At What Point Do You Think Money/Income marginally contributes to Happiness?
Countless studies have indicated that after a certain extent, some 85k, others 100k, money barely contributes to happiness.
As a young person who is ambitious, I keep thinking to myself, is that Apollo associate making nearly half a mil that much happier than someone who is working half the hours, same age, and still earning $130k pursuing institutional partnerships at PayPal?
I am still very ambitious, but I keep thinking about the diminishing returns from all the extra time spent working, not having a life, not having a dating life, not being able to enjoy hobbies.
Interested in your insights, thoughts. Especially from those who have already worked for over a decade and are more seasoned.
There was a princeton or harvard study in 2010 that showed that happiness levels off around $75k
I imagine CoL has a significant impact on this number?
I remember seeing something from Bloomberg on Instagram saying that was disproven. And that seems intuitive, I mean 200k vs. 75k? Didn't really look into it though
It was Kahneman’s paper (respect) based on a survey of 450,000 Americans from 2008 to 2009.
First of all, $75k back then would equate to about $90k today. Second, think of the last time that you ever completed a paid survey (or political poll, etc). Do you know anyone who takes them? These kinds of studies reflect a population that does not resemble the one surrounding most of us here. $90k might be great in Missouri but it sure as hell makes for miserable living in NYC, where the happiness/carefree point might start at around $250k for a single person I’d say.
I imagine hours worked has a significant impact.
I'd feel much different about making 75k if I was working a 40 hour week vs an 80 hour week
So, I'm pretty sure it varies, right?
Those studies that state >$XXXk offers diminishing returns on happiness -- I think that's rubbish.
Ok so yes, let me get this straight, I will probably get less "happiness utility" on incremental salary above say $150K and below $300k.
What above compensation above 500k? 850k? $2mm? Can you honestly look me in the eyes with a straight face and say I will have access to the same discretionary spending opportunities, lifestyle choices, and life experiences, making $2 million a year that Mr. Upper Middle Class has making 200K a year? No.
I don't buy it. I think the studies are pseudo- social science created with one thing in mind, and that's to make your average to above-average person feel better about their lot in life.
Exactly, I've also seen it used as a talking point as to why "nO oNe ShOuLd MaKe A MiLliOn DoLlArs", since social science experiments can always be extrapolated to every single person's exact situation.
My interpretation is that a $5k bonus could potentially make you more happier from 70k to 75k than a $5k bonus from $75k to $80k. and same with $65k to $70k. The logic is explained below. I think it is possible to say that perhaps the biggest marginal benefit is from $70k to $75k but obviously depends on the person.
this is 100% wrong.
5k matters more to you the less you have, and at some point it doesn't matter at all compared to a bit of extra time. that's what these studies are trying to find. and I think somewhere around $100-200k is the answer, depending on the CoL.
are you retarded? lmfao
Agree that there is a lot of variability in the research on this topic, but I believe the reason that the higher earning people weren’t measurably happier than the lower ones was because they kept themselves on the “hedonic treadmill” much in the same way someone earning $75k does.
So basically if you are earning $800k a year, you are unlikely to actually live as though you are making less, and are likely to continue to compare yourself to the next level up (say someone making $3m a year) so you never get the benefits of being “set”. Repeat at $3m, $10m, etc., but this is the more salient point than telling $75k/yr earners they should be as happy as a multimillionaire.
Whether this is true for everyone, or if there is just a lot of correlation between high earners and those who are prone to the hedonic treadmill is unknown I believe.
Anecdotally, there does seem to be some truth to this. FT ran a “lunch with FT” story on Lloyd blankfein a few years ago and he just seemed kinda grouchy. Guy grew up in a housing project and survived cancer and is a multimillionaire with a ton of power and was just kinda “meh”. It’s one interview of course but maybe there is some truth to that.
Also rings true for the wealthy people I personally know. I can’t really say a lot of them come across as super settled or content or happy; if anything, it’s quite the contrary, they are always on the lookout for the next big thing to do.
This is the most accurate assessment, the hedonic treadmill is very real and is what really contributes to the effect. Lets say at $200k/yr you're going skiing three times a year, getting a nice hotel each time, at $2m you're still going skiing, maybe you rented a nice ski chalet, maybe at $20m you own your own ski chalet, but are you really that much happier because of it?
