How Much Money Do You Need to Be Happy?

Pop quiz: How much money does the top 1% make?

$500,000 per year? $5,000,000?

I believe most of us don’t have a clue. How far off are my guesstimates? If being in the top 1% is a goal, should households aim for such staggering incomes? Is that a purpose-driven objective worth chasing?

Let’s have a look at what the data tells us:

Holy smokes. The disparity in income between the top 1% and the rest of us 99%’ers is off the charts! Even $250,000 per year pales in comparison to what the top 1% make in just about each of the 50 states. Allow me a sec to pop my eyes back into their respective sockets…

An interesting observation can be made that this disparity is blind to political disposition. You have blue states mixed in with red states throughout this list.

Near the top, you have the uber-wealth of Wyoming, a traditionally red state, nestled just below Connecticut, a reliably blue state. At the bottom, West Virginia and Alaska (usually red states) are interwoven with Iowa and Hawaii (generally blue).

My at-a-glance conclusion? There’s no correlation between money and politics. We’re all greedy blokes: red, blue, or independent.

How Much Do You Need to Be In the Top 1%?

Let’s take another look at the data. This time we’ll slice it by looking at what the threshold is, to be considered part of the 1%. For kicks, this chart includes some tasty nuggets on the top .01%. Curious how roughly four million of us Americans “get by”? All I can say: those hedge fund managers in Connecticut and New York are skewing and skewering us all into the ground.

Gulp. What have I been doing with my life?!? I should’ve moved to Connecticut right after college and planted my flag there. At the very least, I could’ve become a highly paid butler or dog-walker making $250,000 per year, which, brace yourself, is a mere 1.3% of the bare-minimum income to qualify for the top .01% in that state. Let that sink in, folks.

A History of Income Disparity

This is about the time you start to wonder if there’s a real problem with income disparity in this country (there is) and if what I just wrote justifies you referring to me as “Captain Obvious”.

The data provided by the Economic Policy Institute brings home another conclusion: As incomes become more disparate over time, our roads and bridges crumble, and our Thanksgiving dinners devolve into bickering.

That’s a broad reach on my part, but hey, maybe this disparity stuff has some real consequences for a democratic nation of equal men and women. Maybe all that money gives a select few some deliciously royal influence over things that the little guys could never achieve. It goes on…

Here’s a look at how income disparity has ebbed and flowed over the last hundred years or so:

Observations

It’s interesting how the Northeast stands out as the most volatile of all regions. You’ll note the period of relative quiet, low income disparity across all regions from World War II in the 40s up to the Reagan years of the 80s.

A couple of dynamics were at play. One was that the country sacrificed a LOT during the second world war, and that was the injury to the insult of the Great Depression. So yeah, lots of regulation intact, but a booming economic decade of the 50s followed.

For whatever reason, the Cold War overlaps this period as well. Nothing like showing the Soviets how egalitarian we could be during this stretch, eh Ivan?

I’ll leave the topic of income disparity at this: There’s nothing wrong with making a decent amount of money. There’s also nothing wrong with ensuring everyone has a right to a good education, reliable healthcare, and adequate housing, along with safe drinking water, and national defense. Oh, and a few decent, dedicated bike paths (non-crumbling) would be nice…

Income Distribution: For the Rest of Us

Bringing the discussion back down to earth, to the 99% orbit at least, let’s have a look at the distribution of income, based on US Census data:

This adds a bit more perspective. About a quarter of U.S. households earn over six figures (27.7% to be exact). Households (never mind individuals) taking in over $200,000 amount to just 7%. The Cubert household is not at this threshold, even with our real estate business generating decent cash flow, and jobs that pay quite well.

Nevertheless, there’s nothing for us to complain about. Why would we? Our household is in the top 13.6% of earners. That’s a reflection of a few things. Some of which we have control over, and others maybe not so much.

