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Your Take: Magic Income Number

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The WSJ reported a couple weeks ago on a study by Princeton economist Angus Deaton and psychologist Daniel Kahneman that:

The magic income: $75,000 a year. As people earn more money, their day-to-day happiness rises. Until you hit $75,000. After that, it is just more stuff, with no gain in happiness.

The conclusion came from a series of Gallup surveys of 450,000 Americans in 2008 and 2009. I thought it was interesting that happiness pretty much peaked at $75,000 (lending credence to genius of Biggie’s “mo’ money, mo’ problems”) but “contentment” was the only thing that increases with income. “More money does boost people’s life assessment, all the way up the income ladder. People who earned $160,000 a year, for instance, reported more overall satisfaction than people earning $120,000, and so on.”

What do you think your magic number is? Is it $75,000? Higher? Lower?

{ 38 comments, please add your thoughts now! }

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38 Responses to “Your Take: Magic Income Number”

  1. cubiclegeoff says:

    I always hate this national polls because the country is extremely diverse, and a number that is generalized to the entire population is useless.

    I don’t know what my magic number is, but its significantly more than $75,000, mostly because I live in a high-cost state.

    • cdiver says:

      I agree, a national number is useless as is another person’s definition of happiness as well as contentment. I have big goals, and will not bbe happy without hhitting them.

    • It can be a magic number, but it depends on where you live, and that’s where a national poll has some good and bad points. Bad because it’s taking into account many things, but good because it’s showing an average.

  2. Mike says:

    My magic number is $20,000 more than my friends and neighbors. Whatever that number is.

  3. Alex says:

    75000$ per person in the household? So, if you have 2 children and you wife does not work you should make 300.000$? It sounds good to me. If it is per household, than no way. I can hardly survive and would always think about finding money. How can I be happy than?

  4. cdiver says:

    I would have to say much higher, at least in my state. Would be good if both spouses pulled in $75k each but not enough on a single income.

  5. Matt K says:

    Is per person? if it’s a family of four, would you want 300k? (75k*4)

    I’m not sure how this breaks down, but I do agree that at a certain point, you run into the mindset of just acquiring meaningless “stuff” that makes you happy at the moment, but fades real quick.

    And also agreed that a state by state number would be more useful. If I made my income and moved out to the midwest, I’m sure I could afford more of a house, more of a ____ . but I don’t think I’d be happy, cuz I lived in the midwest =P (no offense to anyone from out there).

  6. So, we live in the Bay Area where the cost of living can be “challenging”. Looking at our expenses, our remaining mortgage is $1000/mo; ongoing property taxes need to be considered so that is approx $500/mo; basics like electricity, phone, insurance, gas, food, etc comes to $2000/mo (I have been tracking this for years); vacation estimate at $1000/mo (figure two big trips a year at $5k each and various weekends away in between – we are almost retired so travel is definitely in the plans!); and let’s go with $1000/mo for unexpected/emergencies. That total is $66000. So as long as we are talking $75,000 AFTER taxes, we are good to go. If not, our Magic Income Number would more like $100k/year

  7. NY Ben says:

    I was as happy making $18K per year as I am now making $180K. I saved then, I save now. I always have traveled and had fun (without going into debt), etc.

    I figured out how to live on less than what I earned so money never was an issue. Does that mean I want to go back to being at the poverty level, no. But I’ve always believed that more money will not make you happier.

    Now when will my review happen, I’m supposed to get a raise October 1st.

    • live green says:

      This is the situation I was in. When I was in college and right out of college, I wasn’t making as much money, yet I was still savings, taking trips and having fun. As I have made more money, I am still doing the same things and having fun trips. I would say my life has been made slightly easier because of certain things I can now buy I couldn’t buy before. On the flip side, I now have more responsibility and less time than I did then.

  8. Ash says:

    This IS our magic number!

    My husband makes roughly $40k right now. Before deciding I would go to school, we figured out how much we need to scrape by, how much we’d need to get by with my (small) student loans so I can finish my degree, and then how much we needed for our retirement and life goals.

    The final number was about $75k once I’m working in a full time position.

  9. Traciatim says:

    My magic number is just 15% over whatever I’m making.

  10. Christine says:

    My magic number is 200K for a family. I think this is an income at which a family could live modestly with no financial worries or wants. It would allow for adequate retirement and college savings, family vacations and recreation without unnecessary extravagance.

  11. Don Coley says:

    It takes one person $50,000 to have nice things and trips and to save some. It takes $100,000 to have a family, nice home, boat, trips and nice things and save a little, but the ultimate would be $200,000 If you paid $50,000 in taxes if you saved right you should be able to bank $75,000 a year.

    25,000 used to be decent money 30 years ago. You have to double that now. But nobody would deny that a miliona year wouldn’t be supreme.

    • poscogrubb says:

      Again, it really depends on whether you have that nice house and boat in, say, Minnesota as opposed to California. You can’t just put it into straight dollar amounts like that.

  12. Diane says:

    In our area, southern Louisiana, $75K would probably be enough for one person. As others mentioned, it depends on the number of people in the family. I agree that $200K would probably be a comfortable amount for a family of 4, depending on the location. Right now I’d settle for the $75K, which would be an improvement for us!

