The Ideal Income For Maximum Happiness

HappinessIt hit me the other day that maybe the government is benevolent and not a bunch of self serving, two-faced, power hungry crooks.  For the longest time, I thought the government was sexist because they don’t provide an equal amount of deductions or leeway once a couple gets married.

If I make $250,000 and my wife makes $250,000, why is the government penalizing couples making more than $250,000? $250,000 plus $250,000 is $500,000 in household income numb nuts! Do you expect one spouse to make nothing or a fraction of the other spouse’s income once they get together? That’s kinda silly and totally presumptuous you sexist pigs.

And another thing. What about if one spouse has a $1 million mortgage and the other spouse has a $1million mortgage. $1 million + $1 million is $2 million, so why is the mortgage interest deduction on income capped at $1 million for couples?  Isn’t it logical to conclude that two people living in $1 million mortgaged houses might seek to live in an even more expensive house when they marry? Heck, the couple might even want kids too which warrants a bigger house. Guess not.

DON’T LISTEN TO POLAR ENDS

You know that only the poor or the super wealthy say “money can’t buy happiness.” When I write “poor”, I don’t mean those who are poor through no fault of their own. What I mean is those who’ve tried to make more money but failed and use the phrase as an excuse, and government-funded researchers who continue to try and prove the theory over and over again. First the researchers came up with a study that anything above $60,000 a year stops making you happy. Then I read recently, to NO SURPRISE that anything above $75,000 doesn’t make you any happier. I started giggling like a school girl when nobody noticed the nice little 23% inflation in the happiness income indicator!

Listen up researcher number one thousand seventy eight who thinks money can’t buy happiness. Money sure can, just not at the capped level of $60,000 and now $75,000 you state! It’s so obvious you guys choose these numbers because they correspond with YOUR average income level. Do you really think that people don’t know how much academics make nowadays? Come on, we ain’t stupid.

Any good student from a good university can graduate college and make $65,000-$75,000 as a 22 years old if they want to. It’s amazing why the government and academics want to coddle the masses into thinking they are good enough. Instead, why not encourage progress?

THE REAL INCOME LEVEL FOR MAX HAPPINESS

Can anybody guess what that magical income number for happiness, or specifically no more happiness is? Anybody guess $100,000? How about $1 million dollars? No?  OK, well I’ll stop teasing you now.

The magical income level where happiness stops increasing is $200,000! The reason why your happiness doesn’t get much greater after making more than $200,000 is because the current administration has clearly telegraphed they are going to gang tackle every dollar from you after $200,000! Thankfully, a compromise has been reached as of 2013 where only income over $400,000 for individuals faces a 4.6% higher federal income tax rate to 39.6%. That said, once you add in state tax, medicare tax, and social security tax, you’ll be paying over 50% in total marginal tax. If you stay around $200,000, you’ll get to keep more of your money than the government.

Remember, the government has your best interests at heart. They are here to serve you, and not themselves. They know that making more than $200,000 won’t make you happier, because a large majority of them do, with steady raises during economic Armageddon to boot! Hence, it is only logical to draw the line in the sand and say that $200,000 is what differentiates the wealthy between the middle class.

The government wouldn’t be so evil as to arbitrarily make $200,000 the line given how equal the cost of living is around the nation. Who cares if $500,000 buys you a 4,000 square foot mansion in Des Moines, and only a 600 square foot studio in Manhattan. Everything is equal!

The government knows that after you make $200,000, you start craving power and the desire to make your own rules. That is a threat to national security, and we can’t have that. So remember non-zombie readers, $75,000 is still way too low. You are being brainwashed to being average. Good for us, we’re not mindless zombies!

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Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Davis says

    There is no such thing as the “magical income number” – income is completely relative to where you live and what you do.

    I spent the last month on a beach in Thailand, hanging out with amazing people, and doing the odd bit of work. My records show I spent just under $1500 that month. I’m pretty sure I couldn’t get any happier than that.

    I live an awesome lifestyle and I don’t need to earn 200k. Explain why I’m not happy?

    • Financial Samurai says

      Nobody said you aren’t happy mate. The article’s thesis is on the Maximum Income level for happiness, not whether you are happy or not.

      The thesis states that you will reach your max happiness state at 200k and fade afterwards.

        • Financial Samurai says

          Of course. Why would I write this otherwise? If you are happy, that’s fine. You don’t know what you’re missing, and that’s perfectly fine too. Being content with what you have is just dandy.

