Happiness Is Earning $60,000 A Year?
Nobel laureate and founder of behavioral economics Daniel Kahneman performed a TED Talk this year about how as humans our “experiencing selves” and our “remembering selves” perceive happiness differently. Basically, he says that our memories of experiences differ from what really happened during the experience itself.
But what ended up being the catchy soundbite was in the Q&A session after his talk, where he tells us that while millions of dollars won’t buy you happiness, a job that pays $60,000 a year might help. This is based on a survey of 600,000 Americans:
“Below 60,000 dollars a year, people are unhappy, and they get progressively unhappier the poorer they get. Above that, we get an absolutely flat line. I mean I’ve rarely seen lines so flat.”
“Clearly… money does not buy you experiential happiness, but lack of money certainly buys you misery,” he said. But the real trick, Kahneman said, is to spend time with people you like.
I found this talk through the GatesVP blog, who offers this analysis:
In most parts of the US you already have access to a very good and healthy life at 60k. You’ve pretty much covered everything commonly deemed as a necessity and you probably have some money left over for “entertainment”. So the jump to 90k really just gives you a little more “entertainment” and maybe some bigger stuff, but that’s it.
And if you’re the type who’s not happy with being in the top 20%, then how much further do you need to go? Top 10%? Top 5%?
Really, 60k for one job is far enough “ahead of the game” to keep happy those that can be kept happy. And that’s probably why this is true.
According to the 2008 US Census, making 60k a year is in the top 20%. I pretty much agree, especially with the idea that humans are creatures of comparison. As long as we’re doing a little bit better than our neighbors, then we tend to be happy. What do you think?
You can view the entire TED Talk below. The Q&A session starts at about 17:15, and a transcript is available on the right sidebar here.
May 26th, 2010 at 4:02 am
I make slightly more than 60K. That’s fine for me since I have no kids, but if I was supporting a family of 4 or 5 that might not cut it. Since some people would be happy without a family, and some would not; I think that’s a relevant variable.
May 26th, 2010 at 5:04 am
As they say, it takes money to make money, and for most there’s a certain level where it’s very difficult to save or make large investments.
May 26th, 2010 at 5:24 am
We’re around there and I definitely wouldn’t want to make less, maybe a little more so I could save a little faster to make that big down payment on an acreage. Just read a book that said that if you make over 50k per year you are in the top 1% for income in the world. Seems amazing to me to have to be above 99% of all the world when it comes to money to be happy. Sucks to be that other 99% I guess huh?
May 26th, 2010 at 5:57 am
I also fall into this range, in my mid 20′s and currently single. While I am contempt and am able purchase everything that is “deemed necessary” plus some entertainment, I have always wanted to own a house and I think it is practically impossible given this current salary.
I did not read the full article, but location has to be play a huge factor as we know that if you lived in say Indiana making 60k a year compared to Boston, New York, etc… you would be able to spend money differently.
May 26th, 2010 at 6:32 am
So for a couple would that be 120k per year? I wonder. That means if their is a family with only one income, then it would take that much to make them happy.
May 26th, 2010 at 6:50 am
60K in the midwest is like… 100K in NYC?
May 26th, 2010 at 6:58 am
I’m not sure I agree with this article, I know a lot of wealthy people that really are not very happy and know a few that have a hard time making ends meet that are very happy people. I also have found a lot of times the less affluent people are the ones more willing to help others. I personally feel making a healthy salary and keeping debt levels to a minimum makes me feel more secure and in turn creates happiness but basically happiness is a choice one can make whether rich or poor. I agree that once you achieve a certain amount of material items beyond basic needs creates a certain amount of happiness I would bet having life experiences creates more.
May 26th, 2010 at 7:25 am
I would definitely have to agree that once a person’s basic necessities plus a little entertainment budget are funded, the marginal happiness gained from each additional dollar of income approaches 0 really damn quick.
Once your personal needs are taken care of, the factor limiting your happiness becomes time, not money. Think that attorney or banker who works 90 hours per week and makes some ungodly amount of money is even remotely happy?
May 26th, 2010 at 9:42 am
huh… well my base income level last year was $212,000 and I am miserable.
I feel like I have golden handcuffs with my current employer. I like my “job” but hate the politics and the overall corporate oppression we deal with day to day at the office.
There are other incentives to stay, Success plan Bonus, 401K match, stock awards annually, and company shares in its success by providing an annual “discretionary” award to our 401k in the form of company stock equal to a % of base income – Add that all up and the total compensation package is quite large.
Still… am I satisfied with what I do? No.
Thankfully I live my life and run my finances at a much lower burn rate, so if I took a lower paying job, I would not be hurting. But I certainly do not agree that money buys happiness whatsoever.
May 26th, 2010 at 9:47 am
“Once your personal needs are taken care of, the factor limiting your happiness becomes time, not money. Think that attorney or banker who works 90 hours per week and makes some ungodly amount of money is even remotely happy?”
I know folks in that category who are doing just fine and others that seem miserable. But I don’t think that split is much different for folks earning $60k vs. $100k vs. $1M. Folks earning less than $60k or so do seem to be worried more and fret about their future.
