So just how much money to you really need to be earning per year in order to be happy?
It’s one of the most frequently asked questions in the areas of financial planning, personal development, and lifestyle arrangement.
Every person differs when it comes to their personal circumstances, personality, goals, and preferences. Therefore, it would seem that the optimal annual income would be difficult to quantify from an objective perspective; each individual’s figure would be purely subjective.
A number of studies have been conducted that purport to have an answer, if not the answer.
A study done in 2010 by Daniel Kahneman and Angus Deaton from the Center for Health and Well-being at Princeton University found that the magic number is $75,000 per year (though that would have to be adjusted to about $83,000 in today’s dollars).
Other studies pinpoint the annual income required to be around $50,000, such as the one done in 2012 by the Marist Institure for Public Opinion.
What these studies make clear is that one should earn enough money to:
- Eliminate financial stress brought on by expenses
- Have the ability to spend time with family and friends and pursue activities that you derive happiness from
In the article Passion, Proficiency & Profitability, I wrote how it is imperative to ensure that your ideal job or career can cover the following needs (the last one would be better described as a want):
- Medical care
- Savings for retirement (investments in stocks, bonds, GICs, etc)
- Savings for sporadic, unforeseen expenses (such as a major vehicle repair)
- Savings for pleasure (vacations, hobbies, internet access, etc)
The purpose of having enough money to cover the above is to mitigate suffering to the greatest extent possible. Once you have an adequate level of funds to ensure you can survive, you are free to pursue your happiness via your social relationships and activities you are passionate about. It’s very difficult to do this if you are starving, lack medical care for a ongoing illness, or live in your car.
Money doesn’t buy happiness – it simply pays for the things that allow for your survival, so you are free to pursue happiness, whatever that means to you.
In essence, you need to have your basic needs met to move as far away from death as possible, in order to live life. Money prevents you from dying.
If money could buy happiness the rich would have exactly zero personal problems and be in state of perpetual peace, joy, and tranquility. But that’s not the case; rich individuals who have poor relationships, failed marriages, shallow friendships, lead idle and unproductive lives, and lack a clear sense of purpose, duty, or higher calling, are apt to be just as miserable as the person who is scraping to get by.
They may be rich, but they don’t live; they simply exist. And existence is not enough for human beings who, at a deeper and more primal level, yearn for self-fulfillment and self-transcendence.
A useless life is an early death.
– Johann Wolfgang von Goethe