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A salary of $100,000 had always appealed to me in my younger years. I thought that figure would make me happy. How I came to that number, I’m not exactly sure. Maybe I gravitated towards it because it’s a nice round number. As I got older though, I learned that chasing that number would not bring me happiness. While money is a tool that can help you meet your needs, it isn’t the end-all-be-all that I thought it would be.
But, how much money is enough? If you follow John D. Rockefeller’s thought process then it’s: “One more dollar than [you] have.”
Ever heard of diminishing returns? Well, I learned about it in my microeconomics class in school.
When you are starving and start devouring some pizza, the first slice always tastes amazing. However, by the 4th slice, as your stomach becomes full, you no longer gain any satisfaction by eating more. In fact, if you force yourself to eat another slice, you may experience some negative effects.
Happiness & Income
Recently, a study published in Nature Human Behaviour examined whether happiness rose indefinitely with income, or if there was a point in which higher income no longer led to greater happiness.
Researchers from Purdue University examined this question using data from Gallup World Poll, which sampled over 1.7 million adults, 15 years of age and older, worldwide.
In their research, they found that globally, individuals needed $95,000 to achieve satiation. However, they asserted that the ideal household income is likely higher. They used the term “life evaluation”, which takes into account long-term goals, peer comparisons and other macro-level metrics, in order to be happy.
“That might be surprising as what we see on TV and what advertisers tell us we need would indicate that there is no ceiling when it comes to how much money is needed for happiness, but we now see there are some thresholds,” said Andrew T. Jebb, the lead author and doctoral student in the Department of Psychological Sciences at Purdue University.
“It’s been debated at what point does money no longer change your level of well-being. We found that the ideal income point is $95,000 for life evaluation and $60,000 to $75,000 for emotional well-being. Again, this amount is for individuals and would likely be higher for families.”
Interestingly enough, researchers found that increases in income beyond $95,000 was associated with declines in emotional well-being and happiness. This may be due to the fact that once you are wealthy (i.e. past the point of having all of your needs met) you may succumb to unhealthy comparisons with your peers as you try to keep up with the Joneses.
“High incomes are usually accompanied by high demands (time, workload, responsibility, and so on) that might also limit opportunities for positive experiences (for example, leisure activities).”
Individuals in North America needed to reach $105,000 to achieve happiness, while on the other side of the spectrum, those living in Latin America and the Caribbean were happy making $35,000. Maybe it’s because of the weather or the island lifestyle, but I wouldn’t mind finding out if I could live off of $35,000 in the Caribbean.
As you can see, your location has a tremendous impact on the salary amount needed to be happy.