1. We were born here. If you’re an American citizen, you’re bound to make more than the average earthling. The handy infographic above from Pew Research Center underscores the advantages most of us have.
2. We graduated, then went to college. Then went to more colleges. And yes, through hard work, beer, and the occasional joint (and occasional studying), we acquired our degrees (plural) and nearly $200,000 in student loan debts. Rosy.
3. We didn’t rest on our laurels. Hard work is one thing, but a curious mind looks for ways to earn money beyond the traditional W2 paycheck. Mrs. Cubert’s healthcare practice and our real estate business supercharged this household’s earnings.
4. The tax code is a beautiful thing. If you own a small business or real estate, your accountant can help you offset taxable income from your W-2 paycheck. Our effective tax rate since organizing our businesses: low teens.
5. We’re in the right place, at the right time. The Twin Cities is a great place to be for high-paying jobs in a variety of sectors. You can job hop from one Fortune 500 company to the next with relative ease. That’s a path I was on until I landed at my current cubicle station over ten years ago. You just have to be willing to suck it up come wintertime, Sally.

This wasn’t always the case. Just ten years ago we were hovering at about zero net worth. My career in the information technology sector started with a whimper. A $27,500 salary in the tech support call center doesn’t sound promising in retrospect. Heck, I even managed to get laid off, just shy of turning 30.

An entire year followed without any income (save for two months of making cold calls in a supposed “internship”). No help from Mom and Dad (not that I asked!) or anyone else. Just a home equity line of credit and a prayer (and a rent-paying roommate).

Persistence, Time, and Extra Effort Can Make a Difference

I finished that year blissfully not waking to any alarm clock with an MBA in hand, ready to make some money. Within months of starting a new gig, I had backed out of my Peace Corps mission at practically the 11th hour (a big regret, but one I learned from).

I eventually moved on from that first, post-MBA gig to my current company. It’s been a roller coaster of a career, but one that I can ultimately be proud of when I call it a day. I had a few bad bosses with low-stress work, which sucked. And I had some very good bosses with high-stress work, which also sucked.

But when you have a family, when you have “wants”, and when those needs creep up on you..? You better have a job. I find it a bit weird that newly-minted college grads whine about the workaday life as if some mythical dream job (or dream life) is owed to them.

Those first-world problems won’t earn a tear from someone starving on the streets of Bangladesh. You sure won’t get any love from Jiro, who’s still slinging sushi in his 90s.

We should all have to “shovel coal” for a good 10 to 20 years after college. Climb your mountain. Embrace your cubicle work and bust your butt (for the first 10 years at least!). After you’ve acquired enough money to retire early, then you can go live your dream life of hang-drying your laundry outside while your garden grows green and your kids learn how to repair small motors in your home-school shed.

How Much Money Do You Need to Be Happy?

Here’s the interesting part of this exercise. At what point does the amount of income stop mattering in terms of relative “happiness”? How much do you need to earn to have a “joyful life”?

Well, according to Purdue University (following in the footsteps of Princeton’s 2010 study), $75,000 a year is what it takes. That at least brings an individual “emotional happiness”. Whatever the f*ck that means…

The Purdue U study interestingly finds that $95,000 is needed for “overall life satisfaction”. Remember, this is per individual.

So for a family with kids, you’d need to shore up an income of $120,000 to $150,000 I’m guessing, for your emotional well-being. And boy oh boy, if your nuclear family hopes to achieve life satisfaction, you’ll need a hefty handsome $190,000 per year annual household income.

That sounds like a lot of dough. And it is. Scroll back up to that bar chart with income distributions. Guess what? Maybe 8%-13% of U.S. households are satisfied with their overall life at a given time. That is INSANE.

Maybe we put in a little sanity check here and say that in a combined household, you gain lots of efficiencies (one house, one TV, etc., etc.) and therefore $100,000 is the more realistic target for household life satisfaction. In that event, we’re still only capturing a mere 27% of the population. Still INSANE.

