you catch yourself comparing, pause and list three things about your life you genuinely appreciate.

4. Choose Experiences Over Things

Spending money on shared moments or meaningful activities often brings more lasting joy than buying more stuff. This week, try planning a simple, low-cost activity with someone you care about: a walk, cooking, or a free concert in your local park. (I just discovered one in my neighborhood on Sunday afternoons!)

5. Simplify Your Money Management

No matter your income, finances can be a source of stress. This week, pick one money-related task to simplify or automate—maybe setting up automatic bill payments or creating a basic budget. I procrastinated on keeping a budget for years, but now kind of “enjoy” the math! Being proactive with your finances can be a huge boost to well-being.

I hope these small steps encourage you. They aren’t about big financial overhauls but tuning in to how money really fits into your life and happiness.

If you try any of these, I’d love to hear what shifts for you.

Talk soon,

Sonja

P.S. Know someone else who would enjoy the Happiness Files? Use this link to recommend the newsletter to your friends or just forward this email!

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Want to go deeper? Go through the source material here:

Gilovich, T., & Kumar, A. (2015). We’ll always have Paris: The hedonic payoff from experiential and material investments. Advances in Experimental Social Psychology, 51, 147–187. https://doi.org/10.1016/bs.aesp.2014.10.002​

Graepel, T. (2025, August 25). Money for happiness and chits for free. Patterns of Thought. Substack. https://thoregraepel.substack.com/p/money-for-happiness-and-chits-for?r=b7hdd&utm_medium=ios&triedRedirect=true​

Killingsworth, M. A., Kahneman, D., & Mellers, B. A. (2023). Income and emotional well-being: A conflict resolved. Proceedings of the National Academy of Sciences, 120(10), e2208661120. https://doi.org/10.1073/pnas.2208661120​

Smith, M. D., & Wesselbaum, D. (2023). Well-being and income across space and time: Evidence from one million households. Journal of Happiness Studies, 24(5), 1813–1840. https://doi.org/10.1007/s10902-023-00660-4​

Stenlund, S., Guo, Y., Rights, J., Dwyer, R, & Dunn, E. (2024). How spending decisions shape happiness in everyday life. Communications Psychology, 124(2). https://doi.org/10.1038/s44271-024-00166-6​