The Unexpected Ways a Big Raise Affects Your Happiness

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.

More is more

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.

The paycheck next door

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.

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

The Unexpected Ways a Big Raise Affects Your Happiness

Getting more money often leads to immediate satisfaction. The good feelings might not last.

More is more

The paycheck next door

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.