Money and Happiness
A little money matters a lot, a lot of money matters a little...
According to Professor Dan Gilbert, money makes us happier... up to a point.
If you have very little, doubling your wage will make you much happier.
However, there is a threshold beyond which money enables you to buy everything you really need. Now, any extra is spent on luxury items. Positive psychologists tell us that splashing the cash on luxury items like clothes or fancy meals gives us a spike in happiness but the buzz is not sustained for more than a day or so.
Hence, earning more money always makes us happier but, at some point, we see diminishing returns.
Where am I on this curve?
As someone who has dropped out of a reasonable job to pursue The Meaning of Work, I assumed that I was now operating somewhere in the bottom left region of the graph (i.e. earning more money would make me a lot happier). After a little more research, I was pleasantly surprised to learn that I was further up the curve than I thought.
Speaking Globally:
Earning $28 000 (£18 200) per year, puts you in the top 5% of earners.
Earning $52 000 (£34 000) per year, puts you in the top 1% of earners.
1.22 billion people earn less than $1.50 (£1) a day.
Global income distribution by percentile and income. Source: Doing Good Better, William Macaskill
Astonishingly, these values are calculated after variations in the cost of living have been taken into account (e.g. the wage of $1.50 a day is what this could buy you in the US as of 2014).
So, in global terms, I'm still pretty rich.
Why do I still want more money?
For many of us, the size of our pay packet is a big driver behind our career choices. This is likely to be a hangover from the 12 000 years of nasty, short and brutish lives that most people lead prior to the 20th century. If, in order to stand a fighting chance against starvation, the average worker needed to toil hard for 15 hour days on the farm or in the cotton mill, they were in the bottom left region of the Happiness vs Money graph. Therefore, for thousands of years, we (quite rightly) linked earning more money to being happier.
Now, I would argue that if we live in warm sheltered accommodation, can afford to eat a healthy and balanced diet, have access to healthcare, drive cars and go on holiday, we have already reached financial abundance. The strong association between money and happiness, that has been ingrained in our psyche for thousands of years, is inevitably going to take a long time to wear off. Many of us in the western world are already members of the financial elite, we just haven't realised it yet.
How can I use this to my advantage?
It seems obvious to set a target minimum salary that gets me most of the way up this curve without limiting my opportunity to derive more happiness from non-cash-related factors like finding time for relationships, exercise and work that is meaningful to me (more on these later):
Summary:
A little money matters a lot, a lot of money matters a little
Retail therapy gives us a spike in happiness but it’s effect does not last long
Speaking globally, a salary of $28 000 (£18 200) per year puts you in the top 5% of earners
- Setting a target minimum salary is one way to hit the sweet spot on the happiness vs money curve