        • Powell says

          I could never hang around on a beach for more than a month and do nothing productive to help society. It would be such a waste of education and of life frankly. What is it that you do for a living Davis? Is it just affiliate marketing stuff? How do you plan to build retirement savings, or a buffer hanging around the beach all day?

          It’s sad that this recession has created so many 20-something year old and maybe even 30-something year old unproductive members of society.

          Guess what? I took 8 weeks off this year, save about $85,000 in cash thanks to work, and I love work! It’s a great balance!

        • Davis says

          Powell, I actually run two web apps – Im a software developer who has created a number of popular code libraries which you probably use every single day.

          I also love work – that doesn’t mean I need to aim for a 200k salary a year – been there done that and its not fun. I get to play around in code, creating amazing software, solving real problems and helping people.

          I don’t plan on retiring when I hit a certain age – what I do know feels like retirement as I wake up everyday looking forward to working and not wanting to go to sleep at then end of the day. I don’t need to take off any time from work – I simply just change the amount of work I contribute to my company.

          The affiliate marketing stuff? A new project I’m working on – call it an experiment.

          I’m not against the concept of wealth – I save as well and obviously look at increasing returns from my company each month. But I am 100% against the idea of creating wealth for wealths sake. That is why I said income is relative. While i’m in Thailand I live a very nice lifestyle for $1500 per month, I’ll be in Europe later this year and I will need around $4000 a month. I suggest you read The Four Hour Work Week – I know, the title sucks, its not about that at all, rather it explains the concept of relative wealth.

        • Chris says

          Yeah, you nailed him, man: happiness is the most subjective thing there is. 75,000 comes a lot closer to the amount you need in the U.S. to be happy: you can afford to by a nice house, a nice car, and take care of a wife and a few kids (assuming she’s also working in some capacity). Any more than that is just icing on the cake, and too much icing makes a lot of people “diabetic” (i.e. a greedy, money-grabbing bastards)

  2. Daniel says

    I think you’re mistaken if you think any student can make 65-75K out of college. For non-business and science majors, that’s just not realistic. I know 4.0 anthropology students who spent a year walking dogs and waitressing before deciding to go back to school. She’s much smarter than I am, I just happened to choose the right major. Basically anyone with a BA is screwed.

    • Financial Samurai says

      Did you just write in other words that you don’t think students right out of college can make 65-75k, but you are making 65-75K? Tell me I’m reading this wrong.

      Anybody who WANTS to make 65-75K out of college can.

      • Evan says

        “She’s much smarter than I am, I just happened to choose the right major”

        No she isn’t. She was stupid enough to choose Anthropology as a major and then be shocked when there are no jobs. If she were smarter than you she either would have had a plan to make money coming out of college or chosen a major that would support ANY kind of lifestyle.

        You are better than that don’t put yourself down D!

        • Financial Samurai says

          This is the whole point. Everything is rational. She decided to be an Anthro major which means she DOESN’T care about making money really, and therefore would logically never complain about not making money.

          All someone has to do is be a straight A student in high school, go to a top university, and try and get into engineering, finance, consulting all the big internet firms, etc and they ALL pay over $65,000 the first full year out of school.

        • Daniel says

          So ANYONE can do that? I don’t make 65-75k, even with the business major. Low 50s right out of school. I consider myself to be pretty smart, but this girl is more intelligent than I am (better?). Even with my lower GPA (3.7), I was able to get a good job and she wasn’t.

          Most people won’t, in high school, say that they’re going to go into finance or engineering because they can make an extra $15,000 out of school.

          • Financial Samurai says

            Anyone who WANTS to. If you say you want to make $65,000-$75,000 after you first full year out of college, then you will probably get a 4.0 (not a 3.7), go to a Top 10 school, and enter an industry which pays just that.

            First year analysts in investment banking or private equity for example make about $115,000 ($65,000 base, $60,000 bonus) their first full year. Management consultants make about $85-100,000 their first full year etc.

            People just choose to want to study and do what they want, and money is secondary. That’s cool!

        • pilito says

          No she isn’t. She was stupid enough to choose Anthropology as a major and then be shocked when there are no jobs. If she were smarter than you she either would have had a plan to make money coming out of college or chosen a major that would support ANY kind of lifestyle.