No money isn’t everything, but it helps.
May 26th, 2010 at 10:05 am
That is around the income level of myself, and I have to agree with the other comment about location is a key factor. In the overall country you might be in the top 20%, but zoom in to Region, State, county and town and you would have huge variances where 60K provides for you and your families needs, and areas were you could not afford your mortgage, taxes or utilities on 60K/year.
The article must be pointed towards the ‘American’ family ideal and have both parents workign full-time and both making 60K/year each to pay the mortgage and all other exepenses. Surely if you came to Long Ialand, NY you wouldnt find a single person making 60K/year and living happy. You would find that single person living in a basement apartment rather than a small home of their own.
May 26th, 2010 at 11:35 am
The research indicates that its household income of $60,000 or more that they are talking about. Closer to 40-50% of American households are above $60,000 household income. Household income is generally higher than personal income on average given theres often more than 1 wage earner or high income households have the luxury of only 1 earner.
May 26th, 2010 at 12:12 pm
Chris: Quit. Really, Find a job that would make you happy and go for it. My neighbor was making $150k at an ad agency but was miserable. She quit it to work at a nonprofit as an arts administrator, making a little more than 50k. While she’s had to make a major adjustment to her new financial situation, she’s become a MUCH happier person.
May 26th, 2010 at 12:12 pm
While I agree with the general premise, I think this type of thinking is dangerous in the wrong hands. I’d think it would be easy for a government official to use this kind of argument to say it’s ok to confiscate income much over $60k and give it to others since they can buy more happiness with it. Unfortunately, when you take away the incentive for productive people, those jobs making more than $60k quickly become worthless and the whole economy collapses.
Another point, I’ve made $20,000 a year for the past 5 years as a grad student and I already have the basic things I need to be happy and $40,000 in savings not counting retirement (another $20,000). Granted, the past year or so I’ve had the help of my wife (also a $20,000 a year grad student), but it makes me wonder where some people’s money goes if I’m able to save this much. I guess having a very modest house, no kids, and 13 year old cars goes a long way.
May 26th, 2010 at 12:15 pm
It makes me wonder how correlated it could possibly be once you have “enough” money. As you quoted above, Jon, perhaps it’s only when we don’t have enough to get by that the lack of it makes us unhappy. But above that perhaps there are other driving factors that prevent money from being a primary concern? Very interesting indeed.
May 26th, 2010 at 1:10 pm
if i am rich i will be happier. why? because i can persue my true passion, to travel around the world in 800 days.
May 26th, 2010 at 1:25 pm
Chris,
I respectfully disagree with David.
I also love what I do and the fringe benefits I receive, yet I can’t stand the bureaucracy. I think David’s suggestion holds true only if you can find that something else that you would enjoy doing. While you try to figure that out, I would suggest adjusting your frame of mind with the job you hold now. For example, what you and I make in a day is what some people in this world make in a month. Your job and my job isn’t something to love. Loving is far too important an emotion to attach to the way we make our way of living. You have to love your friends and family and you have to enjoy your avocations. And aside from IRAs and 401ks, your current wealth can be invested in ways that may benefit you years down the road. In my case, I spent money on acquiring my graduate degrees so that I can teach in my older years. I give money to my relatives-in-need in hopes that when we are all older, they would return the favor and help me out in return. I don’t mean that to sound like I’m buying them or making them indebted to me, it’s just a “golden rule” kind of thing…it’s the right thing to do. And doing the right thing promotes that feeling of well-being.
Our frame of mind can easily get overly fixated on those frenemies or that intolerant boss at work. Leaving your current job may seem like an escape, but you’re bound to encounter similar people and situations that you cannot stand now. And your way of dealing with those feelings depends on your frame of mind or perspective. There is one gal I cannot stand at work. But I always say to myself that she is a smart person and a valuable asset. True, she should burn in hell for all eternity, but her content expertise is greatly needed. There’s another gal I mentored at work for two years. I recently found out that she makes 14% more than I do. My frame of mind helps me deal with this. One perspective is that she is now indebted to me. She owes me big time for helping her get where she is. I don’t expect dividends from helping her out, I just believe that what goes around comes around – the notion that the beneficial effects one has on the world will return to oneself. Another perspective is not only am I happy for my colleague; I would never want to do what she does for a living. Her role involves far more risk and anguish that I am willing to endure. My take is that those golden handcuffs are just one frame of mind (i.e., if there is a hell, we’re already there).
May 26th, 2010 at 2:10 pm
I can attest that $60K/year in NYC doesn’t make you feel like the top quintile of anything. I make considerably more now, but it was a tough period to work through, even with the reasonable expectation of upward mobility.
Anybody who thinks we don’t have significant rationing of opportunity and a de facto class system in this country is fooling himself, IMO.
May 26th, 2010 at 2:15 pm
I would also add that, for much of the population, $60K/year happens to be about the level at which you are earning “more,” while still not paying a great deal in taxes. And it is about the level at which you still don’t ever need to think about the words “alternative minimum tax” — something that would add a point or two to almost any misery index.
