“See, this is what we call an all you can eat buffet. Here you can eat all you want for just $6.99. That why everyone comes here on Tuesday nights, except for Kenny’s family because for them, $6.99 is two years’ income.” – South Park
The purpose of having money is so you can afford to buy things like this.
I remember having a negative net worth and still enjoying most parts of life. I had my health, my youth, good friends, PEZ® and meaningful work. I also remember sleepless nights worried about how I was going to pay this bill or that bill. I clipped . . . coupons. And used them. I’m so ashamed.
Let me back up.
I was married before The Mrs., as I’ve mentioned before. That relationship ended (which made both of us happy) but my previous spouse had been in charge of paying the bills. On her last day in the house she handed me a bulging plastic grocery sack filled with bills. She then handed me a checkbook in a blue plastic cover, the sides of the cover starting to crack at the point where the cover bended to open and close the checkbook.
“I have no idea how much money is in the account,” she said.
The answer was, “not much.” The first bill I pulled off the top of the stack was a credit card that hadn’t been paid in several months.
Wow.
I got out a spreadsheet and started to add up bills. I made a list of minimum payments. I made a pretty ruthless budget ($4 a day for food for three?) and . . . went to work. I took a loan against my 401K and paid all the back payments due on the accounts. Lots of Hamburger Helper®.
But was I happy? Well, yes. My friends said that I hadn’t looked happier in years. And I felt happy.
Now there has been no time in my life where I couldn’t afford to feed my family. Were there times when I was a week of payments away from being at zero cash? Certainly. Did I have an emergency fund? Not really. I could have played the alternate-bill game, slowing payments for the electricity so I could pay the gas. I could have maxed out my credit cards, sold family heirlooms, sold plasma, sold a kidney. I could have averted bankruptcy for a few months. Emergency fund? No, a catastrophe spending plan.
Thankfully, it never came to that. So, a negative net worth and a happy life? Sure. I was young: the future was wide open.
But you don’t have to trust me. Actual Nobel® Prize-winning economists (Angus Deaton and Daniel Kahnemann) did a study where they tried to measure the impact of income on happiness. And, they found (in 2010 dollars, which were less plump and firm compared to today’s inflated dollars) that happiness was maximized at a household income of about $75,000 (that would be $85,000 in today’s dollars). People’s perception of life increased with more money (they thought they were doing better) but they weren’t any happier.
I then began to wonder what factors might influence whether or not $85,000 is enough?
- If you’re paying a huge proportion of your income on debt, it will prevent you from spending on other things. In my personal example, I had debt, but I also had a plan: work like the devil to pay it off. Each retired credit card or past due bill was a little victory. There are some forms of debt, though, that are worse than others. The king of bad? Student Loan debt. While education is valuable, the only way to default on a student loan is to die, and I think that’s pretty extreme to get out of a bill.
- Location, location, location. New Yorkians and San Franciscainites would scoff at $85,000 per year. Their homeless rat-catchers make more than $85,000 on a bad year. I tried to come up with a city that might be near the national average for cost of living: I ended up with Reno, Nevada. To replicate $85,000 in Reno would require $184,000 in Manhattan, and $143,000 in San Francisco. I’m not sure that this really covers it, because the average house in San Francisco per this survey was $1,000,000, and the last time I looked, $1,000,000 buys you a house with 830 square feet in San Fran. 750 square feet in Manhattan. My college apartment was larger. No free range children there – you probably have to stack cages to keep more than one.
- What does your future look like? This is going to impact your overall contentment. Feel like it’s all over and the dark of winter of your life is at hand? Or is it just dawn, and you’re looking at a warm spring day with a lifetime ahead? Your perceptions of yourself, your potential, and your future influence your contentment. Grumpy old men? Yeah, they think that they’re at their winter and are angry that you’re limber enough to touch your toes.
- Number of Kids/Parents to Support. Have you ever spent money to buy food for a seventeen year old defensive tackle/noseguard? I have seen The Boy get up from a Sunday dinner and go directly to the fridge to see if there’s anything to eat. How many ribeye steaks can you eat? I’ve seen him eat three. After three or four bratwurst. These are not exaggerations. I went shopping one Sunday with The Mrs. We had a shopping cart filled with food. She looks at me. “This is just for The Boy’s lunch. One week of his lunch.” He has a little brother, Pugsley, who will soon enter Junior High and the high calorie consumption of testosterone and a teenager. Then there’s college. There are cars. Spending money. Have a dozen kids? Yeah, $85,000 for the household seems a bit sparse – you might need to sell some for medical experimentation.
- Medical Expenses. The Mrs. listens not to my entreaties that her insulin costs nearly as much as gold per shot. She’s all, “Well, if I don’t take it I’ll die.” The Mrs. has a really crappy pancreas. But if you have medical expenses that are very high? Forget insurance – it’s been awful for years – it’s like paint made for the government: it’s expensive and covers nothing. Have enough of these issues? Jimmy Kimmel will cry for you, and $85,000 might seem woefully small. Note: substituting “homemade” insulin is not recommended. The Mrs. did NOT think that was amusing.