  13. Rhino says:

    75k seems about right for Sacramento per household.

  14. freeby50 says:

    As a generalization / average number I think $75k is probably about right. Course that wouldn’t be too comfortable in NYC and would be more than you need in rural South Dakota. But for average cost areas it would be enough to live fairly comfortably.

  15. Demonstrable says:

    It think it depends heavily on where you live but I imagine $75k would be enough for one person to live fairly comfortably. If I made $75k a year I would have absolutely no monetary stress, but I am still fairly young with no family to take care of.

  16. Tim says:

    I think at a certain level there is more aspirational pressures. I live in a high cost area, we are DINKS and earn over $250k, and I don’t see how people can afford kids. Although we live on only 25% of our income (because we just bought a house), it seems that we are caught up in saving every last remaining cent to ensure a secure future without dependence on outside resources since there won’t be any since the US is so deep in debt.

    i don’t know where the govt gets the idea that $200k for individuals and $250k for families is wealthy. I think that is arbitrary and will be problematic causing stupid things like the AMT if we get too hung up on a finite number. Plus, why is it that individuals can earn $200k but married couples can only earn $250k to be in the same category? I would figure that $200k+$200k=$400k.

  17. Wolf says:

    I currently make about 120,000 to 140,000 (depends on overtime) and it doesn’t seem enough, but I am paying for the wife to go back to college now. After maxing out my 401k, and my wifes Roth IRA, paying all the bills. It still doesn’t seem like I have alot of money left over. When I read this it sounds like I am whining. But the money just doesn’t go very far. I want to travel, a lake house for vacationing, but I am in my late 20s so mabye I want to much to soon.

    • Ryan says:

      Hmm..the money doesn’t go very far…is a second house (lake house) necessary? Somehow people manange to live making half of what you do. That leads me to believe that you could too. Get your priorities together.

      • cdiver says:

        It does go far, your maxing your IRA and 401k and your wife is in school. Count your blessings.

  18. FlyFisher says:

    Obviously this isn’t going to perfectly relate to each individual’s local environment, but I think it shows how often we get caught in the trap of “needing” more to be happy. Making over $75k puts you in the top 1% of people in the world. “Rich” is always relative.

  19. Shirley says:

    Now retired, we live quite comfortably (and still contribute to our savings) on $50k annually. Of course, we have no outstanding debt, have only one teen left at home (grandchild), and pay monthly expenses in full. While it took 50 years to get to this place in our lives, we now realize that it was definitely worth it!

  20. daenyll says:

    it’s an average and will depend on a person’s location and stage in life.

  21. Vince says:

    I was pretty happy when I was a student making $0. I now make >$300,000 and not any happier. However, finances are not a significant stressor in my life. What I find helpful is not keeping up with the Jones’. Actually, my wife makes about as much as I do and we live in a neighborhood with people who make an average salary. We made the decision to live this way since both of us grew up with “average” salary families. We do not want our kids growing up with a lavish lifestyle and thinking that the average family makes > $500,000.

  22. Augiebball says:

    My happiness is linked to getting rid of my underwater mortgage. If I could sell that house…I don’t care how much I make per year…I would be happy. It’s all relative.

  23. Steve says:

    Depends where you live in the country, as well as how expensive your tastes are.

    $75K/year for a frugal couple in rural Indiana is a king’s ransom; almost anywhere on the East Coast, it’s merely adequate (and that’s only if you don’t have any kids). Do you have free hobbies (like hiking in parks) or expensive ones (like golf or dining out)? What if you live in Manhattan? Then even $75K is a joke!

    Instead of a fixed salary number, maybe this would be best measured in terms of how much DISCRETIONARY income (after living expenses) and/or ability to save for a rainy day makes a person feel secure and/or happy. I’d put this number at about $50K for most people – that seems like more than enough

    My recreational budget is maybe $10K/year, and I find it makes things tight because I have a lot of fixed living expenses due to living in a relatively high-cost region of the country.

    • cdiver says:

      Well said. $50k of discretionary income would be great.

    • Joe Bassett says:

      The best thing to have fun are the cheapest. Hiking, biking, ping pong, badminton, darts and tennis are very cheap. But things like even bowling, golf, and fine dining are expensive and not very rewarding. I’d like to see all the golf course blowed the frick up. I’m sick of White bastards talking about hitting a damn little ball. It’s too damn expensive. Takes too long to learn. Takes up too much land.

  24. Jessica says:

    The magic number for my family is $30,000. I’m sure this sounds extremely low for anyone reading this post but I grew up poor and my household’s income hovers about 20% higher than the federal poverty limit. We can pay our bills but barely and we don’t take any federal aid other than Pell Grants for college. I would love to get our household income up to right around $30,000. This would allow us to purchase a home, a decent car and be able to pay all of our bills without worry. My husband and I are taking turns attending college a semester at a time (he goes one semester, I go the next). This allows one of us to always be working so we can pay our bills.

  25. billsnider says:

    The magic number is that point when you stop worrying about the tax bite out of your income. It no longer matters.

    Bill Snider

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