May 26th, 2010 at 4:10 pm
60k would definitely make me happier than current salary (actually not a WHOLE lot lower than that) Right now I don’t have much going into savings. If I had a modest increase I’d be able to put away more money into savings, which would make me happier.
May 26th, 2010 at 6:28 pm
To those who disagree with the claim based on your own experience, be aware that Kahneman is an incredibly rigorous researcher, and his claims are based on large datasets and sophisticated measures – he doesn’t discuss hunches. As one of his colleagues is fond of saying, “the plural of ‘anecdote’ is not ‘data’”. Yes there are people with nothing who are deliriously happy. Yes there are super-wealthy depressives. But Kahneman is saying that after controlling for a huge number of factors (and making a number of assumptions), income does not contribute to overall happiness beyond the $60,000 mark. It’s a heuristic, but it provides some insight into the relationship between income and happiness.
May 26th, 2010 at 6:28 pm
Chris:
When you are dying, you won’t give two monkey farts about the stock options.
May 26th, 2010 at 7:13 pm
If I were not taxed to death by an ever growing bankrupting socialist and communist government plus the parasites at state and local levels, I could be happy with my less than $60k salary.
Don’t forget the corrupt monetary system creating inflation every year that lowers everyone’s standard of living.
May 26th, 2010 at 7:44 pm
All of you are really making 60K or more? I just turned 30 and am making 35K and many of my friends, most who are in careers of their choice, (more arts-oriented like designers and media, advertising etc) are not making 60K.
I think for us, it’s hard to even imagine earning that much right now. And when Dave said he can’t imagine being able to comfortably raise a 4-5 member family on his income of a little over 60K, it really freaks me out.
May 26th, 2010 at 8:07 pm
Yeah, that’s what I thought when I made $50k per year.
No matter what the number is for any person, the happiness quotient when it comes to money is always “just a little bit more.”
May 26th, 2010 at 9:28 pm
Oh man still too far to go…..
May 26th, 2010 at 11:17 pm
sth_txs – but don’t you know, inflation is GOOD and necessary for a thriving economy?! And don’t you realize that without the federal reserve, our monetary system would become unstable and we would all lose all of our wealth?!?
/sarcasm
May 27th, 2010 at 12:45 am
sth_txs – if you are only making $60K you are NOT being taxed to death.
“Nearly 22% of those making between $50,000 and $75,000 end up with no federal income tax liability or negative liability as do 9% of households with incomes between $75,000 and $100,000.”
http://money.cnn.com/2009/09/3...../index.htm
The effective tax rate for a single person making $60K is only 18.64%, without any deductions.
May 27th, 2010 at 6:12 am
Most people don’t enjoy money beyond a certain point because they don’t really know how to use that money. But yes, I totally agree, that less money brings in misery and some people needlessly romanticize poverty, or having “just sufficient” money.
~~ Sarah ~~
May 27th, 2010 at 6:50 am
I know there’s a lot of good points on either side of the argument but I have to agree that money does help in buying happiness. I know a lot of people are commenting that “I was working making $###K a year and I was miserable”, but seriously, if the money/job is making you unhappy at least you have more financial resources to try and find a full-filling happy life where as someone who is making significantly less can’t change their life into a better life as quickly. In short, it’s easier to get rid of money to make yourself happier then it is to make it.
May 27th, 2010 at 6:56 am
* Location matters: I bought a house when I was making $45,200/year. Single-family detached on 1.33 acres.
* I agree withsth_txs: it would be easier to enjoy 60K/year without the income tax, medicare tax and social security tax. (Fair Tax anyone?)
May 27th, 2010 at 9:44 am
Happiness is not Money!!!
This article is rubbish. Do not try to relate money and happiness.
Sorry to be rude..
May 27th, 2010 at 10:32 am
If you take a 30% tax bracket, then the difference between gross income for a person earning 60k vs. a person earning 90k appears to be 30k ,whereas the difference in actual income is only 9k.
So assuming that the person earning 90 k has to go through far more years of education and has a job which gives the person more tensions in their life, it is as if the person earning 90 k is taking on lot more tensions (worth 30k) for a return of only 9k hence the incremental happiness flattens out.
May 27th, 2010 at 10:55 am
I make about 32K a year and support 4 at my home a baby, 12 year old, and my husband. The stuff we have that we enjoy were gifts given to us, the things that were not gifts we are paying for monthly. If I could get my car paid off and my loans, then we would be able to dine out, or even go to a movie. Now, we can’t go to the movies, or any other places that aee fun because all our money is going to bills and food. I agree more money would make me happier. I need to find a job for even 45K a year which would allow for some entertainment, or emergencies. Money is not an equivalent to happiness, but it sure does help.
May 27th, 2010 at 12:16 pm
60K is a totally subjective number, which unfortunately the presenter fails to mention. I make over $100K … but live in Manhattan, and have a family of 4 – and I’m barely making ends meet!!
