The Perfect Salary for Happiness

Maybe you’ve already heard. But for those who need a recap, a recent Wall Street Journal article has brought the nations’ attention to some buzz-generating findings from a Gallup survey about the economy. Princeton economist Angus Deaton and psychologist Daniel Kahneman have interpreted Americans’ responses to the survey and have found that there is a threshold, above which, money no longer contributes to “day-to-day contentment.”

The magic number: yearly earnings of $75,000.

That’s right. The emotional well-being of one who makes less than $75,000 a year rises with all gains in income, but for those who earn more, there is no change. Thus, this survey suggests there is a ceiling at which money no longer adds to daily happiness. However, there was no plateau found with regards to what the researchers called “overall life assessment,” or “broader satisfaction with one’s place in the world.” It’s still apparently true that the more money one earns, the better they feel about life in general.

What it says about us

This income plateau concept makes for some pretty interesting social commentary. Essentially, the survey seems to indicate that money, after a certain point, matters only in the larger scheme of things. Once one reaches a certain point where bills, rent, and mouths to feed are no longer an issue, then money does not add or subtract to or from one’s daily contentment.

But doesn’t that fly in face of our consumer mindset? What about the prevalent (predominant) culture of the impulse buy? The world in which weekends are spent perusing dinette sets at Pottery Barn or trying on clothes at Macy’s rather than spending time with our loved ones or going for a walk on a sunny day. Advertisements tell us to buy, Buy, BUY to look better, fit in, and feel better about ourselves. So logically if you have more money you can buy more things and feel more of that instantaneous buyer’s rush, you’ll be happier in the short-term, correct?

Well, apparently, wrong. The study reveals what the Don Drapers of the world don’t want you to know. Buying things can’t ultimately make you feel better. It may provide a quick jolt of pleasure in owning something new, but that fleeting feeling barely registers a blip on that day’s happy radar.

What you can’t put a price tag on

In this humble writer’s opinion, day to day happiness is the result of living comfortably, of taking care of the things necessary to living for one’s self and one’s loved ones and taking care of them well, such as living in a decent enough house in a safe neighborhood, without too much worry for the future. Luxuries like fancy clothes, sports cars, and McMansions – on a daily basis, do not matter so much.

But take some time and reflect on your own priorities. What matters more – happiness in the moment or happiness in the larger scheme of things? Do the findings of Deaton and Kahneman illustrate that money does not buy happiness? Do you live like it does?

Joseph Gustav enjoys musing on topics related to the economy and employment as a guest blogger for Pounding the Pavement and Guide to Career Education.

  • Traciatim

    I think they would be more accurate if they had declared it as around 2 times the median individual income rather than a flat figure of 75K. Since the median individual income for the USA is somewhere near 35K-40K it seems to make sense. Plus as incomes increase their conclusion would still be relevant. Also, declaring it this way makes it apparent than not everyone could be magically wisked to 75K salary and have everyone happy all of a sudden, since it simply wouldn’t work that way.

    • http://www.bripblap.com Steve

      @Traciatim: I agree. I’ve said before that $75K won’t easily support a family of 4 in NYC but it would be just fine in a small town in Pennsylvania, of course. I’m sure it’s just a bit of showmanship in the study – “the perfect salary is 75K” is a bit snappier than “the perfect salary is double the median individual income for the local area.” Your point is correct, of course – double the median income will make most people feel happy simply from a comparative point.

  • http://inthetrenches2009.blogspot.com Carol@inthetrenches

    Maybe $75,000 is also the threshold were people realize that money doesn’t buy happiness so they start expanding their horizons and expectations. This would contribute to their sense of well being, contentment, and satisfaction.

  • http://www.financialsamurai.com Financial Samurai
    • http://www.bripblap.com Steve

      @Financial Samurai: I think it’s all just playing with numbers, really – the point really is that there is a point of diminishing returns IN GENERAL. Different life circumstances for different people, of course. Like I said in my earlier comment, it’s just a catchier headline.

      I do have to say you lost me in your post, though, when I read this: “The reason why your happiness doesn’t get much greater after making more than $200,000 is because the current administration has clearly telegraphed for the past two years they are going to gang tackle every dollar from you after $200,000!” I know you’re trying to be tongue-in-cheek, but really, I’m tired of hearing this worn-out claim. An increase from a top rate of 35% to 39% is hardly “gang tackling every dollar” after $200K. The US still has a tax rate far below most developed countries – and a flat tax is fine with me, but let’s make sure all of the deductions go away too. Everybody’s going to be fine with doing away with the home mortgage interest deduction, right? And trust me, this so-called Democratic president is probably going to fold under to the Republican demands to keep that rate down, anyway.