MELBOURNE, AUSTRALIA – OCTOBER 10: Miley Cyrus throws money in the air as she performs at the … [+]
FINTECH SNARK RESERVOIR OBSERVATIONS
How much extra money would you need to make yourself “happy”? That’s the question financial services company Empower asked Americans in a recent investigation which revealed:
- Financial happiness means different things to different people. Two-thirds of those surveyed associate paying bills on time and being debt-free with financial happiness. Half said happiness was found in being able to afford everyday luxuries without worry, while others said it was found in spending on experiences with those they loved and optimism for the future.
- More money = less problems. Seven in ten respondents said having more money would solve most of their problems. A third said $15,000 would have a “significant” impact in their lives and increase their sense of financial happiness for six months. For 42% of Americans, it would take $25,000 to make an impact, but for 17%, $5,000 would be enough.
- Americans need a lot of money to be happy. Overall, Americans said they would need an annual income of $284,000 to be happy, about four times the current median salary of $74,000. Men need more than twice as much – $381,000 versus $183,000 as women (obviously my wife and 3 daughters were not surveyed). Millennials estimate their figure at $525,000 per year, with Gen Z, Gen X and Baby Boomers expressing a need of $125,000 to $130,000 per year.
- There is a magical net worth that produces happiness. Generations also differ in their views on the net worth needed to produce happiness. Half a million would make Gen Z happy, baby boomers want double that, and it would take $1.7 million to make millennials happy. Oh, how things have changed. A 2019 study from Department26 found that “Millennials don’t believe in money, they believe in themselves.”
Net Worth Required for Financial Happiness
Other conclusions of the study included these absurd results:
- 62% of Millennials say they are willing to pay $7 for a daily coffee because of the joy it brings. They can’t get the same level of “joy” from a $5 cup of coffee?
- 73% of people say they would give up social media if it made them financially happy. Except for a small percentage of people who generate income through their social media efforts, social media participation has no impact on financial happiness, so why question this absurd link ?
While we get rid of unwanted fees, can we also ban unwanted search?
Congratulations to Empower for striking a chord with this study that earned it coverage in major media outlets like CBS, Fortune and, yes, Forbes. However, the “research” has some flaws that call its legitimacy into question:
1) Happiness is neither a binary nor measurable concept. Asking someone what would make them “happy” implies that there is a level that can be reached, or a bar to cross, that would move them from “unhappy” or “not happy” (which are not the same thing) to a state called “happy”. However, this is not how “happiness” works.
2) Research doesn’t break down happiness by income and net worth. The study captures the percentage of respondents satisfied with various aspects of their financial lives. But it does not present the results by income and net worth. It is possible that there are many Americans who earn and have a lot of money but are financially unhappy, and those who don’t earn or have a lot of money but are happy. It is also possible that many people are “satisfied” with what they already have, and still are satisfied with less than what they currently have.
State of happiness in America
3) It is impossible to answer the questions precisely. If you don’t make (nearly) $500,000 today, how would you know what it means to make that kind of money? You may be better able to meet the financial commitments you currently have, but what’s not to say that you wouldn’t have new commitments that would be just as difficult to meet at a $500,000 income level?
To emphasize the self-interested nature of this “research”, Empower’s write-up of results ends with the following point:
“The secret to experiencing more happiness? Have an action plan: 73% believe that “a solid financial plan would bring me happiness.”
Really? A financial plan, by itself, is not likely to produce happiness if you need to make four times what you already do and need a million dollars more in net worth.
Realize the plan could do that, but not the plan itself.
But as they say…whatever makes you happy.