If you want maximum happiness, there is an ideal income to earn. After this ideal income level, unfortunately, not much more happiness will be achieved. Therefore, you want to make up to the ideal income level and no more so you don't waste too much energy and time.
Researchers say the ideal income for maximum happiness is $75,000. But I believe that's BS. In my opinion, as someone who has made $4/hour to over $1 million a year, the ideal income for maximum happiness is about $250,000 per person and $350,000 for a family of up to four.
It 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.
The Ideal Income Based On Research
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 Ideal Income For Maximum 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 – $250,000 per individual, depending where you live! The reason why your happiness doesn't get much greater after making more than $200,000 is because the government starts phasing out deductions and raising taxes when you start to make much more.
Thankfully, a compromise was reached in 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 per person or $250,000 per couple, 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 and government shutdowns 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! OK, by now I hope you know I'm being facetious here. It is absurd there is no cost of living adjustment with regards to taxes.
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!
Other Reasons Why $200,000 / $250,000 Is The Ideal Income
* Enough money to live happily anywhere in the world.
* The highest income that receives the maximum tax deductions.
* The Alternative Minimum Tax doesn't aggressively kick in until higher amounts.
* Income level where tax audits begin to surge.
* Optimal income for paying your fair share of taxes, but not an egregious amount that makes you sick.
* No longer a target by the government, the media, or the IRS.
* You're less miserable. A lot of people who are making multiple six figures just can't stand their jobs!
It's funny, but in 2023, professor Daniel Kahneman who won the Nobel Prize in Economics, and who came up with the $75,000 threshold, finally admitted that $500,000 is the ideal income where happiness no longer increases.
Go Financial Samurai! If you’re interested, here’s a deep-dive into how these Nobel Prize winners got the income figure so wrong. Because revising up their ideal income figure by 6.5X thirteen years later is pretty extreme!
Recommendations To Build Wealth
1) Manage Your Finances In One Place
Get a handle on your finances by signing up with Empower. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to manage my finances.
Now I can just log into Empower to see how my stock accounts are doing, how my net worth is progressing, and whether I'm spending within budget. The best feature is the 401K Fee Analyzer which is now saving me over $1,000 a year in portfolio fees I had no idea I was paying! There is no better free online tool out there to manage wealth. It only takes a minute to sign up.
2) Start your own business:
If you feel you're not getting paid what you're worth and want to boost your income, start your own business online on the side! It used to cost a fortune and a lot of employees to start your business.
Now you can start it for next to nothing with a hosting company like Bluehost for under $3/month and they'll give you a free domain for a year to boot. Skip the unnecessary add-ons too. The key is to just get started if you want to make the ideal income and have the ideal lifestyle.
Brand yourself online, connect with like-minded people, find new consulting gigs, and potentially make a good amount of income online one day by selling your product or recommending other great products. Not a day goes by where I'm not thankful for starting Financial Samurai in 2009. See my step-by-step tutorial on how to start a site here.