According to a Princeton Study, the Price of Happiness is…

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Posted by The Savvy Retiree on March 15, 2016 in Money Saving Strategies, Personal Finances

“Wealth consists not in having great possessions, but in having few wants”

There are a half-dozen cafés within a block or two of our apartment.

One serves terrible coffee…but in a pleasing enough environment. Another has an excellent WiFi connection…but waiters that defy the meaning of the word. And still another buzzes with hipsters and the impossibly chic urbanite set…but the ristretto is the best in town.

Today, we’re enjoying the ristretto…and eavesdropping on the woes and worries of the clase alta.

One lady—giant sunglasses atop her head, enough shiny jewelry to make a magpie blush—frets about the catering for an upcoming party of some sort.

Will there be enough food? Will it all arrive on time? Should they have gone for the more expensive wine? Cocktails or champagne? Or cocktails AND champagne?

Her luncheon partner, a stylish younger woman (quite possibly the daughter) feigns some interest…between glances at her iPhone, her wristwatch, and over the older lady’s shoulder.

Occasionally she sighs or nods or…”hmmms.”

A few moments later, another woman enters—middle aged, animal print skirt and black blazer, larger sunglasses than even the first lady and with at least as much “bling.”

The three exchange kisses.

The newcomer has with her a portfolio, which she spreads across the table. We catch a glimpse inside. It’s full of stunning models…standing in grand ballrooms…posing for the camera…in elegant wedding dresses.

(Ah, so that’s the party!)

The daughter/bride-to-be barely looks up from her phone…except to cast a wandering eye at the handsome young barista…

When we left you last week, we were musing on the topic of wealth independence. (See here and here if you missed it.)

There’s more to life than money, of course. True love…motherly advice…daughterly indifference…

But it helps not to have to fuss and anguish over it.

Don’t worry…be happy. And all that.

So, how much does one need to whistle Bobby McFerrin’s care-free tune on a daily basis? To be really…content.

Fifty grand? A million dollars? Ten million?

We wonder…

A few years ago, a couple of researchers set out to discover the magic number. The study, conducted by the Princeton economist Angus Deaton and popular psychologist Daniel Kahneman, concluded what most of us probably already knew…

That is, like many things in life, money exhibits a certain “declining marginal utility.” Which is to say, more is generally better…to a point. Eventually, each additional unit of “more” gets “less better.” Until you barely notice the difference.

In other words, to someone earning an average wage (about $26,695 per individual in the U.S., or $50,500 per household), a $10,000 windfall would represent a significant and welcomed impact.

But for someone earning a million dollars or more per year…ten grand is just another few cases of ’95 Chateau Margaux gathering dust in the cellar.

So what’s the tipping point, where you start getting less proverbial “bang for the buck?”

Deaton and Kahneman reckon $75,000 a year is about right.

The pair discovered—after analyzing Gallup surveys of more than 450,000 Americans—that as people earned more money, their day-to-day happiness rose…until they reach $75,000.

After that, it was just more “stuff.”

Ah, but the italicized caveat is important. Deaton and Kahneman identified two broad types of happiness…the immediate, “here and now” kind…and the wider “life assessment” variety.

While the day-to-day happiness plateaued at the $75,000 mark, the researchers found the “life assessment” of those earning $100,000…$150,000…$1 million, etc. increased commensurate to the underlying income.

“Giving people more income beyond 75K is not going to do much for their daily mood,” Mr. Deaton contended, “but it is going to make them feel they have a better life.”


We wonder what kind of “life assessment” someone working 100 hours per week for a seven-figure salary makes.

Is he happier with his life than the person thumbing a dog-eared book in a hammock who earns a fraction of that princely sum?

And what about people who live in locations with a lower cost of living? $75,000 doesn’t go very far in New York or Geneva or Hong Kong. In some parts of Norway, it barely covers a round of drinks!

But in certain places in South America…and Eastern Europe…and the U.S.A….one could lead a life of dignity and self-respect on half that much, if one were so inclined.

A few weeks ago, as you may recall, we asked the The Savvy Retiree Daily readership about what kind of “independence” they considered most important. Was it financial in nature…lifestyle…geographic…a state of mind?

The results (which we’ll share in future issues) were instructive.

Many people expressed concern about their financial health…and their ability to weather another economic crisis.

They are dissatisfied with the existing “system,” and feel the game is rigged against them. (Note: They’re right!)

But although wealth independence was a consistent theme throughout the responses, it was often paired with a desire for something more than just “more money in the bank.”

Wealth ought to be a means to an end, in other words…not the end in and of itself.

One reader wrote to tell us about his time living in Mexico when he was younger…about having his “own private waterfall” outside for a shower…about living simply but feeling healthy and strong and in charge of his own destiny.

The email concluded with a steadfast resolution to return to that kind of living again before long.

Encouraging, yes. And proof that money can’t buy everything we want in this life.

From the looks of the bride-to-be at the table near where we sit…a million-dollar wedding to an “approved” groom might not inspire a smile. But the mustachioed hunk foaming the milk behind the coffee machine—who probably works for 20 to 30 pesos an hour—is apparently enough to rouse excitement.

Each individual will have their own ideals, their personal definition of a life well lived.

Deaton and Kahneman’s $75k “rule” might well be true on average. But who’s interested in average? Who aspires to introduce “my average wife”…or tell friends about “our average holiday”…or look back on a life full of “my average experiences?”

Nobody we know.

When we return, a word or two about that “system” (mentioned above) and how to get out from under its boot.

T&P Tool Shed

Don’t Worry, Be Happy

By the Staff of Truth & Plenty

It’s 3am. You’re exhausted. You can’t stop thinking about that thing tomorrow. You know everything will be fine, but your thoughts are spiraling into the doldrums of anxiety. You’re worried.

Some of us are more prone to worry than others, but we’ve all been visited by the Beast of Worst-Case Scenarios at some point. Worrying cultivates a sense of helplessness and inhibits your ability to enjoy even the simplest of things. Worst of all, excessive worrying, if left unchecked, can lead to digestive disorders, short-term memory loss, and premature coronary heart disease.

However, there are some simple techniques which have been shown to reduce the effects of chronic worrying.

Make a list of your worries and categorize them as unproductive and productive worries. Productive worries are things you can do something about right now, like a task that you’ve been avoiding. Address your productive worries as they arise and you’ll feel better for it.

Unproductive worries are things out of your control, like a fear of death. Theses worries will only go away when you accept them. Some recommend repeating these abstract worries aloud until the idea has become a boring mantra.

In fact, talking about your worries with someone else is one of the best ways to dispel them. In articulating your worries, you’ll gain perspective on the severity of the situation (which is never as bad as it seems) and often you’ll end up solving the problem yourself as you explain them to someone else.