How much we earn plays an important role in providing for our basic, needs, savings and disposable income. But just how much money is enough to be happy?
Imagine if you were asked how much money you need to be happier. Most people would name a figure higher than what they currently have. Human nature forces us to always want more, never satisfied with a particular amount. So why do we think more wealth will equal happiness?
One reason is because we usually equate happiness with the ability to buy more things. The trouble with this approach is that we are very good at getting used to positive changes in our lives. When we buy a new TV, get a pay increase, or buy a new car it makes us really happy at first, then we adapt to it and our happiness from it decreases.
Happiness is all about stripping away the natural impulse for more and focusing on using our money towards:
Personal growth through investing in ourselves
Connections with our friends and family
Being part of a community or giving back to society
With all that said, research shows that there is an amount of money which is a tipping point for happiness gains. Below that threshold, any increase in money is likely to make you significantly happier. Above that threshold, the impact of every additional pound towards your happiness starts to diminish.
Now of course, this number will be slightly different depending on your personal circumstances and values, but many studies have come to a consensus around a figure. That ‘sweet spot’ number is said to be roughly £54,000 (or $75,000) per year.
In our opinion, there is nothing wrong with having aspirations above this ‘sweet spot’ of money, but just make sure that your happiness isn’t linked to it. Amassing money is fine, but someone who earns £100k a year and blows through all of it is worse off than someone who earns £50k, spends £40k and gains satisfaction from more meaningful things. It’s not about how much money you earn, but how much money you can keep!
This article is for information purposes only. It is not intended to be used as financial advice. You should seek specialist advice from your bank or a qualified Financial Advisor before making any financial decisions.