May 27th, 2010 at 11:00 pm
60000 USD / year before or after Taxes?
May 28th, 2010 at 12:03 am
One reason that the curve becomes flat after 60K is that, the more you earn, the longer you have to work for it. What’s the point of owning luxury items if you never get to enjoy them? If you’re the CEO of a major corporation, you may have $100 million in the bank, but you work 24/7 and if you’re lucky, you get to take that yacht out for a cruise a few times a year. Even a manager at an engineering firm, making $150K, works 50-60 hours per week. Then there’s the constant stress that these jobs generate.
The people making 60K are often in 9-5 jobs.
Basically, the ‘happiness’ derived from the luxury items is negated by the fact that you don’t have the time to enjoy them.
May 28th, 2010 at 1:09 am
I agree with Robert and Dar; location matters. I know people who have nice large homes in Canada or third world countries, but their jobs are here in the States.
Robin,
I make almost $180k, but that doesn’t mean I’m rich. Like Dar, I live in an expensive area and it’s really, really tough to make sure I maintain an emergency savings, regular investments, and something stashed away for my toddler’s college fund. Last year we were burglarized, so now I also have a monthly bill from ADT too.
Chris,
I partially have to disagree with Kevin. With regards to your stock options when you are dying, you should have some sort of plan for beneficiaries should something happen to you. If you have no beneficiaries and you have only so long to live, then that’s the time to cash out and either complete that bucket list or give the funds to a charity. Of course, if your plan doesn’t allow for beneficiaries and/or you are dying within a short time span, then yes, Kevin’s quite right.
May 28th, 2010 at 4:21 am
The TED Talk was 1-dimensional. It never takes location into account, or children. Or if both spouses work or just 1. Too many variables for this to mean anything. Sounds like someone just got a grant and after x number of years of “research”, this is what he found. big whoop.
May 28th, 2010 at 5:52 am
If someone can earn $80,000 doing their exact same job (no extra pressure, hours, or responsibilities), I daresay they’d be happier.
It definitely also depends on location, family demographics and so on. $60,000 in Ohio is not the same as $60,000 in NYC.
If we’re talking $60,000 each person, then a dual income household in NYC at $120,000 might make more sense.
But if it’s $60,000 for a whole household in NYC… not so much.
May 28th, 2010 at 9:36 am
About stock options when you’re dying – you’d die more peacefully if you knew you could afford to pay your medical bills and weren’t saddling your family in debt. Or you might live longer because more money buys more and better medical care. It all depends on the context and the point is you don’t know ahead of time what that context will be.
May 28th, 2010 at 10:03 am
Is that before or after taxes?
May 28th, 2010 at 10:35 am
I make a bit more than 60k, have 4 kids and a wife that stays at home (I guess that makes her a “homemaker?”), and we’re great as far as I can tell. Our basic needs are met, we have a little extra for savings and fun, and try to keep our debt minimal (we have house and car debt, but don’t use credit cards). Like he says, we get most of our enjoyment from having friends and family over, which is about every other night as our house is often referred to as the “party house.” No drugs or alcohol, mostly playing games and watching movies. Oh, and the house is a “humble home,” no more than 20k sq feet, just big enough for what we need.
May 28th, 2010 at 10:47 am
Yea, I earn just over this but I blow it all on booze and parties. I have a great life but another 100k would be even better.
May 28th, 2010 at 10:53 am
Fascinating topic…
Back up from the details and grasp the concept:
It’s not significant whether we’re talking $60 or $80K, New York City or Billings Montana, Family or single, low or high taxes, etc.
The point is this – at that magic level where you can pay the rent, have a car, maintain health and have a few extras, that’s where misery drops to a base level. You need to reach this level to ward off unhappiness (worry, stress, safety concerns, health concerns, etc.).
At income levels above this point (whatever the exact figure), there is minimal additional happiness, since the money can only be used for material goods or non-essential services. This does not enhance happiness in a meaningful way (only marginally) – but many people mistakenly believe that it will.
May 28th, 2010 at 4:32 pm
I think there is far too much of generalization! Geographic location, marital status, number of kids and other dependents (parents?), and also social class – if your father was a renown surgeon and you make $60k – that will make you feel completely different compared if you earn the same money when your father is jailed and mother an unemployed alcoholic…
May 28th, 2010 at 10:40 pm
I’d say the key to happiness is the ability to be satisfied with what we have. I’d say the key to unhappiness is to consistently defer happiness until some future date when we get a better job, car, house, etc.
I’ve been blessed with the ability to feel satisfied on meager salaries. When my wife and I first got married and she was student teaching, we were pulling in a whopping 13k/year and were easily able to live comfortably (though frugally) and save on that income (just a few years ago, so those are almost real dollars today).
It’s a sad state of affairs when individuals let marketers tell them what goods will lead them to happiness. It’s a sad state of affairs when our society can’t be satisfied making more than 90% of the world. It’s a sad state of affairs when our society thinks that $200/month TV and cell phone service plans are needs, not wants. It’s a sad sate of affairs when people are financially illiterate and fund their insatiable wants with credit cards charging 30% APR. It’s a sad state of affairs when people can’t fathom making purchases like cars with cash, because who in their right mind would have over $10k in savings to fund such a purchase; and who in their right minds could possibly defer such a purchase until acquiring such “savings.” It reminds me of that SNL savings skit with Steve Martin.