I won’t even get into the cost of living factor here. You’d probably have to double these figures if you live in New England or San Francisco. Course, maybe you could chop off 50% for a family living in the deep South, or Wichita.

Choose Your Priorities

What can’t be overlooked is this: Those who value keeping up with the Jones’s, and keeping their shopping carts full at all times, are probably the ones who measure their happiness based on their income. Alternatively, the wise among us find wealth in relationships, experiences, and contributions to our communities.

What the hell do you think you’ll be pondering on your deathbed: lamenting your inability to make six figures or lamenting losing touch with your best friends from childhood?

There is wealth in having the freedom to choose your path. Not being tied down to a job you don’t like and a commute that steals time away from your kids is the pits. Making money is a necessary part of life, but it should not be the measuring stick for your happiness.

Recalling my days in college and into my 20s, there wasn’t much money to my name. But I couldn’t have been happier hanging out with friends, napping too much, taking in new experiences, and working on long-term goals.

In other words, don’t let these dollar thresholds twist you up in knots. It’s what social media wants you to focus on, and hence the mighty advertisers too. Take heart in the “gotcha” part of the Purdue findings:

“The study also found once the threshold was reached, further increases in income tended to be associated with reduced life satisfaction and a lower level of well-being. This may be because money is important for meeting basic needs, purchasing conveniences, and maybe even loan repayments, but to a point. After the optimal point of needs is met, people may be driven by desires such as pursuing more material gains and engaging in social comparisons, which could, ironically, lower well-being.”

Whoa. I’m sorry: the top 1%. I’m so, so sorry: top .01%. Sigh. Not comforting at all.

Focus on Lifestyle Habits, Not Income

Ever the student of life and happiness, this author subscribes to a different view on happiness: Lifestyle is everything. Household income beyond six figures? Secondary.

Pick up a copy of Blue Zones and you’ll understand where I’m coming from. For the uninitiated, Blue Zones are communities throughout the world where individuals live to be 100 (or more) in good health, both physically and mentally.

Blue Zone elders ascribe to a lifelong journey of hard work – and the type of work requiring you to be on your feet and using your hands. Family and community circles are tight, naps are frequent, and you won’t find very much sugar, red meat, or other processed crap food on the table.

As far as income goes? Well, these folks are often agrarian workers, living in small houses. I doubt you’d find much in common between the Blue Zones populace and hedge fund managers living on Marble Head (or, Collier County, Florida).

This is all the proof I need to recognize the fool’s errand of chasing a higher income and instead choosing a path of early retirement. I don’t need to read Your Money or Your Life or some other dry and dull book to get me charged up. My fuel is the Blue Zones.

All-day long. Heck, you never know. Maybe I’ll figure out a way to move our clan to Sardinia and find a plot of a hillside on which to raise goats. (Is Mrs. Cubert reading this??)

10 Jobs that Make Large Salaries

If you still choose to chase the top earners, here’s a helpful list of the jobs that make the most annual pay in the U.S.:

1. Anesthesiologist: $246K
2. Surgeon: $240K
3. Oral Surgeon: $220K
4. Obstetricians and Gynecologists: $215K
5. Orthodontist: $201K
6. General Internist: $190K
7. Physicians and Surgeons: $190K
8. Family and General Practitioners: $186K
9. Psychiatrists: $186K
10. Chief Executives: $181K (Remembering that a. there are a LOT of small businesses out there)

You can find the rest of the list of top-earning jobs at Business Insider. You’ll find my job at number 21: Computer and Information Systems Managers: $136K.

An ideal path might just be to take the job you currently have and maximize your opportunities THERE. And in the process, explore whether you might have the chops to be a landlord, where passive income and tax advantages could put a huge dent in your retirement timeline. Now that’s something I can strongly endorse.

Now that you know how much money the top 1% make, you can either get depressed about income disparity or go get BUSY. Please share your thoughts in the comments below!