I'm not saying i agree with the study, but you are missing the point. The study - apparently - is saying that "discretionary spending opportunities, lifestyle choices, experiences" (as you describe) do not equate to happiness. Sure, you get more of those things with more money, I wont look you in the eye and tell you otherwise, but it does not make the average person happier.
I also think that most people making $500k-$1.5mm a year work a lot to maintain that income. If you had a trust fund and didnt have to work (which is rare, compared to the amount of people who do have to work), then I think there could be an uptick in happiness.
I remember some Bloomberg article about a recent study saying that the "money only buys happiness until $xx,000" claims were false.
Not surprising. I guarantee I'm happier now than I was when I was making $75k a year and a lot of that comes from the freedom from financial stress and ability to do things that I want to do.
Agreed
A lot of people (probably myself included) feel this way. I'd guess just as many were happier as broke college students, though.
so much of this is dependent on the individual, their values, where they live, their relative success compared to their peers etc. These studies that try to generalize and then come to the conclusion that "happiness peaks at 75k" reek of sour grapes to me. people trying to convince themselves that the extra 300k in salary wouldn't make them happier, because they know deep down they'll never get it.
net worth > income
I know there are many studies out there on this subject as has been mentioned but I think it varies and it's difficult to put down any specific number. Considering something like ~50% of people in the US live paycheck to paycheck (pre covid) I would say that the diminishing return starts to kick in when people don't have to worry if they are going to be able to cover all their bills in any given month and maybe be able to put something in savings for a rainy day. I think it's something many of us take for granted given that we work in a high income industry, but just being able to comfortably cover one's day to day expenses goes a long way for a lot of people.
5-7mm net worth w/ 500k+ income
I think a lot of driven people derive pleasure from solving intellectually stimulating problems and working with people they like. Lots of people can quit work whenever they want but don't because they love the environment they work in. Academics are a great example as are top tier HF guys. Is a great academic passionate about their work going to retire? Nope.
https://www.bloomberg.com/news/articles/2021-01-25/can-money-buy-you-happiness-yes-but-there-s-a-catch
Bloomberg article from a couple weeks ago that refutes the old “75k is all you need” adage. Basically richer people are happier on average - which is exactly what you’d think
Honestly every year I’ve made more money I haven’t been much happier, but that’s because the next level of income based happiness is quite high in magnitude. The after tax value of an additional $50-$100k isn’t much, so to go from make $150k to $250k honestly won’t make you much happier. Now if you were to go from making $250k to $1mm you will definitely be happier as your after tax purchasing power is significant. At that level of income you can make meaningful asset purchases that upper middle incomes will never be able to make and your level of financial security is greater
Depends how long it takes you to make it. Personally, I'm at a sweet spot where I barely work but my family lives nice and I can do whatever I want. I don't even wanna grow my company. This shit's perfect. I'm gonna cruise for a while then start some new shit that's more interesting than stupid multifamily rentals.
People who say anything over $80K doesn't matter have given up on ever making over $80K. The lengths to which people will lie to themselves are... long?
It varies incredibly person-to-person.
That said, to your original question, pretty sure the PayPal guy is exponentially happier than his Apollo counterpart, lol. Just trust me on that one.
I think it depends on your lifestyle. Covid has really taken a sledgehammer into activities and things I would normally spend money on.
I think it's simply that the more money you make, the higher threshold is needed to really feel like you've elevated your position in life.
I'm certainly much happier with the money I make now as a senior VP than I did as an analyst but now it will require a massive step function (not at the expense of my time and health) to be happier.
In other words, I don't think my lifestyle changed materially between my first year as a VP and now, because I quite frankly have never really had to worry about money so it would require a huge uplift in networth and income for me to really feel happier
Hopefully that makes sense.
I think this strongly depends on your job.. .and if you don't like your job then being independently wealthy (having FU Money) is the only way out.
Most stress in people's lives come from their career.
$75K in Topeka buys you a lot more than $200K in San Fran.
Regardless of income, if you are trading in hours of your life to gain money you wont be happy. My advice, do the crappy work that pays the most until you can accumulate assets that you can live off of without touching the principal - VEIRX pays over 3% annually so if you can sock away ~$2.5 million by 35-40 you can take a "salary" of 75k+ and do as you please.
this seems a bit counter intuitive, the idea that you are suggesting that you can't be happy while trading time for money while also suggesting that the best path in life is to trade time for money so that you no longer have to do it after some indeterminate amount of time. you are basically saying not to be happy now so that you can be happy at some point in the future. you are leveraging the present for a future that you only hope to be true, if you are still unhappy after hitting your target and not having to trade hours for money anymore then your entire pursuit has been fruitless. you are also leveraging the present for a future which you may not attain, so that if you never hit your target then you will be unhappy forever based on this framework.