          Hi, somehow I cannot agree with that because it’s a pure generalization and generalizing about stuff like that is just not fair. Isn’t it plain obvious that it’s not a matter of smartness to choose your major. It’s quite complex, but most of all it’s about the environment you’ve been into – if this environment does not encourage your thought to think about it, then you’re done. I’m coming from a little country where people speak about money as something dirty (although everybody wants to have). To speak about financial education for this country is outrageous, just because nobody knows what the hell that is. Nobody knows what savings are, but that’s mostly because people barely make ends meet. That said, when I was growing up, I was never encouraged to think about money or finances or whatever. On the contrary, I was encouraged to excel in arts, music, languages, you name it, but nothing else. So how on earth was my choice of major supposed to reflect my smartness?! You don’t know you miss something, unless you’ve had it. And don’t argue with me that it might have come to me when I reflect on how to have a good life. These ideas just don’t pop up into your mind out of nowhere. Sorry. Unless you have a revelation. So, I ended up majoring in a BA. Then I worked, I met foreigners making business there, I “saw some more world”, and I decided I want to have that lifestyle, too. So I am studying a business degree in a UK university now. But my whole point is: plan making and thinking about your lifestyle comes to you only if the people around you are already “performing” this activity; if you have been stimulated. But don’t take the concept for granted with everybody.

  3. Everyday Tips says

    Dr. Sam: I think that anyone that creates an arbitrary ‘happiness’ number is an idiot. There are so many factors involved. If I was 23 and out of grad school again, 75k would have made me ‘giddy as a graduated school girl’. However, at 43 and with 3 kids, 75k would be a bummer and I would be bitter. (Just our situation, not judging anyone who makes that or less.)

    I think the government has to create that 200,000 number so they can villainze the ‘rich’ and then get more money from them because those bastards don’t deserve all that money and need to share! Nobody cares that the ‘rich’ already pay so much, and they also don’t get any deductions. Rich people are bad people because they educated themselves and worked hard!

    • Money Reasons says

      Very well said Everyday Tips!

      Where is the fairness in the taxing system? It’s really a form of discrimination… Next they will create a fat tax, then a skin tax. In fact, if you aren’t the voting block that represents the current administation, you need to be taxed more (at least in their eyes)!

      I’m not rich, but I have morals, and I think that it’s wrong to single out a group of people just because there are different from others. Is that not the classic description of discrimination?

      The system is so unfair anymore, the I really believe a flat tax is the best way to go. After all, shouldn’t all public properties be owned by those that pay for that property? To me, taxing only the rich, creates a dependency relationship for the rest of the country on the rich. We need to grow up and pay taxes like our parents and grandparents have…

      • Financial Samurai says

        I love the flat tax which is fair. We could sure raise a lot of tax revenue if we got the 47% of americans who don’t pay any taxes to pay even just $500/yr! That would be $50 billion a year among 100 million people!

        • Everyday Tips says

          I would LOVE a nice, flat tax. I don’t know that I will ever see it happen though. Money Reasons, I totally agree that the country is becoming dependent on the rich, even though the rich are apparently horrible, uncaring people.

          I have several friends that are basically Socialists. They said they don’t understand why the word ‘socialism’ is considered a bad word in America. I laughed and said that I thought ‘Capitalism’ is considered to be the bad word.

          Who should work hard when you can get a handout? Great, now my blood pressure is rising and I need to go to sleep! :)

  4. Little House says

    I’d have to say that the number doesn’t matter as much as the life style. There are plenty of people who can live on less than $75K happily (even in an expensive city.) I can’t say that if I hit the $200K mark I’d be more or less happy; I’m guessing I’d probably be the same. But then again, I am unusual. It’s the little things that make me happy. Like hiking, camping, and biking. These activities are pretty inexpensive. ;)

    As for college kids making $65K – $75K right out of college, I’m assuming these must be business majors or computer analysts? I’ve only known one person to make $75K out of college, and that was with a masters degree. He obtained a job as a computer analyst. Everyone else I know started at the bottom squeezing by on $35K and worked their way up.

    • Financial Samurai says

      I like the free things in life, I think they are the best. Just trust me when I say your happiness increases up to 200k bc u stop worrying about money. Unfortunately, once you start making more than that, you get persecuted by the govt like a convicted felon!

      The govt does t want people to think freely and taste more wealth. Anarchy will ensue!

