Friday, August 18, 2006

how much money is happiness?

A read an interesting article in Wednesday's Wall St. Journal in Jonathan Clements Getting Going Column entitled:
Money and Happiness: here's Why You Won't Laugh All the Way to the Bank

My first thought was of Charles Murray's Book In Search of Happiness and Good Government. Amongst the many brilliant conversations he had, he included one which discussed how much money was needed for happiness. In 1990s dollars he calculated about $35,000, which he considered an amount acheivable by most if not all.

Here's a quick summary, but I recommend reading the whole article for the insightful details:

  • People who earn more than $90,000 are much happier than those who earn less than $20,000 per year
  • There is little difference in happiness between those who earn $50k - $90k and those who earn more than $90k
  • People seem more satisfied as they earn more money, but usually on the basis of comparison to their peers (keeping up with the Jones'). They are usually a little more satisfied than happy

The biggest improvements for happiness are:

  • short commute times
  • sacrifice pay for money (to allow more leisure time)
  • pleasures from experience are more lasting than products (such as cars)
  • active leisure makes you happier than passive leisure - you'll enjoy a dinner with friends over watching TV

This issues relates directly to our discussion of whether one should move from a big city to the rural country to earn more money.

Having moved to a small rural community for improved lifestyle and pay. I thought we'd have more time for leisure. Not true. We're busier and spend much more time driving everywhere. On the other hand, the drive is prettier and no one honks at us.

We easily earn more money than many other people in this community - the average income is much lower here than nationwide. However, we achieve little if any comparative satisfaction from it. We work harder and have less time for fun - shortage of skilled /educated personnel in rural communities.

Hmmm... are we happier? Probably not. We really don't have as many enjoyable leisure activities that we can share with good friends. We have some friends here, but not nearly as many as in the big city.

City +, Country -

Certainly if we grew up in the country our social expectations and geographic distribution of relationships would be inverted.

Have a wonderful day,



mOOm said...

Certainly earning less than $20k sucks in average cost areas of the US. In Boston, NY, DC, CA etc. Probably double that is the bare minimum. My girlfriend earns $24k in VT though and lives a good lifestyle. A friend in VA (Charlottesville) struggles with less than $20k. I probably spend $25k in upstate NY so about $35k would be the bare minimum gross income.... You have to have employer health insurance included too and that income level needs to be sustained. Earning $25k a year means your social security payment would be around $15k.... so you are going to need more so that you can save.... So now I got up to say $50k. That is for a single person... hmmm it is above the national average salary...

makingourway said...


Very interesting thoughts!

I think you're biasing your analysis by your healthy prediliction towards savings.

Someone earning $25k before taxes and capable of living on it, would net a number closer to $15k than $25k, so therefore at retirement they would not see a significant income difference - plus they would have medicaid coverage instead of private health insurance.

Payroll taxes $1400
income tax $2500 (guessing 10%)
state and local taxes $1250 (guessing 5%)
other taxes $1000

would bring the person down to $18,500.

If they don't own their home, they may need to tighten their belt or continue working part time.

Still enough to survive upon for many.