Why are people happiest earning $75,000?
The study came out in 2010 saying that people are happiest earning $75,000.
According to a new study from Princeton University’s Woodrow Wilson School, it sort of does — up to about $75,000 a year.
The lower a person’s annual income falls below that benchmark, the unhappier he or she feels.
But no matter how much more than $75,000 people make, they don’t report any greater degree of happiness.
They say that any amount above that like going to $85,000, people aren’t THAT much happier, than let’s say going the same distance from $20,000 to $30,000.
In economics, we call that effect diminishing returns.
They also say there’s two types of happiness: daily happiness and deep satisfaction happiness.
Those who earn above $75,000 achieve a deep satisfaction of happiness, but aren’t necessarily happier on a daily basis.
In other words, the more people make above $75,000, the more they feel their life is working out on the whole.
But it doesn’t make them any more jovial in the mornings.
Still, it made me wonder about the specifics of $75,000 as the magic number aside, so I punched the numbers into a simple Canadian tax calculator.
Since I’m in Ontario, I’m biased to using that province a lot, and it gives you about $58,000 net to play with, not taking into consideration any other taxes or tax credits.
$58,000 = $4833.33 net a month
Each month, you’d have close to $5000 to put towards your bills, which the authors have noted means you have enough disposable income to go out and comfortably spend on what you want to spend on.
IT WORKS OUT TO BE A PRETTY COMFORTABLE NUMBER
You’d be able to put about $2000 towards your mortgage, save $1000 (which would be a hefty 20% net savings rate!) and still have $2000 to spend on life.
I suspect that it is at this point, that most people’s household budgets would be properly satisfied.
The only ones who would be incrementally happier with more money past the point of $75,000, are the ones who think that more money is never enough.
PERHAPS BEYOND $75,000 YOU’RE LOOKING AT MORE WORK
I’d also wager that beyond $75,000, you’re looking at longer hours at the office, perhaps living in the middle-of-nowhere, traveling all the time, and/or more responsibilities.
All that adds up to more stress, and it takes away from the shininess of earning an extra $10,000 more.
PEOPLE GENERALLY DON’T WANT SUPER FANCY THINGS LIKE JETS
Even though we all think we all spend beyond our means, we aren’t really aiming at owning a huge mansion or a fleet of luxury cars in our daily lives.
(Lyon. Full of rich folks, as you can see.)
Most households would be happy to just have an ideal household budget, and some extra disposable income beyond their fixed expenses and their immediate needs, to do what they want.
Read my posts on ideal household budgets:
IT IS ALSO ALL IN RELATION TO WHAT OTHERS EARN
Of course, we all know that how happy you are is relative to what others around you earn as an income as well.
We’re creatures who like to judge ourselves against what others have accomplished.
If you were earning $75,000 while everyone was earning $100,000, you’d be unhappy.
But if you earned $75,000 while people around you earned $50,000, you’d be beyond ecstatic.