How much money do you need to be happy?
The answer finds that most people fall into one of three categories.
1.) Those that believe the best things in life are free.
2.) Others that attribute their happiness to earning more and subsequently acquiring more stuff.
3.) And finally, those that are happy with enough to afford life’s necessities of food, clean water, and shelter with enough left over to save, invest and enjoy.
So, where does that leave the top 1% of income earners that we hear so much about? They’re able to easily cover their necessities and a life of luxury that most of us could only dream of, but does that mean they are disproportionately happier than the rest of us?
Not by a long shot.
Why? Because money is only one (very small part) of the equation, what you do with it is far more important.
I’ll explain.
Let’s start with the numbers:
According to the U.S. Census Bureau, the top 1% of income earners had an adjusted gross income of $465,626 or more. The top 5 and 10% weren’t far behind at $214,462 and $133,445, respectively.
Great incomes, no doubt…but that doesn’t necessarily mean that being a part of the 10, 5, or even 1% equates to happiness.
In fact, a recent study conducted by psychologist Daniel Kahneman and economist Angus Deaton determined that the “perfect salary for happiness” in the U.S. is $75,000 per year. Their work centered around the premise that a person gets measurably happier as they earn up to that mark, however, after that their day-to-day happiness plateaus.
So what do the numbers look like for those of us living in the metro Charlotte area?
If you’re a resident of Steele Creek, your median income is somewhere around $71,420 — which, according to the “perfect salary for happiness”, should leave us fairly content (at least as it relates to our money).
But are we?
Let’s zoom out and take a look at the median income levels of North and South Carolina residents. At $50,584 and $46,898 respectively, though not quite at the $75,000 “happiness threshold”, they’re not terribly far off either.
So, back to a question I posed above — are we content with money?
I certainly don’t believe so.
Some would point to the income part of the equation as the culprit, noting that the average income for a high-school graduate is $35,256 and the average Millennial income (considering all education levels is $34,592.
I, on the other hand, believe it is something that we all have a lot more control over — and that is our behavior.
Think about it, how important is making more money if you aren’t keeping any of it?
Sure, there’s something to be said about enjoying the present, but once your working days are done you want to be able to financially enjoy that too.
We’ve all heard that it’s not how much you make, it’s how much you keep and I wholeheartedly agree.
In other words, how you manage your money is far more important than how much you make.
Someone who makes $1,000,000 per year and haphazardly spends every penny, is not much different from the person who makes $40,000 and does the same.
In fact, some would argue that the person making $1,000,000 per year is in a less enviable position (due to higher demands on their time, as well as an increase in material aspirations that may go unfulfilled) as a result of the higher income.
This, of course, is not to say that earning a high income is bad — in fact, it’s quite the opposite. I would encourage everyone reading this to build your income as high as you possibly can (within reason, of course).
More than that, though, I would encourage you to change your behavior about money and create habits that are less “keeping up with the Joneses” and more “on the path to financial freedom”.
This past weekend, my husband surprised me with a trip to NY City for my birthday. We had a great time on our whirlwind tour. We saw the Naked Cowboy, visited the 9-11 Memorial area, took pictures with the Bull on Wall Street and went to dinner at a 5-star restaurant. The dinner was super pricey, but it was a really rare treat. The extravagance consisted of food and hotel (we used miles to travel and toured only the free areas).
Fast forward to this morning and I was eating my regular fried egg and oatmeal. And I noticed how this routine really made me happy. We managed our money well enough to afford and enjoy a special vacation, yet the regularness of daily life is where the contentedness lies.
Think about it this way: knowing where your money is going (a budget) allows you to save more, and the more you save, the faster you can experience financial independence.
Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.
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