Free Ebook.

Enter your email address:

Delivered by FeedBurner

« Welcome NY Times Readers (Updated) | Main | Win a Free Copy of You Need a Budget! »

December 27, 2007


Feed You can follow this conversation by subscribing to the comment feed for this post.

That sounds good...I want to know more. THANKS for all the links. Will follow the trail for that $40,000 happiness rainbow!

That's funny as I, as a single person, have just started making between 40,000 and 45,000 a year. I have to disagree with the writer though as how much you make has nothing to do with your happiness. How much you save provides security against financial distress. This is what provides contentment and calm in a persons life.

The writer should have said 40,000 in savings not earning 40,000 as in my case I'm seeing that forty grand being eaten alive by fees and taxes.

I don't think she is far off. Other than ridiculously high housing market in FL, we do pretty well on just over $40k a year. We have some debt that is holding us down (but under control) that if we didn't have we better off. We give to our church and other charities so we live on less than we make. I do think it is possible to live and be happy on $40k, we are.

I'd don't know how much advice I would take from Penelope Trunk right now. She just got fired from Yahoo. Here's the link:

Obviously, no one liked her writing, column or advice. Perhaps she can revisit living on $40,000 a year and give us all an update.

Be wary of taking anyone advice.

Boomer --

Ha! I saw that too! ;-)

A couple comments:

1. I liked her book, but I don't agree with everyhthing she says. I do, however, pull out the stuff I like and comment on it here, so I like the $40k info.

2. She was supposedly fired from Yahoo because she writes career posts and they earn less than money posts. You can get details here:

In general, I agree. Although I think 40K would be miserable for most people raising families in New York or San Francisco (unless they have a tight knit extended family network).

40K is a decent starting point, provided of course that you earn ~7% annual raises for the rest of your career. the key point being a decent starting point and annual raise.

I think I'd tend to agree. I make much more than that now (and more than the 60k number, too. But I remember clearly my first job making $42k, and the subsequent raise to $45k, and that really making a huge change in my life. I unfortunately had married badly and ended up with a lot of debt, but that shift past $40k moved me into a place where if I had to blow off the credit cards, I could pay for a nice place to live, all my utilities, groceries, transportation and put some money away. In short, I quit worrying about the absolute necessities of life at that point and was just stressing about debt (and credit card debt at that).

Since clearing the $60k mark, I am painfully aware that I'd be in an incredible shape financially if it weren't for the debt I've racked up. I have some of it that has carried over from my failed marriage and its associated financial fiasco, as well as some really poor judgment calls while I was a single mom. But, my new husband and I are working diligently on clearing the debt, and once it's gone, we will be living on less than $60k and the rest will be going into retirement planning and investing, without a doubt.

Granted, the cost of living isn't terrible where I live (Dallas/Fort Worth, in the suburbs)... I could see the requisite number being higher in other areas.

I think we'd be delighted with $40k a year. When I was earning about $28-30k at the secretary position we got by. Now my goal is to earn a bit more than that...we'll see.

I wish I could find the source, but way back in my college days, I read of a study that showed the amount of income needed to be happy was twice your current income and this was remarkably consistent across all income levels.

And now for something completely different: Try living on $500.00 per month. I rent a small apartment in a rural area, no cable/satillite,no car (public transit), no cell phone,don't draw foodstamps or medicaid,do have medicare and hud. Just a beautiful view of the river and my kids close by.
$40K a year...yeah right.

What is happiness?

If its just 2 adults and neither of you have big health problems and you have health coverage, maybe. Once you change the dynamics to include kids it starts to get iffy. What about health problems. I think these two items greatly impact the feasibility of that statement. Although I'm not to sure. We are in school living on 21K a year with two kids. 40K just doesn't seem to clear the student loans.

Let's face it, most people are never happy with what they make. The real problem is almost universally how much they keep. I like the comment above that the "ideal income" is always twice your current earnings.

I think $40k is a pretty good benchmark. Tax-wise you are still in the lower brackets, so depending on the state rates about 20% is probably going there, at worst. That still leaves about $32k net or a little over $2,600 a month. I would say for most people that could be a comfortable living, factoring in COLAs of course.

