The Unexpected Ways a Big Raise Affects Your Happiness
Getting more money often leads to immediate satisfaction. The good feelings might not last.
Getting more money often leads to immediate satisfaction. The good feelings might not last.
Up and down the income ladder, people say more money would make them happier. When they actually get it, that isn’t always the case.
Some people who have gotten big raises recently say the money hasn’t changed their day-to-day life or hasn’t provided them as much joy as the things in their life that have nothing to do with money. Others were hoping for a bigger raise or felt conflicted about making more money.
Jess Tapia, a 28-year-old accountant in Hoffman Estates, Ill., thought for years that $90,000 was a salary that would make her happy. When a raise of about $20,000 pushed her pay to that level last February, it did—at first.
To celebrate, Tapia booked a vacation to Germany the next month. The good vibes soon wore off.
“By the time I came back from that trip, it kind of fell flat for me because it was just back to normal, back to the routine,” she said.
The past few years have been good ones for workers seeking higher pay. Median year-over-year wage growth hit a recent peak of 6.7% in summer 2022, after mostly staying below 4% for more than a decade before 2021, according to the Atlanta Federal Reserve. Many of those who switched jobs, or threatened to, made substantial salary gains.
And people with higher incomes do tend to be happier, many studies show. Research looking at lotteries and random cash giveaways indicates that additional money can make people happier for months or even years.
But moving up the income scale, it takes more money to generate the same good feelings, said Jan-Emmanuel De Neve, an economics professor at Saïd Business School at the University of Oxford who studies well-being. The proportion of the increase matters.
“If an employer moves somebody from $15,000 to $30,000, that will have an impact on people’s life satisfaction that is the equivalent of them moving somebody from, say, $60,000 to $120,000,” De Neve said.
A pay increase that takes someone from financially stressed to financially stable often leads to more happiness. At the low end of the earnings spectrum, a higher income is associated more with squashing negative feelings than producing positive ones, according to a 2021 paper in the journal Proceedings of the National Academy of Sciences.
Randeep Chauhan, a 30-year-old nurse in Ferndale, Wash., went from making about $45,000 in 2021 to $90,000 in 2022 after completing a one-year nursing program.
“Doubling my income didn’t double my happiness, but it came close,” he said.
For Chauhan, much of the happiness boost came from being able to stop worrying about being able to cover his family’s monthly bills. He said his blood pressure dropped to a healthy level after his change in pay, which he attributes largely to the drop-off in financial stress.
If you get a raise, don’t just spend it, said Neela Hummel, a financial planner and the co-CEO of Abacus Wealth Partners.
“The worst thing that can happen with a raise is that that money gets immediately folded into cash flow and a client doesn’t even notice it,” she said.
Many people also jump ahead to how nice a car or how big a house they could afford with a new paycheck. Instead, Hummel advises, take the raise as an opportunity to up your savings or pay down debt.
Chauhan said he has avoided lifestyle creep, putting money toward retirement savings and student loans instead of buying a new computer or phone. “There’s a weird rush in making money and not spending it,” he said.
Austin Benacquisto’s pay has rocketed upward over the past few years. The 29-year-old commercial debt broker in Atlanta made roughly $60,000 in 2019, $110,000 in 2020, $180,000 in 2021 and $325,000 in 2022, including bonuses.
His steps up to $110,000 and $180,000 felt better than the one up to $325,000, he said.
“The last 50,000 I made in 2022 just was for stuff in my house that I wanted,” he said.
Benacquisto’s pay fell to about $200,000 last year as his industry slowed down. The drop felt worse than the recent increases felt good, he said.
“This being the first decrease, it definitely stings,” he said.
People’s happiness with their pay is strongly tied to how it compares with the pay of others around them, say researchers who study compensation. Sometimes, those comparisons rankle.
A 30% raise made Ryan Powell less happy at work.
Powell, a 38-year-old finance director for a manufacturer in western North Carolina, received that pay bump in 2022. He had been hoping for more based on the salary information he had heard from recruiters, peers in the industry and his M.B.A. cohort.
The initial thrill of the raise lasted about three months, he said.
“The further I got into it, the more I was realising that I was anchored to the higher number,” he said.
Executives are more likely to leave their companies if their pay is low compared with other top bosses, according to a 2017 study in the journal Human Resource Management.
