How much money do you need to be happy?
I’ve been thinking about this since I read the Should I Try To Make Less Money? post last week. It reminded me of a study I read years ago about the financial tipping point where there is no more emotional satisfaction derived from a higher salary. I’m not saying that you can’t live a more fabulous life (travel, buying stuff) if you earn more than that amount, but that earning more will not impact your emotional satisfaction.
The article states that a salary around $75,000 is the tipping point. This means that a person’s basic needs are met and they are emotionally satisfied. In other words, you can pay the bills. You don’t worry about covering the costs of housing, food, transportation.
Should $75k Be The New Minimum Wage?
Yesterday I read a story about Gravity Payments CEO Dan Price. Mr Price raised the minimum wage in his company to $70,000. For some employees, that will be a 50% pay increase. Mr. Price is currently earning $1,000,0000 per year and will reduce his own salary to fund the higher salaries for employees. Gravity Payments is a privately held company. There are no investors to satisfy with earnings reports, which gives them a little more flexibility.
But what about other companies? Do you know a CEO that would reduce his income in order to increase his employee’s salaries? I’ve worked with CEOs that talk about taking care of their employees, but they would not reduce their own salary. I’ve also learned that many CEOs are trying to keep up with the Jones, without realizing that they are the Jones. It’s hard for many of us to imagine, but there are people earning $1,000,000 that cannot live within their means.
Have you Thought about it?
Have you thought about how much money you need to earn to feel secure? Is $70,000 enough? That study was published several years ago, should the number be adjusted for inflation?
We have increased our income a significant amount over the last couple years. That increase has been at the cost of long work hours and travel. When I finished our tax return this week and reviewed our taxes in comparison to the prior year, there were a few things I noticed:
We increased our income by $10,000
Approximately 30% of that increase went to taxes
We lost several deductions and refundable credits by moving into a higher tax bracket.
Was the $10,000 increase worth the extra hours of work? Did the money contribute to our emotional well-being?
It was worth it because we put all the extra money towards debt repayment. I could see myself doing it for a couple more years to pay off my student loans. When the loans are paid off, I would rather work less. We live a comfortable life now so I think we could reduce our income and still be happy.
Have you thought about reducing your income?