Are we talking about $40K per person or total family income for 2 people? Because I am sure that $40K or even $80K won't work for a couple who lives in an average area in Brooklyn without children when student loans are near $130,000 (as this is my situation). Also the article mentioned, after [$40K] "you have to turn to something other than consumerism, because additional money has negligible impact on how happy you are." What makes me and my husband the happiest is traveling, seeing the world, other people, other cultures...sometimes seeing God's creation costs mega$. The airfare alone is outrageous even for the most undeveloped countries in the world. So we wouldn't be happy if we couldn’t travel and therefore this theory doesn't work in my opinion. When we travel we are buying not primarily leisure but life experiences, knowledge and memories not “things” or objects that accumulate dust in our home… The same thing could be said for someone whose passion is, for example, art - all the art supplies are going to add up etc.

Happiness isn't necessarily related to income and oppressive debt can occur anywhere by anyone no matter the income. My family of four lives quite well on less than 40k from one income. I tend to follow the advice of economist E.F. Schumacher who wrote in his book Small is Beautiful: "It's not what you can afford, it's what you choose to spend your money on."

I think it really depends on your age and where you are at in life. When I was in my early 20s, $40k was enough to pay my bills, my school loans, a nice apartment, and extra for other funs stuff. Your needs are smaller when you are young. As I get older, I am starting to worry about saving enough for retirement, for a down payment on a house, and hopefully have children.

Your expenses increase expontentially as you age because you head into the wealth acquiring stage in your life during your 30s-50s. Then once you acquire the wealth and head to the spend down stage in your 60s+ then you are probably going to be okay with $40k again.

$40,000 a year won't buy my child a house in a good school system, so for me? No. This amount is not enough.

The economics is almost right. Like most things, money has diminishing returns. The first $40,000 will give you more happiness than the next $40,000. When you start making $500,000 a year, an additional $40,000 probably won't mean as much to you.

However, the threshold income level that would be equivalent to happiness (or at least satisfaction) varies from person to person. Economically speaking, individuals are different from one another and value different things differently. That's why eBay works: the buyer values a good more highly than the seller, and both people come out ahead. Economically speaking, then, it isn't universally true that $40,000 = happiness.

Other thoughts:

I didn't read PT's book so I don't know if she goes into more detail than the snippet you posted. But does the study she cite say that $40,000 in salary is sufficient, or do you really need $40,000 in pocket or even $40,000 in disposable income (after taxes, debt payments, retirement savings) each year to be happy?

$40,000 would probably be enough to make me happy now, but with New York's cost of living, I wouldn't be able to save as much for retirement. So how happy will I be 40 years from now when I won't be able to have $40,000 in income each year? Not very.

I had the same thought as honest dollar. If you need 40,000 in liquid cash to be happy, that translates into a $50,000 salary assuming a 25% tax liability. You might need to earn more depending upon your company's health insurance plan and other payroll deductions. I've just spent the last week pouring over quickbooks and discovered that I spent about 35K this year. Would I be happier if I spent 5K more? I think I'm happier knowing that I have a cushion of savings that can get me through potential dry spells on the horizon (I'm self employed).

Our income is significantly higher than $40k, but we end up spending about $35k/year total, and we are happy, so I think this is pretty close. However, part of what makes us "happy" is all the savings we have, so maybe a little more than that will add some more security, but I would bet that a family making $40k and one making $80k would have little difference in quality of life, where a $20k and $40k household would be drastically different.

I think for a somewhat frugal person, $40k is fine - PROVIDED you don't have a lot of debt that has to be paid on, or kids/family with special needs.

If we take our student loans out of the picture, my husband and I spend a little less than $40k/year on our living expenses (mortgage, food, utilities, entertainment, some clothing, etc.) We make significantly more than that, but all of the extra goes to our student loans. The minimum is $700/month, and we double or triple that most months.

At the risk of being a bore, I really did discover, after a lifetime of chasing the "almighty dollar," that happiness only comes from "inner peace." We can only achieve that "inner peace" when we quit being a slave to pride (pride goeth before destruction). We all make many purchases because of the "spirit of pride." For proof, just ask the "luxury label" marketeers. The weaker we are on the inside, the more "props" we need on the outside, to "prove" that we are "somebody." When we have finally exhausted ourselves trying to prove ourselves to ourselves, we come to realize, no one really cares (what I have achieved or what I own).
What have I learned about money and material things from 40+ years of business (ownership)?
1. Everything is a liability, because it costs a lot of resources for maintainance. (Nothing is an asset unless it produces a positive cashflow).
2.No debt for consumption. By paying cash for every purchase, we make better decisions. (ie: Would I rather have this item, or the Hundred Dollar bill I have to give for it). When "buying" with the credit card, our minds trick us into believing that, one moment we have nothing and the next moment we "own" something. (Of course at this point, we don't own anything except the debt). In the "heat of the moment" we forget that long after the "thrill of having" is gone, the stress of the debt incured, destroys us!
3. Always live within our means. If we can't "give a little" and "save a little," from every paycheck, we're living beyond our means and we must economize somewhere and/or we must generate additional income. (We can only spend each dollar, once).

