How much money do you need to be happy?

In this article we will discuss the complex, surprising and sometimes contradictory data and research about money and happiness.

We often have clients asking us how much money they will need to be able to afford to retire, but almost never does anyone ask how much they will need to be happy. Having said that, our approach means these two points often converge in our objectives-based advice process.

In assessing how much money someone needs for retirement, there are a large array of influencing factors. These include your cost of living, where you intend to live in retirement, the age you commence retirement, tax, inflation, and investment markets. Overriding all these functional impactors is the key point of your objectives. That is what is important to you, or to put it another way, what makes you happy? This can be captured in the various aspirations you have for the rest of your life.

Therefore, when we are asked about how much is needed for retirement, we seek to uncover how you want to live.

Before diving into the growing research in this area, we can present the Black Swan Capital definition that the amount of money you need to be happy is the amount that will allow you to live being able to fulfil all life’s aspirations and without the stress of financial compromise.

In an article on income disparity and the link between earnings and happiness in 2025, in The Conversation, the author referenced Aristotle and his concept of eudaimonia as an aspiration and an alternative to wealth accumulation in its own right. This might be our new favourite word!

Eudaimonia may be captured as a state of well-being, flourishing or living well, placing importance on developing oneself rather than only focusing on acquiring external goods. As they state eudaimonia doesn’t necessarily mean living a monastic life devoid of material belongings or wealth altogether. Rather it is about its centrality in our lives and remembering to focus on personal development and what is most important to us as well.

The fact that Aristotle was describing the shortcomings of a life focused only on acquisition of material items in Ancient Greece means it is not a problem of 21st century life, it is a problem for the ages. His descriptive statement that acquiring goods beyond our capacity to use them does not enrich the soul or lead to fulfilment or happiness has a contemporary feel to it.

This opens several topics worthy of discussion. The first is the Black Swan Capital position that money should be considered a means to an end. You acquire wealth for a reason; it is not an end in itself. With this approach we always keep your objectives top of mind.

There has been research over recent decades on the links between money and happiness. We wrote about the research by the famous economist, Daniel Kahneman and his fellow researcher Angus Deaton, where in 2010 they published a paper stating that income and happiness links weakened beyond an annual income of USD$75,000. That figure might be more like $115,000 in today’s money, but the principle of their research remains, that above a certain level of income, additional money did not have such an impact on happiness.  

This has been followed up by more recent research. One study that suggested the marginal increase in happiness linked to higher income had a much higher cap, up to $500,000 per annum. Other studies show that it is not necessarily capped but that the impact to wellbeing is greatest where the change in income or wealth is proportionately largest.

What appears most interesting is that it is what someone does with the increase in income or wealth is more impactful than just having it. One study noted the happiness delta impact was felt whether the increase in wealth was spent, saved, or donated.

There was also research that suggested larger wellbeing impacts were found when money was used for experiences rather than to buy items; using higher income to buy more things doesn’t necessarily make one happier.

Indeed, we see this to the extent where an increase in wealth in the form of a higher income can reduce happiness. It sounds counter-intuitive. One of the risks we observe and help our clients to manage is a cost of living or wealth ‘creep’. This is where, as your income grows, so you start spending more. It might be small items at first such as buying premium brands at the supermarket, travelling first class on the train, or ordering in food more frequently so that any increase in income you have received is absorbed by your expanding spending habits. Some of that may be social pressure and the need to keep up with colleagues and your wider social circle. In this scenario you might find you are spending aligned to someone else’s aspirations and not your own. Loosening the budget belt is not all bad but if it is done without consideration to why and how it makes you feel it can make you feel trapped or even failing. It is an area we add value to professionals as their career and earnings are on the ascent.

When we drill down into the most valued aspects of someone’s life, their memorable moments and their dreams, they are mostly about relationships, experiences, and time. it is rarely money in the bank. That is why when we are asked how much money is needed for retirement we seek to uncover how you want to live, and what your objectives are.

Research into the links between wealth and happiness are a useful reminder to be conscious in earning, spending and investing decision making and to take the time to engage with a professional like Black Swan Capital to put together a financial plan that is specific for you, to make sure you are focusing on what is right for you so you can ensure you will have enough money to be happy.