I’d be interested to see if there are any studies which relate happiness to financial literacy. I’d be there’s a pretty big correlation. I think that financial literacy is a good complement to income (because financial literacy essentially augments income through wise choices), so that a financially literate $30k/year earner is just as happy as a financially illiterate $60k/year earner.
May 29th, 2010 at 7:03 am
One point to clarify. The stock in question is REAL stock, not options. I hold the shares in my brokerage account. These are direct equity awards that are given to me annually. Most companies these days do not offer “options” in preference to restricted shares which vest over time.
Aside from planning my retirement years… Hopefully less than 20 yrs away (I am 44) I do also have a plan for giving. Each year I donate 10-15% of my income to an organization of my choosing. This year, the private grade school I attended will be the recipient of that money as they are suffering through a serious financial crisis.
I do have plenty of beneficiaries listed in my will, and I do plan on helping my 9 nieces and nephews with college, or later in life with their weddings or first home purchases.
@Ron, I agree. I actually love what I do for my job. Its exciting, I find it fun. Fortunately I do get to work from home a far amount of the time and I can avoid getting sucked into the corporate environment. It is a state of mind, and I just need to find the balance and method to escape it from time to time.
May 30th, 2010 at 9:42 am
Another thing I find interesting here is that there doesn’t seem to be an appreciable effect from the increased financial security that would be provided higher incomes. Even if a person only “needs” 60K, I would think that the ability to save a significant percentage of income on top of that would meaningfully increase peace of mind. Perhaps this mentality is not all too common (meaning most people consume up to their incomes), but I think the question might be worth looking at separately.
Maybe a study could attempt to control for individual savings rates as well, and see if there is a more durable relationship between income and happiness among the group of “savers.”
May 30th, 2010 at 4:43 pm
I think the location and the associated costs is already built-in to the numbers. If you make more than $60k a year then it is likely you live in a higher cost location. $60k just happens to be the middle ground (near the top of incomes in low cost locations and near the bare minimums in high cost locations).
“Income sixpence, expenditure five-pence, happiness. Income sixpence, expenditure sevenpence, misery.” Few can explain the money-happiness connection better.
May 30th, 2010 at 9:57 pm
[...] Jonathan @ MyMoneyBlog discusses the TED talk by Nobel laureate and founder of behavioral economics Daniel Kahneman. Happiness is earning $60,000 a year? [...]
May 31st, 2010 at 1:56 pm
[...] Happiness Is Earning $60,000 A Year? @ My Money Blog [...]
June 1st, 2010 at 12:03 am
Hi guys,
Try to live in Serbia on $300/month or go to Africa and live on $2/month – come back to America and you will be the happiest man on the world!
Many people don`t appreciate what they have for granted.
June 1st, 2010 at 8:19 am
My guess is that, in most parts of the US, $60K is an accurate target amount for average people who lead reasonable lives. It’s the reasonable life part that needs to be defined. $60K doesn’t get the McMansion, luxury SUV, deluxe home entertainment system, and all the rest. As long as there’s no overblown sense of material entitlement, $60K should be fine for most.
June 1st, 2010 at 11:24 am
Unfortunately Its true… money can buy happiness- eventhough it may be in a material form. So where 60k may provide a comfortable lifestyle for the single man or smaller families; it often leads to wanting more. I agree with you Zsolt- it’s easy to take the things you have for granted.
June 1st, 2010 at 8:24 pm
Money is just part of the complex nature of our emotion…60K is good but you need other things to be happy on it’s fullest sense.
Happiness is a very complex emotional experience and different individuals have different emotional orientation.
June 2nd, 2010 at 4:29 am
My wife and I together make that after taxes (about 30k each) together and we have a child. We do fine, but some months we have to use credit card as cash gets low. If we both made 60k each a year (instead of combined), there would be no worries and I am sure that would make me happier.
One downfall to being financially happy to me is; I gain weight and have to struggle to keep it in control…
June 2nd, 2010 at 8:33 pm
This whole monetary system and capitalism needs to go. What if the whole world was your home and you could travel and do what you wanted everyday instead of chained to a desk staring out the window of yet another nice day of your life passes you by. This reality will come true someday for us all when we drop this stupid monetary system and change it to a resource based economy. Letting technology work for us not just using it for entertainment purposes. Then one day politics, religion, and mundane jobs will all become irrelevant.
Oh and that Iphone you bought was made in China and the person who helped build it for you made pennies building it that day then went home to their dormitory where she shares a room with 6 other women and committed suicide.
June 2nd, 2010 at 11:22 pm
This is just an assumption…I come from a very humble family and they never made close to that much and they’ve been most of their life happy.
So if you ask me yea, who wouldn’t mind 60k per year, but if you don’t need it for the things that you want…it just doesn’t matter. I can live like a king in south america with 20k a year. And I am still happy
June 3rd, 2010 at 3:55 pm
having spent most of the past 20 years making less than $20k a year, and in 2009 getting a job that pays me $60k a year, I can affirm that I was miserable, and am now quite happy. Grin.