The latest research says (and I cannot believe they needed a study to confirm this) more money = more happiness but that there’s diminishing marginal returns
I can’t remember if it was Khanamen or another, but the paper I read split happiness into 2 categories: day-to-day ups and downs and overall life satisfaction. What they found was that your day-to-day happiness stops increasing with money at around 60k because you have all of your basic needs met and have adequate contributions to savings. After that rough salary mark, it’s more money more problems, literally.
Overall life satisfaction, however, did steadily increase with wealth without a cap. Obviously any individual can get less happy, but a lot of wealthy people building massive brands or businesses end up donating millions to causes they care about and naturally feel more complete. That part isn’t talked about as much because the headline is obviously more interesting.
I think in general people who are super money motivated will be unhappy unless they earn a shit ton of money just because that’s their nature, rather than earning loads being a necessity for happiness. Personally, if I became a big 4 accountant or something I’d feel a bit shit, even though I would be earning a perfectly decent sum to survive/buy nice enough shit. I’m sure there are others who would be at their optimal happiness doing the same job.
Just stopping by to provide an anecdotal data point
I don't feel any happier now making ~$400k than I did making $100k 4 years ago. In fact I feel worse, and completely trapped by this money. I am definitely much more comfortable though
What do you mean by that? Trapped because you feel as thought you are stuck on the job since you're used to the lifestyle and that you'd prefer not to quit?
I struggle to articulate this. I can't justify quitting/leaving at this time, primarily due to the comp, because I can't get my head around giving up such an insane salary and trajectory without knowing with damn certainty that wherever I'm moving is better for me in the long term aggregate.
Put another way: How can I quit a job that pays me $400k when so many ppl barely earn $40k? What would I do if I quit and how would I justify leaving behind the obscene comp? I've done good job of limiting lifestyle creep and save about 60% of my net pay and have a decent nest egg for my age. but I can't come to terms with the idea of leaving the salary behind no matter how much I may dislike the actual job. The more money I make the more impossible it feels for me to "give this up". I straight up need to see a therapist about my money complex.
I would like to quit and think about it everyday.
A few thoughts:
A lot of money (net worth, income) does not necessarily result in a lot of happiness. However, it is probably more certain that having no money results in no happiness.
That said, imo, money and happiness are just results. The drivers are behind it. That's why, there is happiness with or without money. They are not necessarily mutually exclusive. But there are certain keys to it.
Focusing on the money and the number will probably backfire and leave you empty or frustrated. There will always be a Jeff bezoz, or buffet or +insert next billionaire. Even if you are already incredibly wealthy.
Focusing on the perks that wealth brings to you will have a similar effect, as they run off and like beauty or any other good thing, in excess it starts to bore off.
There are problems and issues larger than wealth. Waaaay larger. Take health, for instance. It probably is more frustrating being incredibly wealthy, being able to pay whatever treatment, and knowing it is not going to pan out. Life has often an untactful manner to show, that money, for all the power it may have on certain domains, remain a good invented by humans.
Happiness, derived from more deeper drivers (meaningful work, meaningful relationships, meaningful existence, family/friends, enhancing people's lives, working hard towards and achieving purposeful goals, establishing a legacy of good, consciousness about owns existence/reason why here and why to love for, etc.) Is certainly more solidly built. So, as long as you can have a certain level of necessities covered (put a reasonable number in here and adjust to whatever effects may help you get the point across) that allows you gain terrain on the pillars of fulfillment, any additional amount of money may no necessarily be the most important factor to make you happy.
In my view, time is the absolutely most precious "asset", followed by health and closely by meaningful purpose and relationships. Mastery of time and a generous amount of the others can certainly propel you further into happiness than money alone.
There is some joke/story about a consultant and a fisherman...
Probably sounds like some outlandish guru stuff, but is drawn from observation, both professionally and privately...and ultimately only an opinion.
Another guy that has delved into this topics with golden nuggets of wisdom is certainly @thebrofessor
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