  5. Khaleef @ KNS Financial says

    Great article. I hate when people throw around arbitrary numbers as if they are fact! You are absolutely right about this administration and their affect on the “rich”. I guess the easiest thing to do is to attack the minority and blame them for all of problems – then have the brainwashed masses re-elect you! Doesn’t really matter that the “rich” are the ones that create jobs and stimulate the economy.

  6. Nunzio Bruno says

    I could not help but smile through the entire post! I think this post just made it’s way to number 1 in my top read posts of all time. I mean your presentation was spot on and your break down of how the gov’t intervenes to cap out levels of happiness was hilarious! In the macro-econ class that I teach at Bay Path College one of the things I constantly stress is utility and elasticity. You did such a great job here I might just post it up on the projector for everyone to read tomorrow :)

    • Financial Samurai says

      Hi Nunzio,

      I would be honored if you threw this post up and engendered a discussion amongst your students! I’m glad you understand the idiosyncraciea of this post! I don’t write too clearly on purpose, but it sounds like you get all the poi ts.

      I’m curious of u do show the post to your class, what the outcome of the debate will be!

  7. Kevin@InvestItWisely says

    “so why is the mortgage interest deduction on income capped at $1 million for couples? ”

    Why do you guys even have that? What a big FU to renters. ;) I think that study was a joke, too.

    So, Sam, what level of taxes do you see as fair today, and in the future? Today there are obviously some programs that cannot just be killed right off the bat (SS, etc…), so there would be a lot of disruption to drop spending too quickly. How about in the future? For what is it justified to force people to pay taxes?

    • Financial Samurai says

      Is it a FU to renters? If it is, why not just buy?

      The mortgage interest deduction is VERY important to homeowners, especially those in the top tax brackets.

      The government encourages home ownership, as that is a fabric of Americana that everybody wants a piece of.

      I think the best tax rate is a 15-20% flat tax rate which MAXIMIZES revenue b/c it minimizes tax avoidance, and everybody can pay. Everybody should pay their taxes.

      • Kevin@InvestItWisely says

        Unless renters can deduct their rent, then it seems like a big FU to them. Either let both deduct or let neither deduct.

        If everyone uses public services, then everyone should pay. I can agree with that, although many would probably disagree with both of us. I’ll take whatever improvements we can get. However, what about the premise that we need to be politicizing everything? Why are so many services provided via the public bankroll? Maybe that’s something that should be examined, too.

  8. Lindy Mint says

    When my husband and I sit and stare at the stars, and dream about “making the big bucks,” we always cap it with the caveat – as long as we don’t make more than $200 K. That’s our inside joke. Isn’t it funny? You’ve hit it quite well with this one.

  9. Kevin@OutOfYourRut says

    I really doubt happiness is an income level at all. Who’s more likely to be happy, a person with a high cost lifestyle, including a $1 million mortgage, and a $200,000 job he can’t leave, or a guy who runs his own business, has $100,000 bankroll, no debt and an income of “only” $50,000? My vote is for the 2nd guy (or girl) hands down. It’s not even close. He may even make more money eventually because his mind, his time and his money are his own.

    Happiness really isn’t about money. Yes you need a certain amount just to survive, but I think what really buys happiness is liking what you do for a living (even if it doesn’t earn big money), being liquid (living within your means and having a comfortable cash cushion) and not being owned by a job or lenders (mobility, transferrable skills or business, debt-free position). I think a lot of people who chase money are really chasing these, thinking more money will be the way to acquire them.

  10. Darwin's Money says

    Numerous studies all provide conflicting data and utilize a wide array of assumptions. Many key points were raised here and in comments – location, location, location. That’s huge and the aggregate data (at least the headlines) ignore that. Additionally, I’ve seen studies and have witnessed myself, that much of what defines a “content” level depends on your peers. If you hang with rich dudes in the city bringing in a cool $250K-$400K and you’re pulling in $80K in a high cost of living city, you still feel slightly inferior – especially if you try to keep up with them. Ideally? Make a decent wage in a moderate cost of living area and stash away a lot for a rainy day and retirement. Now, that makes me feel good.

    • Kevin@InvestItWisely says

      This envy is probably the #1 reason for most of the more damaging policies. If men were angels, we wouldn’t need government. However, because men are not angels, we don’t get good government, anyways… :)

      Is there a way to get rid of this envy? I don’t know, and I don’t think so. Better to educate people on the proper response (which is lift yourself up and put yourself in a better situation) though I realize it is somewhat of an uphill battle.

