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If you have clothes to wear, food to eat, and a roof over your head, increased disposable income has just a small influence on your sense of well-being.To put it another way, if you’re living below the poverty line (,050 annual income for a family of four in 2009), an extra ,000 a year can make a buy some happiness, but as you’ll see, it’s just one piece of the puzzle.But research shows that our choices are based on more than just arithmetic—they’re also influenced by a complex web of psychological and emotional factors.
And there’s a real danger that increased income can actually make you miserable—if your desire to spend grows with it.
But that’s not to say you have to live like a monk.
It doesn’t do much good to learn about compound interest or high-yield savings accounts if you don’t know how money affects your well-being.
If personal finance were as simple as understanding math, this book wouldn’t be necessary; people would never overspend, get into debt, or make foolish financial decisions.
Previous studies have found a correlation between money and happiness, but the Case Western study used the data on individuals over time to demonstrate that income can a reduction in negative emotions.
It also found that an increase in income can reduce the incidence of serious mental illness (defined as a score of 10 or higher).Money can certainly help you achieve your goals, provide for your future, and make life more enjoyable, but merely having the stuff doesn’t guarantee fulfillment.This book will show you how to make the most of your money, but before we dive into the details, it’s important to explore why you should care.A substantial body of economic research says otherwise: Statistically speaking, household income is strongly related to both emotional well-being and a person's evaluation of their own quality of life.Will getting a raise this season make you less nervous, stressed or sad?"We earn income because there are things we want to do — we want to live our lives, support our families, have experiences and so forth," said Clingingsmith. Although the mass media has convinced many Americans that wealth leads to happiness, that’s not always the case.It depends on how much you're already making, according to a recent study from an economist at the Weatherhead School of Management at Case Western University.Each dollar makes a big difference in reducing negative emotions for people in the 20th income percentile, but those returns fall off by the 80th income percentile and disappear at around 0,000, according to the study.And for individual people, learning more about the relationship between income and happiness could help them find their own personal sweet spot — where income leads to life satisfaction without requiring additional sacrifices.There's still a lot of economics work that needs to done to fully understand that relationship.