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Even if you make enough money to cover the bills and have a little fun, chances are you wouldn't mind having more. But according to new research, that boost in income may not lead to as much happiness as you might expect - and a pay cut may not land you in the misery you imagine.

In a study conducted by the University of British Columbia and Harvard Business School, researchers asked over 429 people earning a broad range of incomes - from $5,000 to over $200,000 - to rate their own happiness. Then they were asked to predict how happy they and others would be at different salary levels, both higher and lower.

The results - which will be published this fall in The Journal of Positive Psychology - show that people overestimate how closely money and happiness are tied.

For example, respondents predicted that people making $55,000 a year would rate their happiness at around 51 on a scale of 1-100, and that a person making $125,000 could expect a happiness rating of 73 out of 100. In reality, the $55,000 earners weighed in at 76 on the happiness scale, and those who made $125,000 were actually less happy, at around 68.

Most surprising, however, was just how drastically respondents underestimated the happiness of those who earn less. They predicted that people making $10,000 dollars a year would rate their happiness at a paltry 13 out of 100, and that a worker bringing home $25,000 should only expect a happiness rating of 23 out of 100.

In reality, the average $10,000 earner came in at a respectable 50 on the happiness scale, and the average person who makes $25,000 ranked their happiness at 70 out of 100 - nearly three times higher than the study subjects predicted.

"These are glaring errors," says UBC psychology assistant professor and study co-author Elizabeth Dunn. "People are vastly underestimating the happiness of individuals making low levels of income."

The only area where the participants' intuitions were correct was at the top of the income scale, where they rightly predicted that people making $1-million aren't much happier than those making $90,000.

According to Prof. Dunn and lead author Lara Aknin, the misconceptions could be because people at all income levels often commit themselves to large expenditures like mortgages and car payments, then fear losing them should their income fall.

People also tend to associate having money with good things, and not having money with bad, Prof. Dunn said. They may forget that those with lower incomes might actually be working less or doing jobs that don't pay as well, but are deeply satisfying or are less stressful.

And while a sudden job loss and unemployment are associated with a drop in happiness, Ms. Aknin says the findings should provide some comfort to the millions of people who may have experienced a dip in income during the recent economic downturn.

"Although the situation isn't great, it is comforting to know that we might be really underestimating our happiness at lower levels," she says.

Still, those deep-seated beliefs about money and happiness can be tough to shake - even for the researchers themselves. "Money buys certain advantages and opportunities, but it can also get you used to a high-cost lifestyle that can be debilitating," Ms. Aknin, a UBC doctoral student, said. "But I'd be lying if I said having a little bit more would be a bad thing."


Predicting happiness

Researchers asked people to rate their happiness. Subjects were then asked to predict how happy someone would be at a range of different incomes.

(on a scale of 1 to 100)

Predicted happiness

Actual happiness