  11. Kevin @ Thousand-aire.com says

    This is such a broad question that I don’t believe there is a single answer. The amount of money I’d want that would make me happy just increased significantly because my family is going through some financial hardship. This month, I wish I had a lot more money than I did last month when I wasn’t thinking about helping out my family. Then when you take into the factors you mentioned above such as cost of living in your city, there is no magical number.

    I do want to chime in on the “anyone who wants to make $65-75K out of college can” statement. In 2008, I graduated as an A-/B+ engineering student at a top 15 US News school, and I’d like to think I interview pretty well. I only had one internship on my resume and it was rather weak, but overall I was probably, on paper, a better job candidate than at least 95% of the 2008 graduating class. I had multiple job offers, but all were for a bit less than $65K. Now when I think about a B student at an average school, I’d imagine that person would find it exceptionally difficult to find a job around $65K.

    Finally, I’d love a flat tax. It amazes me that the ~50% who pay all the taxes aren’t more pissed off that the other ~50% pay nothing.

    • Financial Samurai says

      Kevin, if you keep singing and making those cool videos, you might get a record contract and strike it rich!!

      Regarding the A-/B+ grades.. what if you were a A/A+, summa cum laude student? Would you be able to land the $65K salary? Locations are different…. Apple and Google pay their incoming class $65,000 base for example.. and therefore every single other major tech/internet firm does as well!

      Trust me, there is a silent rage that half of America doesn’t pay taxes.

      • Kevin @ Thousand-aire.com says

        I probably could have worked a little harder and gotten better grades, but there are some people who work their butts off to get a C, especially in more technical fields. For many people, exceptional academic performance in math or science is not an option, no maatter how much hard work he or she does.

        Just like most of us don’t have the athletic talent to play professional sports or the artistic talent to be a professional musician, many people don’t have the natural intelligence to be an elite student in a technical field.

        With that being said, I don’t want to derail the conversation. Let’s get back to the main point about this administration hating rich people.

  12. Charlie says

    Yeah the marriage tax is so annoying. I’m really curious what’s going to happen with the expiring Bush tax cuts. The market sure rallied like crazy today and boy do I hope it continues.

  13. Larry Might be Living in His Van Soon says

    I don’t exactly know what the ideal income is for happiness, but I do know that if you spend more than you make, you’re screwed. You will be stressed most of the time and broke. You will have to work forever, live in fear of losing your job, and suffer the indignity of dealing with jerks all day long. Please, people think twice before you take on debt, think again before you add something else to your monthly bills, and definitely save some of your income, because no matter how much you might like your job today, someday it will suck, and you will want to go.

    Larry

  14. Sunil from The Extra Money Blog says

    i agree – great discussion – but no such thing as a magical number. agreed with the validity of the premise – i can easily believe it. that said, if you are not happy today, you won’t be tomorrow. all numbers should be the magic number – ideally of course :)

  15. Roger, the Amateur Financier says

    Interesting thoughts, as always, ‘Dr.’ Sam. I’m not sure I can offer any true insight; unlike the researchers you cited, I make no claims to speak for the entire population with regards to issues like ‘happiness’ (a nebulous concept at best). But, in the interest of putting in my two cents, here it goes:

    Readers, what do you think is the magical income number for maximum happiness?

    I don’t think there is a magic income number; sadly, magic doesn’t seem to exist in our world. What income level will make you, as an individual, happy is determined by many traits. How much your neighbors, friends, family, and coworkers make will have a major effect on your perception of how happy you are; if you are the highest earner in your circle, you’ll probably be thrilled, even if you’re only bringing in $20,000. On the other side of the coin, if everyone around you is making twice as much as you, you’re likely going to be less happy, regardless of whether you’re making $50,000, $65,000, or yes, even $200,000. We’ve had the conversation about utility of increasing numbers of dollars before, and how no matter how much you make, the last dollar you earn will bring you less happiness than the first, but at what point those extra dollars bring you no more happiness will depend on you. (Personally, I don’t think there is a magic income number; I think even Bill Gates gets a little smile when he sees his net worth increase.)

    Why do you think people are so easily brainwashed by the government?

