“Money can’t buy happiness” is a well-known saying.  Research has found this to be somewhat true – money is only correlated with happiness up to a certain income level.  If someone doesn’t have enough money to get by, they are more likely to be unhappy.

However, once someone reaches the income level they need to pay their bills and “get by”, any additional income after that is not correlated with increased levels of happiness.

Essentially, money means nothing if you have enough of it, but it means everything if you don’t have enough of it.  So, why does having “enough” money make people happy?

I have noticed that the happiest people I know are also the most financially stable (I’m defining “financially stable” as living debt-free and having substantial savings).  Many of them are not high earners – far from it, actually.

Some of the most financially savvy people I know earn low to middle incomes, but they are also frugal and quite happy.  “Money doesn’t buy happiness”, but it can buy security, freedom, time, and fun.


25% of Americans have no emergency savings.  For these folks, an unexpected mini-crisis, such as a car accident, broken leg, or home repair, can become a serious disaster.

They may feel obligated to charge the expense on a credit card, to take out a “pay day” loan (a high-interest loan that is expected to be paid back when the person receives their next paycheck), or to cash out part of their 401(k).  These are all poor choices that may lead to regret and feelings of helplessness.

In contrast, a financially stable person doesn’t need to go into debt when an emergency strikes. He or she has plenty of money saved for unexpected disasters.  This person can pay the cost in cash and doesn’t have to deal with all of the negative emotions associated with debt and “living on the edge” financially.


When you’re in debt, you are never truly free.  Your time is not your own – you work like crazy, but you don’t get to see the fruits of that labor.  Too much of your hard-earned money goes straight to the lender, and a depressing amount of that money is wasted on interest.  You may put off doing many of the things that you value – like buying a home, traveling, or starting a family.

Debt often leads to emotional distress.  According to research by the Yellowbrick Program, people with debt are more than three times as likely (compared to those without debt) to experience a mental illness, and 29% of those with high debt report severe anxiety.  Fewer than 9% of people who are in debt report no mental health problems.

Money may not be able to buy happiness, but being broke or in debt can certainly lead to misery.


Someone who is financially stable doesn’t need to waste their time doing things they don’t want to do.  They don’t need to work a second job or work overtime just to get by.  If they don’t get PTO at their job, they can probably still take a vacation because they can afford to take unpaid time off.

If a financially stable person hates cleaning, they can hire someone to clean their house.  If they don’t like the headache associated with filing their taxes themselves, they can hire someone else to do it.  If they value convenience, they can grab a meal on the go instead of brown bagging it every day.

Their time is valuable, and they spend it doing things that they actually enjoy.


If you’re broke or in debt, you may decide cut back on fun things that you enjoy, like going out to dinner or taking a vacation, or you may cut those things out of your budget entirely.  Even if you continue doing fun things once in a while, you may feel guilty every time.

There are plenty of fun things that can be done for free, but of course, even going to a “free” event costs money – there’s still the cost of gas, parking, and wear and tear on your car.  When money is tight, these things are always on your mind.

For a financially stable person, these aren’t even issues.  If they love going out to eat, they can.  If they want to become a yogi at an overpriced yoga studio, they can.  If they want to take a kickboxing class, they don’t even need to give it a second thought before they sign up.

Does Money Buy Happiness?

“Money doesn’t buy happiness”, but it can buy security, freedom, time, and fun.  Being broke or in debt, on the other hand, often buys misery.