How Much Money Is Enough?
I often wonder why people with tens of millions of dollars don’t call it quits and just retire or do something that they love, like sail around the world, or die in a blaze of glory filled with hookers and blow. It was really only after I saw an episode of “Orange Is the New Black” when one of the actresses talks about a study where a salary over $75,000 only slightly marginally increases your level of happiness, that I looked further into the issue. The study the character is talking about was a study published in 2010 by Princeton University’s Daniel Kahneman and Angus Deaton, who would go on to receive The Nobel Prize for economics. I want to talk more about the correlation between money and happiness, but first I want to talk briefly about the study that was done to give more context.
The Happiness Study
The study surveyed over 450,000 people in the United States from all different backgrounds, incomes and ethnicities and focused primarily on how great was each participants emotional well-being. They actually divided happiness into two categories, one which was your happiness during your day to day life and another, which was how happy you felt about your life in the grand scheme of things. They found a relatively strong correlation between short term happiness and incomes up to the $75,000 marker, at which point it seemed the correlation started to dissipate. This lead them to the conclusion that people making $75,000 or over will not increase their short term emotional well-being by increasing their income even further. However there did seem to be a correlation between how much money someone makes and how they value their lives in the long run , that seemed to be unbroken as income went up. However for the sake of my write up I want to focus on just the short term happiness findings.
Many people might say that there are other factors that could attribute to a day to day emotional well-being, like mental disorders or relationship problems or relationship problems and you would be correct. The study acknowledged that there were many other factors that could affect individual happiness, but overall as a basic model their findings seemed to work. Making general models and assumptions is an economist’s job though so their data is a nice lens to look through to help how you see the world. Overall the study a generalization, but I do believe there is a lot of truth to it.
Valuing experiences over things
I strongly believe that money stops making you happy after a certain point because after that point most people are just buying ridiculously expensive things rather than experiences. There is sufficient research that shows that the joy of a good experience lasts much longer than the joy of an item. I think as a society we have been brainwashed to buy crap we really don’t need and at a level that goes beyond excess onto disgust. Why do we need 100 pairs of shoes or even 10 pairs? Does it really matter that your shoes don’t match your belt? As a society we think new things will make us happy, and it fits the agenda of the government because to them spending is good. People are looking for guidance in their lives and looking for something that can make them happy, even for just a small moment of time. Advertisers take advantage of this and make you believe that the 50,000 BMW is the solution to your problem but you soon realize its just another thing and the hole you feel in your heart just comes back. Sure you’re happy for a time but it fades away.
Purchasing experiences, many of which are far less expensive than the items you are buying, add to a feeling of completeness. I often hear people say things like “I can’t afford to go on vacation” or “ I don’t have time to take a class at a community college” ,but they have money for those $300 shoes, or they have time to binge watch Netflix on the couch. When were young we picture all these grand things we want to do with our lives and when we get older, we start making excuses as to why we can no longer do them. We need to start taking advantages of the experiences we have access to rather than waiting to buy another thing that will only give us momentary happiness.
Money can be the root of relationship troubles
I read a study a while back that the leading cause of fighting between married couples was usually about or had something to do with money. It’s a sad fact, but money is needed to live your life today and raise a family. Without at least some income life becomes less enjoyable, which is why we see a correlation between money and happiness up to a point. Once you are at a sufficient amount of money to support your family and enough to avoid arguments that cause stress take and toll on your relationships, your day to day life becomes much happier.
So why do people continuously work even after they become extremely wealthy?
I really wanted the study to delve into why people who are extremely wealthy keep on working when they could retire any day, but sadly it did not. However I still want to put forward some ideas on why I think this is the case. Im sure there are many reasons like people are addicted to their jobs, they like the recognition or would just be bored, but in my opinion I think at that point people start treating their bank account like a high score. They start to imagine all the things they could buy and become obsessed with increasing that meaningless number. But the things they can buy wont make them happy day to day, rather if they are spending their lives miserable at work it will make living a chore. They also become obsessed with the status of a good job, but that wont make them happy either. I think our culture of greed has created a society of people who can’t pursue their passions because they only think about the next payday. Obviously this isn’t the case for all of us, but I do think many think this way.
I have always held the idea that as soon as I had enough money to live off my dividends I would stop what I was doing and get a job I loved doing, no matter the wage and just live. I hope one day I can truly achieve this dream because living a life worrying about whether or not im going to be able to support my family truly scares me. Unless my crypto assets appreciate to absurd amounts, I will have to find another way to make my dream a reality, but one thing is for sure, as soon as I get to the point where I can live happily off my dividends I will be retiring and enjoying as much as my life as I can until I die.