    Well, I think that people are easily brainwashed, period; whether by the government, a particular political party, a news station, or an exciting blogger (*cough*), people have an endless number of outside forces trying to shape how they think. (I will admit that the government has as much, if not more, interest in doing so as anyone, and that they have far more resources at their disposal than the bulk of their competitors combined, but let’s remember that the government is far from a single, monolithic entity. There are dozens of Senators, hundreds of Congresspeople, a president, vice president, and scores of Cabinet members, to say nothing of all the aides, assistants, and assorted hangers-on required to keep the government running (as much as it does…). About the only thing all these people agree on is that they want to be re-elected/elected to a higher office. But back to the brainwashing…)

    We can argue about any number of psychological reasons for people to be so easy to brainwash, from a desire to fit in to the increasingly complicated world in which we live, but again, these traits can be preyed upon by any group, government or not. (For the record, I don’t think the government is particularly malevolent; while not benevolent (at least, anytime other than during election season), I think the government, and the politicians within aren’t any more evil than any other group. The only difference is the amount of power they have.)

    • Financial Samurai says

      The government is benevolent for themselves and the possibility of getting re-elected and enriching themselves in the process. Tim Geithner wanting the gov’t to RAISE taxes and evading taxes himself is a great example.

      Trust me, your happiness will increase the closer you get to $200,000.

  16. The Financial Blogger says

    My magical number is a combination of 2 things; annual income and weekly hours worked.

    Therfore, my objectives is to make $100,000 per year (my wife doesn’t work) but working 30 hours maximum. Therefore, you have enough money to live comfortable and you have time to enjoy your life.

    I am now officially working 4 days a week at my day job (so 33hours) and I work on my online company for the extra day. Overall, I am probably working around 45 – 50 hours a week but 20 hours a week is for my company, which is a hobby at the same time (I sometimes put my book or my playstation aside to write on my blogs!).

    Earning 100K while you don’t feel like working would be the magic number for me.

    • Financial Samurai says

      I’m impressed you are only working 45-50 hours a week TOTAL with your company and online ventures.

      I don’t think I’ve worked less than 50 hours a week EVER! Maybe it’s b/c I love working so much? Donno. Then again, I wasn’t satisfied with just 100K either.

      • The Financial Blogger says

        My goal is to make 6 figures by working 30 hours per week. I rather enjoy life than making more money.

        I currently work about 30 hours a week at my “day job” and 15-20 hours a week on my online company. At one point, I would just drop my day job and work 30-35 hours on my own. I don’t mind not making 250K+ if it means that I can pick up the kids at school everyday and enjoy all my weekends.

        In the end, the magical numbers is definitely coming from the lifestyle you want to get.

  17. Steve Jobs says

    Well, the number or the income that can make a person happy is actually depending on the person himself. If the person can’t be contented even though he is already getting the enough income to nurture himself, then it would be higher. The thing here is contentment.

  18. Dave says

    Absolutely true, Sam. People are being taught to be average – to stay in the line! It is true that someone might feel happy with even less amount of money, but that is just they have been got used to it – it’s not that their ultimate happiness cannot be increased.

  19. Nicole says

    I don’t know if anybody pointed this out… but if you make 500K and your spouse makes 0, then combined you pay less in taxes than the 500K maker paid before the marriage. The marriage penalty happens when people are earning roughly the same amount and get bumped into a higher combined bracket. If the incomes are very different, then the combined tax bracket results in lower taxes than what they’d be paying individually.

    If you fix the marriage penalty at one end, it goes out of whack at the other end (I used to know the math for this off the top of my head, but I’d have to dig up a textbook now to prove it).

  20. Credit Cards in Canada says

    I am not sure happiness can be directly related to money. Money is required to satisfy one’s living requirements but happiness is more holistic.
    Financially, you would need to gauge salary and the numbers hour spent to earn it. A person would be happy with a $60K job working 35 hours a day spending quality and relaxing time with the family and spending a few hours working on the online business at night. Some would be happy clocking 50 to 60 hours and getting in 100K.
    How can we decide what is happiness or the ideal salary for others?

  21. Mike Hunt says

    Sam,

    Re-reading through the comments, a question comes up:

    Do you make $200k a year? Of is it the sum of you and your spouse? If not how do you know it will bring in a perfect level of happiness?

    -Mike

  22. Buck says

    Hey Sam,

    Catching up on reading. Great article. I like your message of not settling and being average. Just curious, do you feel happy at your economic level? Are you striving to obtain more income or would you dial it down to enjoy the finer things and reduce stress?