Comparisons matter closer to home, too. Living in an area where people tend to make more money than you is linked to being less happy, according to a 2005 paper in The Quarterly Journal of Economics.
One reason that Tapia, the accountant in Illinois, isn’t happier after her raises is that she feels guilt about making more money than her parents ever did. Her dad works in construction and landscaping.
“I work from home mostly, I’m comfortable and I’m always indoors. During summertime, he’s sometimes outside working 10 hours in 100-degree weather,” she said.
Tapia recently got another raise of roughly $10,000. She again booked a vacation to Europe but is hoping to extend her joy further this time.
“I’m starting to feel like this is going to plateau, so let me try and make the feeling last a little longer with this trip,” she said.
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Amazon, Google, Microsoft and Meta pour billions into artificial intelligence, undeterred by DeepSeek’s rise
Tech giants projected tens of billions of dollars in increased investment this year and sent a stark message about their plans for AI: We’re just getting started.
The four biggest spenders on the data centers that power artificial-intelligence systems all said in recent days that they would jack up investments further in 2025 after record outlays last year. Microsoft , Google and Meta Platforms have projected combined capital expenditures of at least $215 billion for their current fiscal years, an annual increase of more than 45%.
Amazon.com didn’t provide a full-year estimate but indicated on Thursday that total capex across its businesses is on course to grow to more than $100 billion, and said most of the increase will be for AI.
Their comments in recent quarterly earnings reports showed the AI arms race is still gaining momentum despite investor anxiety over the impact of China’s DeepSeek and whether these big U.S. companies will sufficiently profit from their unprecedented spending spree.
Investors have been especially shaken that DeepSeek replicated much of the capability of leading American AI systems despite spending less money and using fewer and less-powerful chips, according to its Chinese developer. Leaders of the U.S. companies were unbowed , touting advances in their own technology and arguing that lower costs will make AI more affordable and grow the demand for their cloud computing services, which AI needs to operate.
“We think virtually every application that we know of today is going to be reinvented with AI inside of it,” Amazon Chief Executive Andy Jassy said on Thursday’s earnings call.
Here is a breakdown of each company’s plans:
Amazon said a measure of its capex that includes leased equipment rose to a record of about $26 billion in the final quarter of 2024 , driven by spending in its cloud-computing division on equipment for data centers that host AI applications. Executives projected it would maintain the fourth-quarter spending volume in 2025, meaning an annual total of more than $100 billion by that measure.
The company—which gets most of its revenue from e-commerce and most of its profit from cloud computing—also projected overall sales for the current quarter that missed analysts’ expectations. Its shares slid about 4% in after-hours trading Thursday. The stock rose more than 40% in 2024 and was up nearly 9% this year before its earnings report.
Jassy said AI has the potential to propel historic change and that Amazon wants to be a leader of that progress.
“AI represents for sure the biggest opportunity since cloud and probably the biggest technology shift and opportunity in business since the internet,” Jassy said.
Google shares are down about 7% since its earnings report Tuesday, which showed disappointing growth in its cloud-computing business. Still, parent-company Alphabet said it is accelerating investments in AI data centers as part of a surge in capital expenditures this year to about $75 billion, from $52.5 billion in 2024. The spending will go to infrastructure both for Google’s own use and for cloud-computing clients.
“I think part of the reason we are so excited about the AI opportunity is we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down,” said CEO Sundar Pichai .
AI is “as big as it comes, and that’s why you’re seeing us invest to meet that moment,” he said.
Microsoft has said it plans to spend $80 billion on AI data centers in the fiscal year ending in June, and that spending would grow further next year , albeit at a slower pace.
Chief Executive Satya Nadella said AI will become much more extensively used , which he said is good news. “As AI becomes more efficient and accessible, we will see exponentially more demand,” Nadella said.
Growth for Microsoft’s cloud-computing business in the latest quarter also disappointed investors, leaving its stock down about 6% since its earnings report last week.
Meta, too, outlined a sizable increase in its investments driven by AI, including $60 billion to $65 billion in planned capital expenditures this year, roughly 70% higher than analysts had projected. Shares in Meta are up about 5% since its earnings report last week.
CEO Mark Zuckerberg said investing vast sums will enable it to adjust the technology as AI advances.
“That’s generally an advantage that we’re now going to be able to provide a higher quality of service than others who don’t necessarily have the business model to support it on a sustainable basis,” he said.
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