Here’s why $75,000 is the best salary possible.
Money & happiness
You’ve heard it so many times before — money can’t buy happiness, but we tend to dismiss this as a fluffy cliche because we all know that we need to buy food, pay bills, have a new iPhone. As always, it actually depends (my time as a consultant shining through here) — how do you define happiness? Well, happiness is a very broad term, it’s also subjective, complex and highly misunderstood. If you’re starving and freezing then chances are that a bit of money could buy you some happiness. If you’re looking for a true friend or sel-fulfilment, that’s the kind of happiness money can’t buy. Money can buy external happiness, which is fleeting, a bit like a drug — it’s what keeps us buying more clothes when we already have way more than we actually need. Real happiness is internal and durable and you can’t put that on your Amex.
A lot of people who read my first post have been asking me how I’m going to be making money to sustain this new journey I’m embarking on. While that’s a good question and an interesting topic, I think it’s more important to discuss how much I aim to make — bear with me.
Let’s start from the grossly simplistic premise that more money allows one to buy and do more of the things that they want. Also, making money consumes a certain amount of our time and effort, that we would usually rather be spending in other ways. So how much time should we spend on making money? Is it best to spend just a little time working, sacrificing the comforts and luxuries that more money could bring, or should we work more and ensure our brief free time is exceptional?
As a side note — I’ve been starkly reminded by my surroundings that this tradeoff is not always available. Many people in the world work as hard as possible, while still only making just enough to survive; so let’s take a moment to appreciate the fact that we’re even able to consider this tradeoff.
Let’s talk about diminishing returns.
A lot of us seem to forget that money doesn’t have an equal value for everyone — it’s highly circumstantial. $100 could be life changing to someone working in a third world country, earning just a few dollars a day. The same $100 could make a big difference to a poor students living off baked beans. The same $100 might bring a smile to someone earning a good salary. The same $100 are worth essentially nothing to someone with a private jet.
The more you have, the less each additional dollar you earn is worth. So at what point is it no longer worth investing time to make money? In other words, how much money do you need to be earning in order for it to no longer make sense to want to trade your precious time for more money? This might seem like an obvious question to pose and re-evaluate during life, but it never ceases to amaze me how many rich people keep on working their arses off, in jobs they seem to loathe — for what? That extra money will literally make almost no difference to you. It’s a dumb thing to do.
How much is enough?
But hold on a second, there must be a sensible middle ground, right? A point at which you have enough money to do/buy most of the things you want, and at which it becomes silly to spend much more time earning money?
According to a study conducted by researchers at Princeton (LINK), the answer is around $75,000 per year. Once you’re making that amount, you can pretty much satisfy all your needs and desires — any additional money you make will only lead to a very marginal increase in your happiness levels. So logic would dictate that this is the level you should aim for, or at least the point at which it doesn’t make much sense to want to earn much more. So why is it that we’re so good at forgetting the bigger picture? When people start working, it’s to earn money (if you love your job and would do it for free, then lucky you!) so that they can buy and do the things they want — and yet — they keep wanting more and more.
We’re very good at adjusting our baseline, what we perceive to be ‘normal’, and as our salaries usually increase fairly slowly, maybe every few years at best, we have plenty of time to get accustomed to whatever it is that we’re earning. That becomes the new norm and we start craving more — this cycle never ends.
So 75K a year — that’s just over $6,250$ a month. At the moment I’m averaging about $1,000-$1,500 a month in completely passive income (earnings that keep flowing from work I did in the past) so I’ve got a way to go, but it’s a start. We should also bear in mind that the figure of 75K came from a study which was conducted in the USA, where the cost of living is significantly higher than many other places. People are also arguably more materialistic than average. As I’m currently in Thailand a comparable figure may be something like 20–30K, which equates to approximately $1,700 — $2,500 per month. The goal post is suddenly looking a lot closer.
Why is money tabu?
One of the other things I wanted this journey to be about was transparency, especially in terms of finances. I want to show how easy or how hard it is to make a decent living on your own terms. For some reason it always seems to be a fairly tabu subject and people are often reluctant to share how much money they earn — even among close friends.
Let’s change that.