    • Financial Samurai says

      Hi Buck, yes, I feel happy at my current economic level. I wrote this bc I noticed after 200k, incremental happiness plateaued because of government’s desire to redistribute wealth and discourage people from trying harder. I also wanted to tell people that happiness certainly does improve beyond 75k/yr.

      Ithink i found a balance in 2010 taking 6 weeks off in addition to the normal 8 public holidays. How do youfeel about your economic situation?

      • Steve says

        Sam
        Very interesting article regarding salary and happiness. I am a young business/sales professional
        that just got married. I want to make more money, but there isn’t any room
        to grow in my industry. What type of industry/occupation(s) do you suggest to
        get to that number(200K)? I’m assuming from your name “Financial Samurai” that you are perhaps
        in the finance industry? What do you do?

  23. Jason says

    ‘Happiness’ depends on large part from the purpose behind accumulating money.

    I would suppose that when Bill Gates sees the net worth of his charity go up by $200 million, he feels more happiness than say Ebenezer Scrooge (pre-conversion).

    It’s a cartoon example, but I know I certainly look at money as an indicator of what can be done, rather than just a survival mechanism. And I could do a lot more with $200 million, than I could with $200 thousand.

  24. Martin says

    The $60k/75k happiness curve relates to a study by behavioral economist Daniel Kahneman on how we perceive our current state – http://www.youtube.com/watch?v=XgRlrBl-7Yg. It doesn’t account for the type of happiness/pride/satisfaction when looking back on our achievements, which great wealth can give. I don’t know how they took their sample, though I’m assuming it was varied and accounted for people in Manhattan and Des Moines, and averaged out, maybe taking out some outliers. What it really refers to is that once our basic needs are met, we don’t have an appreciable increase in experiential happiness due to diminishing returns, the need to keep feeding the animal to get the same stimulation, etc. I think there’s truth in that.

    Your assertion that the government wants people to be average is completely wrong. They want people to aspire to wealth and buy products they don’t really need to keep the economy moving. I agree they don’t necessarily want people being young, financially independent and out of the debt cycle, as debt keeps people productive, and middle class aspiration is what drives the economy. However, it’s great wealth that stimulates the great advances in our culture. High risk investment isn’t done by average people. It’s done by VC’s, angel investors and private equity as part of a diversified high risk portfolio. For that they need high net worth individuals. it’s the super wealthy that drive research and discovery, and to use that old nugget, job creation.

    I also don’t think you should take behavioral economics with a pinch of salt. The research is revealing realities about human motivation (http://selfdeterminationtheory.org/) (http://businessinnovation.berkeley.edu/WilliamsonSeminar/ederer100109.pdf) that clash with the old idea that people base their effort upon a supposed 1.0 correlation with cash.

    Check out SDT theory above. It seems we’re fundamentally driven by a need for autonomy, relatedness & competence. Your blog lauds achieving early wealth as a means of achieving autonomy, which is obviously smart, though if you want to be truly helpful to others that don’t have the same path – aspiring doctors, lawyers, professors, early parents, entrepreneurs, divorcees and others that defer the rewards for a higher, later, or different type of payout, as well as the average joe, there should be some emphasis on balancing the autonomy with seeking excellence in what you do, and feeling a sense of understanding, companionship and empathy. Many people trade off the autonomy for these other drivers, and it can be cold and alarmist to just look at hard numbers without appreciating the other goals.
    Still a fan however…

  25. backontrack says

    Hi,

    I am a new and very much enjoying reading your posts. I know this is old but hope you still see this – I will say, I disagree with a few things I read often here:

    1. “A students would do better” and picking specific professions while equaling that to success.

    I don’t think this is true. Grades do not tell you much about people’s ability to work. I would get rid of grades all together and focus on skills and independence (Montessori type education) http://articles.businessinsider.com/2011-04-18/news/30058490_1_entrepreneurs-managers-b-students. (btw I taught myself high school so that I could travel the world competing and still managed to get a scholarship in a prestigious university in Boston, though English is my second language and my “high school” grades (I had to take governmen tests to pass it) were not so good).

    2. “you can get a X paying job if you really want to” – Working hard gets you very far, but not always at the top without innate skill – there is only one Roger Federer and thousands of tennis players trying to make it to the top, (I know as I was one of them training 6-8 hours a day to get there but never happened). So yes you increase your chances but it is not realistic for everyone. With that said the skill of working really hard and being goal oriented will get you further.

