In 2010, two Nobel Prize winners, Daniel Kahneman and Angus Deaton, suggested that $75,000 was the magic number for happiness. But from my own experience, going from earning a mere $4 an hour at McDonald’s to raking in six figures in investment banking, I found that happiness didn’t stop at $75,000. I even wrote an article in 2010, arguing that the ideal income for maximum happiness was closer to $200,000 per person, later revising it to $250,000.
Why did I think $200,000 was the sweet spot? Well, back in 2010, I’d just had a rough year financially due to the global financial crisis. But I remember feeling a lot happier once my income crossed the $200,000 mark. I had more financial freedom, could save more for retirement, afford a nicer place to live, and didn’t stress over parking tickets! But earning more than $200,000 also had its downsides. I felt the pinch of higher taxes and societal pressure, as people started viewing me as part of the "evil rich class."
In 2014, I came across a Gallup poll from 2013 that showed 100% of participants earning more than $500,000 were happy. This was a game-changer for me. It made me question whether my $200,000 benchmark was too low. So, I wrote another article suggesting that the secret to ultimate happiness was earning over $500,000. However, to maintain harmony, I only increased my ideal income for maximum happiness to $250,000, accounting for inflation.
Fast forward to 13 years after the initial $75,000 hypothesis, Kahneman, along with a new partner, Matthew Killingsworth, published a new study. They found that happiness increased with earnings up to $500,000 for most people. This was a surprise, but it confirmed my belief that $500,000 was a more realistic ideal income figure, especially for those living in expensive cities.
So why did it take 13 years for Kahneman to change his mind? I can only speculate. Perhaps it was due to inflation, anchoring to a professor’s salary, pressure from other academics and financial experts, elitism and reverse ageism, or even pressure from the government to lower the income number.
Regardless, I believe that there’s no one-size-fits-all when it comes to the ideal income for maximum happiness. It varies based on individual desires and cost of living differences. My advice is to try earning different amounts and see how your happiness level changes. Also, remember that the composition of your income matters too. A mix of active and passive income is ideal.
Finally, remember that you don’t have to earn $500,000 to be happy. There are many ways to increase your happiness without a high salary. Living in a lower-cost area, not wanting the best of everything, living a minimalist lifestyle, and surrounding yourself with friends and family can all contribute to happiness. Most importantly, maintaining a positive state of mind and expressing gratitude for what you have can make you one of the happiest people in the world!
