Your Income is FINE

About a year ago, Fern asked me if I could purchase a video game for him.

"Why should I buy it for you?"

"Because I really, really want it!"

"Then buy it yourself.  You have all that birthday money, Fern.  You can afford it."

"That's not the point."

"Okay, Fern.  Then what is the point?"

"It's soooo expensive.  It's not worth the money."

"So you don't want to waste your money, you want to waste my money?"

"Exactly."

Even just a modicum of shame would have been nice.

"Yo, Dregwaste.  I'm unhappy."

I'm sorry to hear that, Slash.  What's up?

"I want to retire early.  But frankly, I just don't make enough."

If you don't mind me asking, Slash, what do...

"120 large."

$120,000 a year?  And that's not enough? 

"Of course not.  That's chump change, Dampwool."

What income would make you happy?

"Maybe...twice that.  Say, a quarter of a grand.  But that's just not going to happen.  Thus, my unhappiness."

Well, I'm not really qualified to help you double your income.  But I don't think doubling your income will make you any happier in the long run, anyway. 

 "Why not?"

Because back in 2009, three researchers (Lara B. Aknin, Michael I. Norton, Elizabeth W. Dunn) set out to answer the following question:

Can money buy happiness?

Turns out, money can indeed buy happiness.  But only to a certain point.  They found that those who made less than $75,000 a year were happier with each incremental dollar of income (more or less).  But once income hit $75,000, happiness really wasn't affected by money.  From $75,000 all the way up to $500,000, people's happiness flat-lined somewhere between 7 and 8 on a 10 point scale.  Something like this:

So you could spend a lot of time and energy trying to double your income, but it probably won't make you any happier in the end.  Obtaining "more" typically just escalates your desires.  Once you achieve your goal, you'll probably want even more under the false assumption that "well, next time, it will make me happy."  

"So, what are you saying?  Forget happiness?  Drown in my own misery?"

No, but here's the thing.  364 days a year, we Americans focus our time and effort on what we don't have.  Only on Thanksgiving Day do we express any gratitude at all for what we do have.  (And even then, we share that day with football and gorging.)  We are richer than just about everyone on the planet throughout all of human history and we are still unhappy for want of more.

Part of the problem is that we tend to assume that wealth and income equate to happiness and well-being.  Researchers are now pushing back on that assumption, after decades of using GDP as their primary measure of well-being.

For instance, Gallup and Healthways joined forces to create their "Global Well-Being Index" which measures individuals perceptions of well-being.  The survey covers five main categories:

Purpose: Liking what you do each day and being motivated to achieve your goals

Social: Having supportive relationships and love in your life

Financial: Managing your economic life to reduce stress and increase security

Community: Liking where you live, feeling safe, and having pride in your community

Physical: Having good health and enough energy to get things done daily

Do you know what happened when this broader measure of well-being was used?  The Latin American countries came out on top.  That surprised me.  Gallup-Healthways has an explanation:

"That so many people are reporting positive emotions and higher well-being in Latin America at least partly reflects the cultural tendency in the region to focus on the positives in life."

Ipsos conducts a worldwide poll to measure self-reported happiness even more directly.  They basically just flat out ask, "How happy are you?"  Here, too, Latin American countries top the list.  Now, Americans also do quite well.  26% of Americans self-reported as "very happy."  But we pale in comparison to Mexicans.  A full 38% of Mexicans self-reported as "very happy."
 

"Wow.  So do Mexicans know something that Americans don't?" 

It's quite possible.  About ten years ago, I read about a research project that asked Americans and Mexicans what they wanted: more money or more time.  The overwhelming percent of Americans (about 80%) said they wanted more money.  The overwhelming percent of Mexicans (again about 80%) said they wanted more time.  This despite the fact that the median household income in the United States is almost seven times that in Mexico (on a purchasing power parity basis).  That's worth contemplating.
 

"Okay, that's humbling.  And embarrassing.  But of course, I'm steeped in the American culture.  How do I compare to my fellow Americans?"

Here.  Try these figures on for size:

Median U.S. household income: $51,000 
U.S. households earning over $100,000: 20%
U.S. households earning over $150,000: 8%

"Huh.  Well, that actually does make me feel a little better about myself."

And well it should.  Slash, you are in rarefied territory.  When it comes to income, you're a big winner.  So stop focusing on what you don't have.  If you want to be happier, be grateful for what you do have.

Your income is FINE.

"Okay, that's a little naive on your part, Deadwood.  Maybe my income is fine compared to most people's, and as such, I should be happy with it.  But I'm trying to retire early, and unlike you, I live in an expensive city.  My money just doesn't go as far.  So trying to follow your rules is just plain futile."

Don't use your income level as an excuse to avoid taking control, Slash.  Your income is more than adequate, even in an expensive city.  It's your perception that needs adjusting.  I know a guy who lives in San Diego, a very expensive city.  He's on the path toward retiring at the age of 53.  I have a friend who lives in the most expensive city in North America.  He's younger than me, is semi-retired, and is contemplating full retirement next year - on an engineer's/teacher's salary.

(The converse is true, too.  There are people in my town who make a lot more than I did who can't figure out how they will ever retire.)

Where you live is a significant factor, but not nearly as important as you might think.  I am highly confident that for the vast majority of my readers, the old adage rings true.  When it comes to happiness (and early retirement):

It's not what you make.  It's what you spend.

"Let me take a wild guess.  You got a whole lot more to say about spending."

Oh, you bet I do.
 

Disclaimer: I don't mean to minimize the daily struggles of millions of people in this country trying to get by.  I assume my readers are primarily upper middle class Americans.  With the occasional Canadian.  And/or Albanian.