    3. “kids cannot be that expensive when I see families with almost no income and 5 kids”

    HA! 1 in 5 children live in poverty in the USA, a great # of families are using government assistance and an alarming rate is not insured. Of course kids do not have to cost a fortune (and yes they are a choice) but the costs do add up (if no health insurance via my job we would be dead – my asthmatic child’s meds are pricey!). Plus think about babysitting/daycare costs (when they are sick and you need to work for example) where there is no public option (and the HUGE emotional costs of choosing to not be with them as they grow in order to save more). Btw, my birth in a private hospital in an expensive city in the the USA $25k (no complications straight forward, shared recovery room 2 days stay – insurance covered, excluding prenatal appointments) vs $1,800 in Mexico (where my second was born, as was I)!

    Speaking of kids AND happiness, we just came out of a 2 year “reverse retirement” we took to stay at home with our one child and while I gave birth to my second (we moved abroad for that time) it has been AMAZING to be able to do this (4 years after college my husband and I took a year to do our MAs in our favorite city in the world and travel for a year, then got back to our work for 4 years before kids came) Without a doubt, the year we took of to our MAs and the 2 years we took with our kids in our 30s have been the best of our lives so far. Incidentally we were most happy when we have owned the least amount of stuff (we are trying to do 200 items per person or less in the next few years to declutter our life). So I think the key in the happiness is in the balance (if we just took time off for much longer and then had no money I am sure it would get stressful).

    BTW the catalyst for our reverse retirement – my dad died unexpectedly as I was pregnant (I had not seen him for a year since I was working too hard and then my pregnancy was so horrible – with hospital stays and all – that I could not go to work, let alone travel to see him). He died so young without being able to travel like he wanted to – it is good to save (he was ready to retire at 45 and then a huge economic crisis took it all and he was getting himself back up, so this is why I care about savings so much) but lets not forget the #1 regrets of the dying: http://www.guardian.co.uk/lifeandstyle/2012/feb/01/top-five-regrets-of-the-dying

    So why I am here? Our personal goal moving forward – work/save very hard and live below our means so that every other summer we can “live” in a different country with our children as they grow (I work remotely can do so from wherever) and retire at 55-60. Need to get back on the savings track to accomplish though and this resource is very helpful!

    • Financial Samurai says

      Hi there! Welcome to my site. I hope you spend time looking around as I think you’ll find some interesting topics and very useful articles on the subject of career, retirement and money management.

      I also recommend you have a read of this page that talks about Personal Capital, a free wealth management tool I’ve been using since I retired. It’s helped me stay within budget, helps track my expenses, and gives me an overview on how I should manage my investment exposure.

      I wish you the best and look forward to more of your insights! Readers are what makes writing this blog a blast.

      Best, Sam

  26. backontrack says

    Indeed, I spent a lot of time reading through the site (sorry about my SUPER long post btw, I got too excited lol (and was happy to read that you love tennis!)). And yes, opened a personal Capital account yesterday but still have some things to add. We are int he process of trading an investment condo for a primary residence now that we have found a place to settle (tried not to, but it made sense for us, right now) and will look forward to challenge myself in the next few years to meet our financial goals, while enjoying our loved ones. Thanks again!

  27. Julia says

    Great article Sam.

    I’m glad to see that your $200,000 figure is pretty much in line with what I’ve been saying to folks about how much you really need in order to live a comfortable care-free lifestyle over here in the UK (south east, near London – the most expensive region).

    I reckoned at least £100,000 GBP for a family with 2 children (which is around $160,000 US) so not far off your estimate.

    We also have a higher income tax bracket that starts at £150,000 (45% – was 50% a short while ago), which comes to around $230,000 US, so seems to be the amount at which our Overlords consider a suitable limit.

    To me it is wrong that the government can legally take over 50% of a person’s income, especially when you consider the madness of, as you say, treating the individual and household income differently.

    To me the reason they do this is so that they keep more couples in the workforce and paying more tax. Most western governments don’t like the traditional one-income family, although it has been proven that family life and children’s happiness is exponentially better in said traditional family unit.

    They also don’t care much for traditional marriage, hence their effective abolition of married couples allowances and tax breaks.

    Here’s to swimming against the current stream and living well.

    All the best

    Julia

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