How Much Money Is Enough?
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.
-Calaber24p
Most of these money go to investements that provide jobs for other people. There is an extra sense of satisfaction when one is an investor knowing that they provide wealth to others.
Still, they are in the US. The study is nonsense if not taken globally. In much the same way I cannot survey people from Manhattan, from all different backgrounds, and measure happiness for all humans. Different environment entails different parametres. Happiness remains very subjective and is based on many different things. If we knew what constitutes it we would't be having this discussion.
The opposite also applies. This is a post-hoc fallacy. More money, no money, average amount of money, could cause trouble in a relationship. There is no way to measure this effect. This is afterall why social sciences are called "soft" . They can hardly replicate their findings.
For the same reason you continue playing a video game in order to reach a new level. Every level provides satisfaction. After a while this conditioning provides small sparks of happiness. If it didn't they wouldn't be doing it.
After a while you would realise that giving back to the community gives you more happiness. You will start investing and thus making more money.
Remember, we are all humans. We are not THAT different from each other.
Sometimes, and usually only a fraction of it, but that is a whole other giant monster.
I agree, there are many flaws in the study I just found it interesting, like I said it was done as an economics study and they are just trying to make a generalized model that they can make assumptions from. Maybe I should put a clearer disclaimer in that paragraph though.
I agree, like I said at the end it becomes a high score to them.
I would probably do this along side my job and if I was extremely wealthy I would do it as a full time thing. I agree that would probably bring more happiness to my life.
Still, this is jobs for people who would otherwise have nothing. These guys create wealth.
Sometimes things around us might look weird and extreme but after getting into someone else's shoes the world makes much more sense
Thanks for taking the time to jump into the article and provide your feedback. The ping pong back and forth provided a lot of value form me, personally.
Ha.... That looks like a good way to throw your back out.
The more stuff you have, the more it costs to maintain it. If you buy a "dream house" and a "dream car" all of a sudden you are trapped into paying property taxes.
At todays interest rates and risk profiles there is no amount of money that is easily attainable by the middle class that can earn passive income sufficient to maintain their standard of living indefinitely.
At 1% interest it requires 7.5 million dollars to earn $75,000 per year. That would require the typical middle class individual to save 100% of their income for more than their working life span. Once you factor in minimal cost of living and inflation and taxes, game over. It isn't even remotely possible without taking extreme risks in the market.
Someone who earns $7.5 million dollars after taking extreme risks in the market will still fall behind unless they continue to take extreme risks. Negative real interest rates are a bitch.
Yeah I agree with you that once you get to a high level like that, you need more money to maintain. I do disagree that there is no amount of money easily attainable by the middle class that would earn passive income sufficiently however. If we look at average annual returns on the stock market over long periods of time, if you are saving the right amount from when you are 24 or 25 you can live off your dividends by the time you get to around 55-60. High dividend yielding mutual funds/etfs can get you around 2-3% dividends a year, but the key is to live below your means.
Like you mentioned in the first part, the mansion and the large properties becomes a trap. Why do we need a 12 bedroom house for a family of 4? If people live frugally they could easily live their lives and pursue their passions without having to work, or at least not having to work a 9-5 job. Billions of dollars is a different story, you have to get much more creative there, but if your net worth is under 50 million you can still use the stock market without pushing prices much. There are relatively low risk options like VDC, a consumer staples etf which has a dividend yield of 2.16% and almost always goes up because consumer prices are always increasing. There are many lower risk options out there that can help you maintain your lifestyle without having to work a 9-5.
I do agree however that now in the current way things are looking, everything could change. Negative interest rates are essentially a money tax and taxes in general do greatly affect how well you can live off your salary.
"The more stuff you have, the more it costs to maintain it."
This very much reminds me of what one of my college friends used to say a lot...."If a man owns a couch, he must stay home and sit on it."
He claimed it was based off of some old Chinese proverb, but I've never found it anywhere. It makes sense, though. The more things you have, the more time and money you have to spend maintaining them, and the more obligated you feel to stay at home and use them, because you spent all that money on them.
There's a great sense of freedom when you get rid of things. I'm in the middle of moving, and am currently dividing my things into "keep," "donate," "sell," and "throw away." I used to be really sentimental about keeping things, just because someone important to me touched them once. But, now, I realize things aren't people, and I'm being pretty brutal about what I'm donating, selling, and throwing away. Having fewer things is actually a very freeing feeling.
