How Much Money Guarantees Happiness? The Research Reveals

The Growing Wealth Gap and the Question of What’s Enough

Over the next decade, Elon Musk could become the world's first trillionaire. A recent proposal from the Tesla board includes a $1 trillion compensation plan if Musk meets ambitious growth targets. While this figure is staggering, it highlights a broader global trend in wealth distribution. In Australia, corporate pay packets are not yet on that scale. However, even here, the departure of Virgin chief executive Jayne Hrdlicka was marked by a payout of nearly $50 million in shares and other cash benefits.

Research from the United States suggests that people believe the average CEO earns ten times more than the average worker—but would prefer that ratio to be closer to five times. In reality, the gap in the U.S. has been estimated to be between 265 and 300 times higher for CEOs compared to average workers. Australians think CEOs earn seven times more than the average worker and would prefer that number to be only three times. However, the real gap in Australia is also much higher. A long-running study found that CEOs of the top 100 Australian companies earned 55 times more than average workers last financial year.

So, how much money is enough? This question has been debated for thousands of years. Aristotle, the ancient Greek philosopher, introduced the concept of eudaimonia, or "living well." He argued that true happiness comes from cultivating one’s character and mind rather than accumulating excessive external goods. His philosophy does not discourage wealth entirely but warns against making it the sole focus of life.

Recent research has explored how much money is needed for peak well-being. A 2010 U.S. study suggested that well-being peaks around $75,000. Adjusting for inflation, this figure would now be closer to $111,000. However, this varies depending on location and cost of living. Other studies suggest that well-being may continue to increase with growing wealth, though the marginal gains from significant wealth increases—such as moving from $1 million to $10 million—are smaller than those from escaping poverty.

A 2022 experiment studied 200 people across multiple countries who were given $10,000. It found that people in lower-income countries experienced significantly greater happiness gains compared to those in higher-income countries, including Australia. Even those with household incomes up to $123,000 saw measurable benefits. Notably, many participants gave away more than two-thirds of the money to family, friends, strangers, and charities.

Valuing Time and Relationships

Decades of research show that materialistic goals—such as acquiring wealth for status or image—can undermine well-being. This is often linked to low self-esteem or negative social comparisons. People can get stuck on the “hedonic treadmill,” where they constantly seek more to feel happy, only to become accustomed to their new level of wealth.

Harvard research tracking generations since 1938 shows that deep, meaningful relationships are key to mental and physical health. Psychologist Abraham Maslow’s hierarchy of needs emphasizes that self-actualization begins with meeting basic needs like food, shelter, and opportunities for personal growth.

Studies also highlight the importance of “time affluence” and “experiential buying.” Spending on experiences, such as meals with loved ones or holidays, can enhance well-being by building relationships and creating lasting memories.

The Social Costs of Inequality

Economic inequality in Australia is increasing, particularly affecting young people as housing becomes less affordable. Research from the UK indicates that rising inequality leads to worse social outcomes, including increased crime, drug and alcohol abuse, obesity due to unaffordable nutritious food, and reduced social trust.

The richest 20% of Australians owned around 62% of the nation’s wealth in 2019–20. As inequality worsens, it threatens community well-being. Ironically, those who benefit most from extreme wealth may not necessarily be happier or more fulfilled. This raises important questions about how wealth should be distributed and what a fairer society might look like.

Understanding these issues is crucial for shaping policies and cultural values that prioritize well-being over unchecked wealth accumulation.