June 3rd, 2010 at 4:02 pm
As the great American philosopher David Lee Roth put it, “Money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it.”
June 3rd, 2010 at 4:05 pm
If you take a 30% tax bracket, then the difference between gross income for a person earning 60k vs. a person earning 90k appears to be 30k ,whereas the difference in actual income is only 9k.
That is wrong, and it’s apparent you do not know how the income tax brackets work. I’d also suggest learning the difference between effective and marginal tax rates. Only the income that’s in that bracket hits that tax rate.
The IRS tax tables are published on the internet and they reveal the effective income tax at each dollar amount. 60K in taxable income equals about 11K in income tax and 90K in taxable income 19K in taxable income. That’s 49K net and 71K net, or 22K more in income. This is assuming single and zero deductions, but the deductions would cause my numbers to favor the higher earner even more.
June 3rd, 2010 at 4:09 pm
When I lived in Monterey, CA, I earned about $65k a year. I won’t say I was happy, but I surely did not worry about my money.
Since breaking my back and being unable to crack $30k since then, I can say my level of happiness has substantially dropped. I have a place to live, food, and can care for my kid just fine, but I can’t do anything else, and that, my friends, is a recipe for unhappiness.
June 3rd, 2010 at 4:13 pm
Don’t get hung up on the actual $60,000 figure, it’s all relative… In certain parts of California, $60,000/year won’t get you even a sub-modest house to live in, so if you happen to live in an expensive area you of course have to up the ante a little…
But even so, lets say the figure is $100,000 due to the housing market in your area… the study still indicates a flat line from there, so the observations are still valid.
June 3rd, 2010 at 4:18 pm
I make around 60k a year. Single mother supporting three kids, two in college. Let me tell you, on that salary life sucks. The cost of living (utility and grocery bills)has increased at a greater rate than my salary in the last few years with the result that I can’t afford to pay all my bills most months, haven’t been able to afford a new wardrobe in years which is impacting my image at work, have a second job so that I hardly see the one kid at home still, and I haven’t been on vacation in years. And I have no credit card debt or excessive spending to blame it on. I’m not materialistic, so I don’t require much, but it would be nice to be able to go on vacation once a year or the movies and to be able to pay my bills without biting my nails.
For me, an ok income would be 80,000. But then I live in the ny suburbs, so maybe that’s the equivalent of 60,000 elsewhere.
June 3rd, 2010 at 5:29 pm
What is up with all these anti-tax people? I make about the number in question and I have never considered my tax rate a burden. On top of that I am a single, childless, renter, so I don’t get the massive tax deductions that many do. Overall, if you are making $60,000 then you are probably paying in the neighborhood of about 18% in federal taxes.
If you want to argue that is too much, then you are not realistically considering the cost of government. If you want to keep Social Security, Medicare, and the current Defense budget (the three most expensive programs), then taxes will have to be paid. Obviously, considering what these people want to spend, they aren’t taxed enough. We’re looking at about $15 trillion in debt, all because these people want the government to provide the goods, but they don’t want to pay for them.
And saying that we should just cut spending… well, where? Try to cut Social Security or Medicare and these same people claim you’re trying to kill grandma. Try to cut defense and these people say you’re with the terrorists. Try to raise taxes and these people say you’re taking away our freedom (they say that about everything, unless it’s about civil rights). So we can’t cut spending, and we can’t raise taxes, but its always these same people have the chutzpa to gripe about the deficit.
June 3rd, 2010 at 6:46 pm
A lot of you are missing the last comment: “Really, 60k for one job is far enough “ahead of the game” to keep happy those that can be kept happy. And that’s probably why this is true.”
In other words, if you aren’t happy at $60k, then maybe you need to examine why you’re not happy. It’s less likely to be about the paycheck. Maybe you should explore a career change, or lose some personal baggage (ex. stop complaining about wanting to lose weight and act upon it).
I’m in my mid-20s, I make very near the $60k mark now, and I’ve never really found money’s presence or absence to make me happier. There is a momentary boost whenever I have received a raise, and I can assure you I’ve always wanted to make more. However, the reason I want to make more money was for other reasons. I view money as being tied to success and responsibility in my career. It’s not about Money.
When you have less money, you learn how to find less expensive (or even free) entertainment. I would much rather be surrounded by people I love than more money.
June 3rd, 2010 at 7:05 pm
From reading through the comments it would appear that NONE of you actually listened to the whole talk, which was by the way, fascinating.
The essence of this talk is that the ‘experiencing self’ and the ‘remembering self’ have completely different viewpoints of happiness. The experiencing self is the aspect of our life that observes the individual moments of our lives. Meanwhile the remembering self is the entity that keeps track of our memories and the happiness we feel over time. Without understanding this concept you all are missing the point big time.
Now Kahneman says that for the experiencing self when people make more than $60K per year their happiness reported by the experiencing self is absolutely flat. Meanwhile people earning less than $60K per year report more and more unhappiness as their income is lower- again this is for the experiencing self.