Yes, current interest rate environment is distorting markets and makes even earning a nominal rate of return on a portfolio difficult (and risky). Definitely takes a large amount of capital to generate a secure $75k per year now. Hopefully a diversified portfolio could return a bit above 1%, but like you said I wouldn't get too optimistic. Now is not the time to get greedy.
Jim Pattison in Canada has a net worth of 4.9 Billion. I watched an interview with him on TV, and he said...
"People ask me, why not retire and go lay on a beach somewhere and enjoy life?" He says he's tried that, and it's not for him. He's happiest when he's at his desk making money.
Some of these multi-millionaires and billionaires can't stop. Their life path has been the accumulation of wealth, and it isn't a hobby. It's a way of life for them.
To the rest of us, it looks like they are addicted to greed, but they don't see it that way. I wish they would though.. because this stifles innovation that could come from the small guy if the marketplace was more varied and not so monopolized, controlled, and patented to the "nth degree".
I think you are spot on with this. People who are absurdly rich got that way because they are driven and focused with an intensity above & beyond what many people can muster. They would probably become restless and bored quite quickly, sitting on a beach all day doing nothing. Habits are hard to break, and if your lifelong habit is making money, then good luck giving it up.
I actually have no problem with billionaires who make money and then use it to move us forward as a society, for example the way Elon Musk used his paypal money to start Telsa and SpaceX. I do however have a problem with billionaires who just hoard their money and save it for generations to come.
I agree with you. There is a very thin circle of billionaires who use their money to better the world. Sure, lots of them pour money into charties and such. But I like the innovative type like the ones you described.
A lot of people trying to get rich are just not getting rich; they lack the knowledge or skills toward success. Others simply make money as a byproduct of who they are.
So people just love haggling or wheeling and dealing. To be involved in conflicting negotiations to win some reward. Simply some people just love the egomaniac drug of marketing or closing a deal.
So while a million dollars is kool for many people others are not in it for the gold. Some of our famous entertainers are worth millions or even seriously multi millions; yet they grab every chance to be in front of the lens they can.
Any average person could retire with one million dollars, because right now they are probably working most of the year for around $ 50,000 or a lot less. The math shows 50 grand by 20 years equals a kool million.
Obviously that would have to be an older person and someone generally financially set up like only having a minimal mortgage, etc. But with care and planning one million dollars could secure most peoples futures till retirement.
But what would you do all day; could you simply live on Steemit for 40 hours a week : )
/ hugz ; )
But I plan to live to 150 years of age....
My " in laws " were unhappy when I told them, people have no business being alive over seventy five; ( 83 and 89 respectively ). If your ' bucket list ' is not ticked off by 75; then I was probably not worth doing and had little real business being on your bucket list . . .
Today people barely have enough gold to live while earning a wage every week. How much money will most people have in retirement to do the things they want; most likely a lot less. Indeed most people today choose between eating or utility costs, once retirement happens many people will find themselves sitting down to dinner sharing the cat or dog food to reduce grocery costs.
Even for those with enough gold most people will not have the health status to freely travel. Imagine having to return home every week for health appointments. Indeed even those with the quality of life medically to enjoy travel; many will be raising their grand kids so the parents could return to employment to maintain their lack of equity in their house mortgage.
Death and taxes; the only things you can be sure of : )
/ hugz ; )
You told your in laws "people have no business being alive over seventy-five"...
I'm going to take the rest of your comment as brutal and terse colloquy.
Fine, we should all expect hard lives, especially toward the end. I'll agree with you.
"More" To quote Wall Street Money Never Sleeps...
Me personally, just enough to cover my bills and live comfortably... I think others work for more because money can be a measure of social status/power. More = better (just like bigger is better) ;)
I agree that social status/power has a lot to do with it. Im sure money aside, that benefit becomes like a drug itself.
I also had the idea to write a post on the topic: "How much money do you need for happiness?"
still write it and let me know if you do !
"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."
I think the answer to your question is that they value work and progress more than sailing, hookers and blow.
---And those that don't... well, if they survive you usually get to hear about them sooner or later.
Excellent article! I often thought to myself that question "How much money is enough?" and so far have been able to to live owing nothing and having nothing extra, just like the aboriginal principle of eating only what you need, nothing more and nothing less. It provided, so far, for an extremely happy and content life. the extra money only help foster more goodness for others immediately around me or in my circles of friends. Thanks for this great posting! Namaste :)
more than what I got right now, which is jack shit!
Ohhhh.. I don't know, YOU TELL US!
You've made a FUCKING KILLING!