By making a game of it ("Hi, I'm Mister Cheap.") we can turn our thrift into fun, by "stretching our money" and demanding (of ourselves)that we get maximum value for every dollar spent. (Obviously we must not let it get in the way of our productivity). We don't want to trip over dollars trying to save dimes. The key to good decision making is by putting a dollar value on our time. If my time is worth $36 per hour, each second is worth $.01. I must not spend more than 500 seconds {8 minutes 20 seconds} to save $5. But I must also remember that if I waste 25 cents per day, that adds up to $91.25 per year. If I save enough "Quarters" every day, I can pay for a nice vacation or ?

Many times the burden of "debt service" pressures us into unethical behavior and we end up hurting people just "to feed the debt monster." We then start "hating ourselves" and often it causes escapism, creating even more problems. No amount of material wealth can compensate for self-loathing!

The key to happiness? The "good-book" says, "Contentment with Godliness (righteousness) is great gain.

Contentment = Peace = Happiness!!!
Happiness is not based on a "dollar amount," but rather, attitude and lifestyle choices!

So, is that $40K before or after taxes? If it's the latter, I still have a ways to go before hitting the magic number.

I'm pretty content with my life, though- no more sleepless nights wondering how I'm going to pay my bills. And I'm shoveling my 'disposable' income into savings instruments instead of 'disposing' it on unnecessary stuff.

Unfortunately, $40K won't get me into my own home, or one in a decent neighborhood, so I am renting for the time being.

It's pretty funny to set an arbitrary amount. Some people say, "okay, that sounds good", while others would say it isn't enough no matter the number. I do okay for myself, and so does the wife, but I remember when I made minimum wage, and was happy all the time.

In fact, whenever you talk to someone who made their own wealth, as opposed to inheiritance, many of them will tell stories of the "good old days" when they were dirt poor and happy.

I guess it all depends on one's priorities.

I've also read that happiness is a function largely of your income relative to that of your peers.

Presumably this means that the income level required for happiness changes as you age and move along the income curve.

I'm going to guess it's actually closer to $60K in the Bay Area. Our rent alone would eat up more than half that $40K, and reducing it would mean living in a more crime-prone area which would decrease happiness. After $60K, our basic needs were met and you're right ... the happiness didn't increase every time my husband got a promotion or a raise. (In fact, I'd argue that happiness went down after $60K because he ended up spending more time at work and less at home with each promotion.)

You can't even begin to live comfortably until you are making at least $70,000+ don't let anyone convince you of anything else. $70,000 should be the minimum wage :))

how much shold a couple make a year just to get by?

We make $110 000 as a couple combined. I find this is just "getting by" and we have little debt and no children. I think at least $150 000 should be made by a couple to live comfortably - depending on where you live of course!

I'm happy to have reached the point where my finances are secure, and money, or the lack thereof, is not essential to my happiness. *But* my job is not secure, especially in this economy. I could live for at least a year on Unemployemnt Comp. + savings, except for healthcare. I'm hopeful that the next administration will make healthcare available to everyone. Meanwhile, staying employed is essential.

I make $40k/yr with a wife and child at home.
We are living in poverty and not happy. We are fortunate that unlike neighbors in our community we are not users of drugs or alcohol.
Our apartment is in the cheapest part of the city due to the crime. We have a used car that I fix on the street. I can’t use city transit due to my job because I am on call as a security officer.
We’re paying $750/mo on our 2 bedroom apt, (which is cheap btw). Then there’s gas, car mtc, car insurance, food, clothing, bus pass for my wife, and hardly anything extra left over.
We eat wisely and we’re not overweight. We never eat out or go out. Our boy needs a special med which costs us about $175/month. We live on the bare minimum and don’t waste. The math is real simple. The daycare cost for our son is more than what my wife would earn on minimum wage, so it doesn't make sense for her to work, even with subsidized daycare . We live in Toronto…

Some of you must be high. My $40,000 a year salary translates to $27,000 take home pay, or about $2200 a month. You can easily spend half that on rent. The rest: car, food , clothes, social life. Forget putting anything away for retirement or investing. The person who says they live on $500 a month, give me a break. I'd sell crack before I did that...

The comments to this entry are closed.

Start a Blog


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.