Income: How Much Do You Need?

Many of the survival components of the MPI life wall can be obtained with money and, if you live in the developed world, it can be very difficult to obtain them without money. In the meantime, there are other things that money can buy that go beyond survival. Some of these are things that can help you become more productive, improve your health, and contribute to an overall feeling of happiness in your personal living environment. Of course, there are also other things that you can buy that have very little to do with your overall happiness. So the question is, how much income do you need?

There have been several polls conducted with the objective of answering this question. A recent poll conducted by ORC international (8.4) indicated that, for 50% of the participants, the answer is less than $100,000 in the United States. Almost a quarter of the people that participated in the survey indicated that an income between $50-75,000 would be sufficient. This, in turn, happens to be consistent with another study conducted by Princeton University that found that “emotional well-being” rose with income, but not much beyond $75,000.

The conclusion to draw from these polls is that there are certain things that you must have that significantly impact your happiness but, after you get them, using the additional income to acquire “additional stuff” has a diminishing impact on your happiness. It is interesting to note that some people genuinely don’t care about money. Approximately 10% of those polled said that they would be happy with a number between one dollar and $30,000. Further, 6% wanted to make it clear that they didn’t feel the money could buy happiness, period. At the other end of the scale, 23% said they needed between $100,000 and $200,000. The divergence in these numbers can likely be explained by the fact that it costs significantly more to live in places like New York and California compared to many other states in the United States.

When the participants in the polls were asked how much income they considered would make them feel rich the typical answer was somewhere between $100,000 and $200,000. In fact, 60% indicated that an income below $250,000 would be sufficient for them to consider themselves to be rich. Only 11% said they needed to make $1 million or more to consider themselves rich.

The research conducted at Princeton by Dunn and Norton involved examining Gallup poll data from nearly 500,000 US households(8.5)  and found that higher family incomes were related to better moods on a day-to-day basis. However, they also found that the impact of money fell away after a level of $75,000 was achieved. Dunn and Norton explained that doubling income does not result in doubling happiness. The research did find that people who earned $55,000 were only 9% more content than those making $25,000.

The more important finding that was revealed in the research was that what we do with our money is more important than the money we earn. The researchers found that making more money in order to have bigger homes and better cars is ultimately ineffective at transforming money into happiness. The research demonstrated that if you do decide to spend the money on yourself you will generate a bigger “happiness return” if you spend the money on buying experiences (travel and special events) as opposed to buying material objects. 

Another interesting finding by the researchers was the concept of “under indulgence”. They provide the example of indulging in chocolate sparingly instead of in excess because it results in a greater appreciation of the taste and texture of the chocolate. 

I have described, what I believe, to be more important concepts in the first chapter on Happiness that directly address the issues raised in this section on income. The findings by the researchers that indicate that how you spend your money has a bigger impact on your happiness than earning the income are consistent with the principle that earning a lot of money only makes you “potentially successful”. Of course, in this book, we are defining success as the extent to which you have a positive impact on yourself and on the planet and that your overall happiness arises from this form of success. 

Secondly, the chocolate analogy provided by the researchers in the Princeton study is consistent with the principle described in the first chapter on Happiness relating the principle relating to the “relative” nature of happiness. It tells us that the novelty of new success, in this case, the acquisition of a physical thing or perhaps experience, eventually fades and we need to do something new in order to get our next dose of happiness. 

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