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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. Wilma says:

    I want to work one job no more than 50 hours a week and bring home enough money to cover the bills and have some left over to eat out or go to a show or sporting event. Nothing extravagant. Don’t need the biggest baddest best or most expensive. I live extremely frugally now. Just want to be comfy.

    I make about $40K now between 2 jobs and 57 -65 hours a week. So maybe $60K- $70K would be my magic number. Would be nice to spend more time in the house I’m buying.

  2. For most people, even people that you and I would consider ‘rich’ (net worth b/w $5million and $25 million) their ‘magic number’ is …

    … “about double”. Sad but true 😉

  3. thunderthighs says:

    This factoid is worthless as it does not take into account where in the country you live. The people at the WSJ should know that.

  4. drr says:

    I am pretty late to this thread. I apologize for that.

    I want to encourage people not to overlook the big picture. Money is but one component of overall happiness. If you are young and have few serious problems, it might be the biggest factor. I suspect this is the case for many people who frequent personal finance blogs.

    Here are a few of the major things money can do for you:

    1. Provide for your basic needs (housing, food, electric, etc.)
    2. Buy entertainment, creature comforts, luxuries
    3. Buy status
    4. Insure you against bad experiences, i.e., knowing that if you get sick, you’ll be able to afford medication.

    When No. 1 is covered, money has done most of what it can do for your happiness. Thus, $75,000 as a magic number. No. 2 is nice, but its impact is limited. The thrill of a new toy wears off as quickly for an adult as for a
    child. I won’t address status. Everyone is different. It doesn’t do much for me personally.

    (We could add a No. 5, “Help others.”)

    For personal finance aficionados, big interest comes with No. 4. We want to be prepared for the future. We want to have a nice retirement. We want to believe that if we save enough money, at some point — hopefully sooner rather than later — we will see smooth sailing.

    Unfortunately, when life’s travails come along, as they do for all of us, money usually isn’t much help. What if you have a dying parent? Multiple sclerosis? Major car accident? Ill child? If you’re dealing with one of these issues, and suddenly your 401k triples in value, do you become happier? If a man with $100 million had a child with cystic fibrosis,
    wouldn’t he give it up to make her well?

    To the extent that money makes it easier to deal with one of these situations, it helps. If your mother is ill and lives across the country, it’s nice to be able to afford a ticket to see her. But it doesn’t address the underlying problem — and it doesn’t require high income. If it’s a personal illness? If
    I had cancer, I’d rather have $2,000 in the bank and decent health insurance — the kind that comes with a $75,000-a-year job — than $5 million and no insurance.

    My point: Money can insure against unpleasantness, but it is very limited coverage. Most of life’s bad breaks are not financial.

    I won’t turn down money if it comes my way. By It may sound like a platitude, but I will not let money be my life’s ambition. Money’s allure is deceptive.

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