In the case of the remembering self, Kahneman says that the more money that people make the greater the memory of happiness.
I think this makes a lot of sense and should clear up this discussion.
-Mike
June 3rd, 2010 at 7:10 pm
I would only be happy earning less money if my kids could still go to the colleges that suit their skills and talents, and if I had enough to take care of myself at some basic decent level when I get old. If my children’s educational opportunities suffered because of my lack of money, I would be sad.
June 3rd, 2010 at 8:34 pm
[...] Happiness Is Earning $60,000 A Year? » My Money Blog. [...]
June 4th, 2010 at 12:09 am
When you get older, you’re happy if your children are happy.
So when you’re younger, care about your children. It will come back to you.
June 4th, 2010 at 3:35 am
[...] Happiness Is Earning $60,000 A Year? — My Money Blog [...]
June 4th, 2010 at 5:41 am
[...] Dirk shared Happiness Is Earning $60,000 A Year? » My Money Blog. [...]
June 4th, 2010 at 7:45 am
When my husband and I got married and had our first child, he was in grad school and I was working at an entry level job. Our combined income was about $30K (although I did have decent benefits). We lived in a rental that was mostly furnished with stuff we’d picked up off the curb, had one small car, didn’t take fancy vacations, and didn’t have a lot of possessions. We were very happy, though. We had enough money to pay the bills and splurge a bit on entertainment, not to mention good friends, a beautiful child, and each other.
These days, we pull down about four times as much money. But we’re not four times as happy. So I agree with the premise that after a certain point, having more money doesn’t make you proportionally happier. (Although it does make it easier to console yourself with material possessions.)
Also, I’ve known a lot of wealthy people who were just plain miserable. Their money certainly didn’t make them happy.
June 4th, 2010 at 8:28 am
EVERYONE INSISTS ON PICKING ON OHIO!!! IT ISN’T THAT BAD!! COME TO CINCINNATI!
June 4th, 2010 at 9:01 am
If you adjust this for location I think it’s totally accurate. But it’s pretty ridiculous to compare the same “base happiness income” for a place like Kansas and New york City. The quality of housing is so vastly different, and I think that is a huge factor.
June 4th, 2010 at 2:58 pm
[...] Daniel Kahneman, one of the founders of the now-popular field of behavior economics, delivered a fascinating TED talk earlier this year entitled "The Riddle of Experience vs. Memory," and got into an interesting discussion with TED host and curator Chris Anderson. (Hat tip toGatesVPblog via My Money Blog.) [...]
June 4th, 2010 at 3:39 pm
$60,000 would be great. I have a job offer for just that, and I sure hope it comes through. It would be more than double what I made in the Army, and it’s $15,000 more than both my parents ever made together. For me, $60,000 represents a big step upwards. I’ll try to remember that happiness caps out past that point for future reference.
June 4th, 2010 at 3:52 pm
[...] Daniel Kahneman, one of the founders of the now-popular field of behavior economics, delivered a fascinating TED talk earlier this year entitled “The Riddle of Experience vs. Memory,” and got into an interesting discussion with TED host and curator Chris Anderson. (Hat tip toGatesVPblog via My Money Blog.) [...]
June 4th, 2010 at 8:19 pm
[...] Daniel Kahneman, one of the founders of the now-popular field of behavior economics, delivered a fascinating TED talk earlier this year entitled “The Riddle of Experience vs. Memory,” and got into an interesting discussion with TED host and curator Chris Anderson. (Hat tip to GatesVPblog via My Money Blog.) [...]
June 5th, 2010 at 7:17 am
[...] any event, a recent blog post at the “My Money Blog” details the “(present experiential) happiness equals [...]
June 5th, 2010 at 12:17 pm
[...] My Money Blog talks about the connection between happiness and making 60k [...]
June 6th, 2010 at 6:56 pm
[...] Daniel Kahneman, one of the founders of the now-popular field of behavior economics, delivered a fascinating TED talk earlier this year entitled “The Riddle of Experience vs. Memory,” and got into an interesting discussion with TED host and curator Chris Anderson. (Hat tip to GatesVPblog via My Money Blog.) [...]
June 11th, 2010 at 4:10 am
[...] Best Time to Buy Guide @ FreeShipping.org Happiness is Earning $60,000 a Year? @ My Money [...]
June 14th, 2010 at 3:42 pm
[...] Happiness is a warm, uhh, $60 grand a year? (My Money Blog) [...]
June 15th, 2010 at 1:19 am
I AM A COMPUTER ENGINEER IN INDIA. MY CURRENT SALARY IN INDIA IS Rs 300000 PER YEAR. I AM ALSO A GREEN CARD HOLDER OF USA. I AM PLANNING TO GO TO USA FOR MASTERS IN COMPUTER ENGINEERING AND THEN I WILL DO JOB THERE. CAN I EXPECT $100000 PER YEAR IN TEXAS. CAN ANYONE HELP ME ABOUT WHETHER MY DECISION IS RIGHT OR WRONG.
PLEASE HELP ME AND ANSWER MY QUESTION.
