We've discussed the curiosity of financial hoarding as well as one way in which to eradicate the disease by revealing our desires for public shaming. If we feel ashamed, we simply don't spend as much money. Some folks found it a little strange that I find delight in getting judged for having spending desires. After all, we should keep our thoughts pure in order to reach salvation.
The truth of the matter is that my love for saving money almost always trumps whatever negativity or difficulty I've got to endure to save more. The pain of working 14 hour days in my 20s was no match for the joy of having more savings in the bank. The delight of making active income keeps me engaged in retirement for 2-4 hours a day despite generating enough livable passive income to not have to work. Each comment I get about being wasteful for even thinking about spending money on a new vehicle or a watch makes me happier because it reinforces my desire to save more in order to save the children.
I even sacrificed eating tons of yummy cheeseburgers from Shake Shack and In N' Out Burger since 2000 just so I can always fit in my pair of Diesel jeans I bought for $140 on 5th Avenue in NYC. The guilt of spending over $50 for a pair of jeans at the age of 23 made me want to stay in shape forever so as to never have to buy another pair again! (Read: A Weight Loss Tip To Die For if you're serious about permanently losing weight)
Another reason why I'm obsessed with saving money is because I've been ripped off one too many times. From the Mumbai taxi driver who takes the scenic route to my hotel, to the electronics salesman who strongly pushes a product despite knowing it will be on sale the next week, to borrowers who promise to pay me back but never do – I've been thoroughly traumatized by my money spending experiences that I figure if I never spend money, I'll never lose!
The Key To Happiness: The End Game
The main focus on Financial Samurai is to achieve greater happiness through financial independence. We need to do more of what makes us happy, and less of what makes us sad. Based on my experience of earning $3.65hour flipping burgers at McDonald's to making much more than the President Of The United States during my time on Wall St., I absolutely believe that $200,000 a year is the ideal income for maximum happiness.
The one enigma I've been dealing with for the longest time is wondering what the hell is wrong with me for continuing to want to save so much. How much does someone really need after accounting for all the basic necessities for survival, especially if there's already a decent flow of passive income? I then stumbled across a survey by Ally Bank which really made a lot of sense.
Their conclusion based on surveying more than 1,000 people is simple: the more you save, the more likely you are to be happy. But what's more interesting is that saving money affects happiness MORE than how much you earn.
Take a look at the breakdown of the percent of people who felt very happy based on savings amounts:
- 57 percent who have $100,000 or more in savings <— Big jump!
- 42 percent who have $20,000 to $100,000 in savings
- 34 percent who have less than $20,000 in savings
- 29 percent who have no savings
Now take a look at the breakdown of the percent of people who felt very happy based on income:
- 45 percent who earn $150,000+ <— A 3% decline!
- 48 percent who earn $100,000 to $150,000
- 43 percent who earn $75,000 to $100,000
- 40 percent who earn $50,000 to $75,000
- 25 percent who earn $25,000 to $50,000
There is a massive 15% increase in the amount of people who feel very happy when their savings increases to over $100,000. Meanwhile, there is a 3% decrease in the amount of happy people when income increases to over $150,000. Fascinating!
My hypothesis about the decrease in ‘happy people' making more than $150,000 is simply that making more money usually entails more stress and more work. The stress on Wall St. gave me a couple years of sciatica and lower back pain until I read Dr. Sarno's book in 2001 which changed my life forever. Towards the end of my career I had constant golfer's elbow as well as TMJ, where I grinded my teeth at night. Like magic, both symptoms disappeared within two months after I retired.
There is no happiness plateau with saving money in the survey because savings gives people peace of mind, pride, and independence. The less fear you have of going broke and the more freedom you have of doing whatever you want should definitely make people more happy! I just wish the Ally Bank survey didn't stop at the $100,000+ level.
Happiness And Financial Hoarding
We should eradicate the words “financial hoarding” from our lexicon and replace the words with “super saver.” Super savers are acting in a perfectly rational manner – we are saving more because the positive effects of more savings makes us more happy.
The only people who seem to bag on super savers are those who don't have the ability to save a good percentage of their own income or simply don't have a lot of money and are resentful towards those who do. Is it just human nature to try and make others feel bad for things which we cannot do. Perhaps the crazy people are the ones who get into massive consumer debt by spending more than they earn because their actions make them less secure about their future. But then again, I'm just judging because I haven't possessed the ability to splurge since I was in my early 20s.
The conclusion for ultimate happiness is to therefore earn roughly $150,000 – $200,000 a year and have over $100,000 in liquid to semi-liquid savings. But don't forget, if you are making $200,000 a year, based on my net worth by income chart, you should have about $160,000 in savings at 35, $240,000 in savings at 40, $360,000 in savings at 45, $480,000 in savings at 50, $600,000 in savings at 55 and $800,000 in savings at 60 if you allocate 20% of your net worth to risk-free assets.
It's amazing how all things come together now if we do a little detective work!
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Updated for 2020 and beyond.