Are You At Your Income Happiness Cap?

I’ve known for awhile that there’ve been scientific studies showing that your income correlates with your level of happiness only up to a certain amount and then caps off.  This is an interesting tidbit to remember in your thirties, as your income possibly grows more than it has when you were younger.

A study in 2010 found the income level happiness cap to be $75,000. So according to this research, you’d get progressively happier up to $75,000 in income and then your happiness level would remain consistent. Let’s adjust this for 2015 inflation and then adjust it once again for a major city like New York, San Francisco, or LA, plus let’s be generous, so we’ll make the number $120,000.

Now, $120,000 a year is a good chunk of money for someone in their thirties, and nothing to scoff about even in New York, especially for one person and not a household. If you made $120,000, do you think you’d be significantly happier making $140,000?

I guess it depends on who you are, and how well you know yourself. I believe happiness  definitely caps at a certain income level… that level might just be different for different people, but it’ll still work the same way.

I believe there’s a Maslow’s pyramid of needs associated with income. If you don’t know about this pyramid, click the link above…Maslow’s pyramid is a very clear way to view how our goals are naturally set up in life.

Ok, here’s a stab what I think the income pyramid of needs is:

1. Providing basic security items such as paying rent and buying food.

This is the basic bottom level of what money needs to provide- food and shelter.

2. Adding personal touches to our basic needs

At this level, you don’t only eat and pay rent, you can also buy a specific soap you like for your home, and buy a nicer can of beans than Goya.

3. Some disposable income

Once you get to this level, you can move beyond simple food and shelter and possibly go see a movie, or have dinner with friends

4. A good amount of disposable income

Here’s where you can purchase bigger items such as higher education, a vehicle, and a big screen tv. Of course, this is where a lot of people get into trouble and get stuck. Debt occurs the most at this level.

4. Money for the future and savings

This is a major jump that some people never get to.  At this level, you’re mostly out of debt or on a good payment plan, and are setting aside money in a savings account and a retirement fund.

5. Money to give away

At this level, you have all the money you need, and your future accounts are funded. Now you can really help others. This is a nice, happy level to be at.

Beyond the last level, I guess you can give even MORE to others, or sock even more money away or buy a ranch and a bunch of ponies or something, but it’s all extra from there.

So maybe it’s actually not a yearly income thing- maybe people simply need to make enough money to climb to the top of the pyramid, and then more money doesn’t really bring more joy.

What do you think?

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