June 17th, 2010 at 12:05 am
[...] is happiness? (TED, 17 min) “Below 60,000 dollars a year, people are unhappy, and they get progressively [...]
June 22nd, 2010 at 6:13 pm
[...] to buy the things you want and you start buying things based on the amount of money you have (some potential proof). You can afford an expensive car? Great, you’ll buy it. But unless you’re truly greedy (and I [...]
June 23rd, 2010 at 8:11 pm
[...] do you need? Exactly $60,000/year. Posted in Uncategorized by rfslack on June 24, 2010 Mymoneyblog.com reports on a recent TED conference featuring Nobel laureate economist Daniel Kahneman remarks on personal happiness. Kahneman traces a [...]
June 29th, 2010 at 1:16 pm
I think $60,000 used to be a good salary. My salary is $65,000 annually, plus bonus and I was able to support my entire family comfortably on my salary alone but all that has changed. I live in Michigan and the economy here is so bad that I haven’t seen a raise for the last 8 years. In fact, my salary has decreased since I now have to pay $300 every month towards my health insurance. The cost of utilities and food is skyrocketing and it’s becoming harder and harder for us to make ends meet. We never overextended ourselves and we live in a modest home and have zero debt other than our mortgage. Again, $60,000 used to bring us happiness. Now I think it would be more like $80,000.
July 12th, 2010 at 7:31 pm
Just accepted an offer letter for 60k base salary for sales. I cant imagine supporting a family on it, however, from Manhattan to Juno human beings make less and support more, this entire conversation is subjective to life style. My ex roommate now hates me because I don’t really like Pabst and hotdog night anymore. I really Newcastle and chicken wings, What can I say? Point being its all how you live regardless of salary of location. I was raised on 3 good meals, 2 good beatings and not a lot of money allocated for niceties each day and my parents make close to 200k combined. This country is suffering a culture crisis. For the first time the demand for the newest and latest is actually hurting the economy because people still haven’t paid for the last model. This drive is typically helpful as it drives technology but like post cold war russia the cost of space travel left a lot of folks hungry.
July 18th, 2010 at 4:31 pm
$60,000 a year is the American ‘optimal point’, which contains quite a large amount of invalid happiness. The real ‘optimal point’ is much lower than that, as much as 100 times lower, based on our instincts or 10,000-years-ago norm. (See “Is Your Happiness Valid?” Kindle/paperback book at Amazon.com)
July 22nd, 2010 at 1:37 pm
Life has become more complex to many resulting to more complicated effects which is also affecting the supposed to be simple quest for happiness. Thanks for this post.
This is indeed a valuable reminder for us human to understand the real essence of life – to live happily and with love and respect to our fellows.
July 27th, 2010 at 11:59 am
I think it depends on what kind of lifestyle you want to live, if you have kids to support, a spouse to support etc. Its not so cut and dry I dont think.
August 11th, 2010 at 10:37 am
At 60,000 with a family of 3 or more is a bad life in todays world. In Atlanta if you want safe living with a commute less than 2 hours a day you must spend 180+ or more on a house, + debt, + college funds, …. and you will not have anything to save and will be forced to finance everything and work your self into a grave.
August 14th, 2010 at 8:24 pm
To what Steve said (August 11th, 2010 at 10:37 am):
If you can refuse all invalid happiness and pursue only valid happiness, you will certainly feel very rich.
August 16th, 2010 at 5:43 pm
The key to happiness is also related to how much goes out as well as how much comes in. Having all your debts paid off and making $60K is a lot different from making $60K with house payments, credit card debt, and student loans. I can attest to that fact now that I don’t own anyone a cent–never been happier!
August 18th, 2010 at 7:27 pm
Hi Bruce, (August 16th, 2010 at 5:43 pm )
You are right.
However, we can not be happy long if we only have $60k/year without doing something A-STEP-BETTER for keeping our DNA alive.
August 19th, 2010 at 5:36 pm
As family is the most important SYMBIOTIC group (an big origin of happiness), I could not entirely agree what Dave said (May 26th, 2010 at 4:02 am) “some people would be happy without a family”.
August 21st, 2010 at 2:51 pm
atish banerjee Says:
May 27th, 2010 at 10:32 am
If you take a 30% tax bracket, then the difference between gross income for a person earning 60k vs. a person earning 90k appears to be 30k ,whereas the difference in actual income is only 9k.
Dear Artish:
Before you make claims about math, learn how to perform its most basic functions. The take-home income difference between 60k and 90k assuming a 30% marginal tax rate for both levels is $21,000. It’s uneducated folks like you who scare thousands of other uneducated people into a frenzy.
August 26th, 2010 at 1:16 pm
Sorry, Matt Vorwald, but it looks like you know just as much about taxes as Atish Banerjee! Do your HW, you can become educated and hit the 60k happiness mark too!
Based on 2010 Tax Brackets:
60k Salary
Taxes: $11,181
Take-home: $48,819
90k Salary
Taxes: $18,909
Take-home: $71,091
Tax difference: $7,728
Take-home difference: $22,272