Comments on: How Would Your Life Change if your Income Doubled?

By: Jan

Jan — Fri, 02 Jul 2010 14:33:35 +0000

I’m with Joe.
We earn about $40,000 (after taxes) in a pension. We live quite well. House is paid off. We fund our hobbies and travel. And now that we THINK about expenses- they are down and we are saving!
Our daughter’s family makes about $50,000 and hardly scrapes by. The jobs are in a high cost of living area and they have a growing family.
It is all perspective.

By: Budgeting in the Fun Stuff

Budgeting in the Fun Stuff — Fri, 25 Jun 2010 18:07:12 +0000

If our income doubled, we’d be able to retire even earlier or at least have enough put away to definitively retire as soon as my husband is eligible for his full pension in 25 years. Other than that, not much would change at all for a while. I’d probably be able to retire a few years before my husband and volunteer more. We’d also definitely take 3 big vacations a year instead of 1 or 2. Mostly, it would allow me to buy a Prius when my Aveo finally dies so I can stop drooling over my husband’s…

By: RJ

RJ — Tue, 15 Jun 2010 15:05:14 +0000

Thanks Daren.

I’m with you. On a day to day basis, things would be pretty much the same. Of course I would reach my goals a little faster, but in the present, everything is the same.

By: Darren

Darren — Mon, 14 Jun 2010 21:09:29 +0000

If my income would double, like JoeTaxpayer, it would probably just allow me to retire and become financially independent a lot sooner. Other than that, I don’t think my life or spending would change too much.

If my time would double, it’d allow me to pursue my hobbies and passions more, read and learn more, and spend more time with friends and family.

Great article. After basic needs are met, I think that the answer to our problems isn’t more money, but maybe it’s more time to do the things we enjoy, and not doing the things we don’t enjoy as much.

By: RJ

RJ — Mon, 14 Jun 2010 20:34:45 +0000

I looked a little more into research. Found another interesting article: http://www.guardian.co.uk/society/2004/apr/04/mentalhealth.observermagazine

Read work of Ruut Veenhoven about half way down the page.

By: RJ

RJ — Thu, 10 Jun 2010 19:25:31 +0000

I did some searching around. There isn’t much criticism on this study and an explanation to how it was performed. I read his book once, but it was on audio tape in the car. Didn’t get to take notes.

By: JoeTaxpayer

JoeTaxpayer — Thu, 10 Jun 2010 15:14:34 +0000

Forget the actual number for a moment.
There’s an aspect that should be intuitive. Below some level of income, one constructs a budget, even if after the fact, and sees that there are fixed expenses (Mort, prop tax, gas/electric, etc) and then there’s savings. With the saving rate being low, in general, I’ll put that aside right now. The rest is discretionary. At the “some level’ I reference, this discretionary spending money is probably less than 10%, if it were much higher, the saving rate would probably go up as well.
A 5% raise at this point, can be anywhere from a 50-100% increase to that 10% (or less), and I’d imagine when that occurs, one would be happier. It’s only at the point where discretionary income is high enough that the increase has less impact. The happiness delta is also a bit different when it’s a lump sum cash vs an increase in one’s annual pay.

I can see two scenarios (1) a couple is retired, house paid, $40K pension. Spending $30K. They may very well be at the end of their happiness curve, enjoying their grandkids, traveling as they like, just plain happy. (2) A young couple with young kids, in a house that’s probably too big, somehow burning through every last dime between house, college savings, child care, etc. An incremental $50K might right size their budget.

I’m not passing judgment on either couple. I am just curious as anyone to see how these kinds of studies are done with any valid conclusion. I find they either are created using contrived lab-rat experiments, i.e. a university, sit in a conference room environment, or use a survey that somehow naturally skews the data.

By: RJ

RJ — Thu, 10 Jun 2010 13:59:26 +0000

@Patrick – I know what you mean. Some of the greatest vacation I ever took were road trips that cost a few hundred dollars and lasted weeks instead of days.

There is defiantly a certain comfort in having little commitments. Unfortunately, it’s hard to live your entire life that way. The older I get, the more I realize it’s all about finding the right balance.

By: RJ

RJ — Thu, 10 Jun 2010 13:56:14 +0000

@Joe – There are a lot of holes, that I need to dive into.

I think the most important thing is that once most people reach $40,000, there is a diminishing returns on happiness on anything above. So for your situation, it would of course make your life better if you doubled your income. Whose wouldn’t? However, it just doesn’t make as big of a difference once you’re above 40.

By: Patrick

Patrick — Thu, 10 Jun 2010 02:11:38 +0000

I for one agree with the professor that money does not bring happiness. Some of the best times of my life took place when I was a young Soldier in the Army making $1,500 a month. I spent time with my wife and my son every night because we didn’t have money to go out to eat or go shopping.

Now that my income has gone up I spend more time worrying about the next mortgage payment, both cars, saving for kids college etc…what I wouldn’t give to go back to being young and broke lol.