- Hobbies. Sure, they’re optional, but we’re talking about being happy. I like collecting 17th century glassware. And then using it for practicing skeet shooting.
- Spending Habits. Being on a budget sucks – the discipline it takes to plan and scrimp and save is rough, but it’s better than homelessness . . . . Sometimes you don’t get to pick the Sam Adams® and have to just pretend Natty Lite© is awesome. My previous post on the money philosophy of Mr. Money Mustache, Financial Samurai, and Early Retirement Extreme still applies (LINK). Read it.
The Kinks understand that nobody likes being a cut-priced person in a low budget land . . .
So the $85,000 is above the median (half of the households above, half below) household income of ~$60,000. As near as I can figure, $85,000 puts a household in the top 35% of income in 2017. Again all of this research doesn’t prove you’re happy or unhappy at any income. It just shows the sweet spot where additional income seems to stop adding additional contentment for most people.
I would (personally) guess a big predictor of long term happiness would be the amount of wealth that you had managed to save. It would certainly add peace of mind, knowing that you had some long term money, and that would remove a lot of the day to day stress from unexpected events – job loss, sickness, needing to buy Cher concert tickets.
But can you have too much money buried in Mason Jars® behind your house? Sure. If it removes your incentive to work, does that remove meaning from your life? I’ve seen more than one person retire and die a month later. And you don’t have to be old to lose your purpose and give up, as Buzz Aldrin proves (LINK). Not everyone will lose their purpose, and I really do recommend working until you’re sick and tired of it – that’ll get you in the right mindset to retire.
But higher income come with issues as well that might detract from the overall contentment that income earners get – don’t think that the $150,000 crowd has it easy. Long hours. Deadlines. Job insecurity (average VP only lasts six years before being canned). Travel. Time away from the family. Awful bosses (CEOs rank high on the range of socio-psychopath). So, at some point, it’s probably better to live cheap rather than live a stressed out life.
Because the future is wide open . . . .
Some bonus content, since we’re thinking about cheap:
The following is almost nine years old, back at my old blog, Wilder by Far. Here’s a link to the original post (LINK).
For your pleasure, I have transcribed an AC/DC™ tune Dirty Deeds Done Dirt Cheap, as written by William F. Buckley. Enjoy.
If you’re experiencing difficulty with the school principal
He’s making you quite sad
You wish to complete education without resorting to implied sexual intercourse
Here is a course of action
Grab a telecommunication device, I never leave my domicile
Contact me whenever it’s convenient
E-mail – Bonn.Scott73@acdc.com
I conduct my life through extralegal means
Hey
Nefarious acts, performed inexpensively
Nefarious acts, performed inexpensively
Nefarious acts, performed inexpensively
Nefarious acts and they’re performed inexpensively
Nefarious acts and they’re performed inexpensively
You are experiencing difficulty with your life partner
You have serious emotional depression over the relationship
He’s conducting a clandestine illicit possibly romantic relationship with someone with whom you share extremely strong interpersonal ties
You may feel so emotionally distraught that you cry
Grab a telecommunication device, I am currently not in the vicinity of other humans
Or come visit informally with no set purpose or agenda
Enter and remove thoughts about him from your mind
We will cooperatively either stage a fancy dancing party or partake of our own illicit romance
Hey
Nefarious acts, performed inexpensively
Nefarious acts, performed inexpensively
Nefarious acts, performed inexpensively
Nefarious acts and they’re performed inexpensively
Nefarious acts and they’re performed inexpensively
You have a female domestic partner whom you wish to no longer have contact with
But you lack courage to take action
Your domestic partner is continually argumentative and critical
Sufficiently so to make you question your mental competence
Grab a telecommunication device, leave your domestic partner without other human companionship
The proximate moment for you to exhibit some sort of courage is now
With reasonable financial remuneration, I would be glad to
a)perform a silent act of assassination while you pursue your own alibi or,
b)have an illicit romantic encounter with your female domestic partner
(the Internet is unclear here, I prefer version a since I see no reason version b would in any way bring the situation described to a favorable conclusion, but there is some scholarly debate)
Nefarious acts, performed inexpensively
Nefarious acts, performed inexpensively
Nefarious acts, performed inexpensively
Nefarious acts and they’re performed inexpensively, yeah
Nefarious acts and they’re performed inexpensively
Nefarious acts and they’re performed inexpensively
Nefarious acts and they’re performed inexpensively
Heavy quasi-stone masses intended to sink bodies when attached to the feet
Molecules containing triple-bonded carbon and nitrogen
Tri-nitro-toluene
Performed inexpensively
Ooo, common items used for the purpose of constricting the ability of a subject to breathe
Agreements to do wrong
Large differences in electrical potential
Performed inexpensively, eah
Nefarious acts, I will perform them without regard to what they are, performed inexpensively
Nefarious acts, nefarious acts, nefarious acts, performed inexpensively
Yaaargh
