What to Upgrade First When You Start Earning More Money

A higher salary makes it surprisingly easy to spend badly. The first upgrades are often the most visible ones: a more expensive car, a better phone, nicer clothes or a larger apartment. They provide an immediate sense that life has changed, but they are not necessarily the purchases that improve it most.

A more useful question is what an additional dollar can remove from everyday life. It might reduce financial anxiety, eliminate a recurring source of discomfort, protect time, improve the ability to work or make important relationships easier to maintain. Once basic needs are covered, those less conspicuous upgrades can matter more than simply replacing possessions with more expensive versions.

Research on income and well-being helps explain why. Daniel Kahneman and Angus Deaton famously reported in 2010 that day-to-day emotional well-being appeared to stop improving above roughly $75,000 in annual household income. That figure became one of behavioural economics’ most frequently repeated statistics. A 2023 collaboration involving Kahneman, Matthew Killingsworth and Barbara Mellers revisited the question and reached a more nuanced conclusion. For most participants, emotional well-being continued rising with income, while a plateau was largely concentrated among the least happy portion of the sample. The relationship also followed income on a logarithmic scale, meaning larger income gains were associated with similar changes in average well-being.

The point is not that earning more automatically creates a better life. Money creates options, and what people do with those options matters more as income rises.

Upgrade the Body and Environment That Produce the Income

Some of the least glamorous spending can have the largest effect on