A Great Money Question

Here's a great money question (preceded by a fill-in-the-blank statement) from page 209 of The Secret Language of Money: How to Make Smarter Financial Decisions and Live a Richer Life:

1. My current annual income is $_________________

2. In order to ensure happiness and contentment financially, with no more money problems and worries, my annual income would need to be $_______________

A few thoughts on this:

1. I think it's a great question (or exercise if you prefer -- I guess it's not technically a question) because it's very thought-provoking IMO. If you're not happy with what you make now, what amount will make you happy? Or will making more ever make you happy?

2. Of course, we all know people (and I write about them often) who make more only to spend it all -- and they are no better off (and not happier either.) So is income the real issue here?

3. For me, I'm way past the "happiness" level of income. Sure, I'd prefer earning $10 million a year (I could do this for three months and then retire), but realistically I am completely happy with my level of income.

4. If you're not happy with what you make, what are you doing to close the gap? Maybe you're working on growing your career or perhaps earning some more money on the side?

So, after looking at the above, is there a gap between what you earn and what you'd like to earn? If so, how big is it and what are you doing to close the gap?

Comments

[robert]

I used to work on question#2 to the disadvantage of my real life.
Keeping up with 'the Jones' didn't put real worth in my life, just real hassles.
Fast cars(toys), fast women they go as fast. Value added people
are a better indicator in my life.
Yes I do strive to increase my income yearly however
I do not stive to increase my expenses.

[anon]

$110k

$60k

I consider myself very fortunate to be earning much more than I need.

[Anthony]

My wife and I are both fortunate when it comes to our income. We are making a combined $106k only 2 years out of college. We are unfortunate because we have a large amount of student loan debt (about $54k). We are aggressively paying it down, and I hope to be finished in 2 years.

Assuming we had no student loan debt and only a mortgage at this time, I daresay we would be happy making $53k (half of what we make). Of course, we'll pay down the student loans as fast as we can. Then we'll work to pay off the mortgage quickly, while building up our retirement savings.

[wanzman]

My wife and I currently make about $80k combined. My part of that is $50k.

As to question number 2, I would say that I personally would be happy earning $80k on my own. The only reason being that we plan for my wife to quit her job in a few years when we decide to have kids. I would be very happy to maintain the level of income that we now have. We have more than enough to afford the things we want, and put a great deal away in savings for retirement and other goals.

[A very happy person]

Question 1: My base pay is $280,000 and have a target bonus of 35% (can be zero or can be 2x the target). My wife is a SAHM. Beyond that, I have a great 401K match as well at a pension plan that contributes another 20% of the base (retirement funds should be fine!)

Question2: If only I could make over a million a year.....then I would be happy......just kidding

[outdoorgrrl]

This question has been asked a lot by various researchers. The average answer to question #2 is usually 3x the answer to #1...no matter what you make. You have unusual readers on this site!

[steve]

To the previous comment. I have read this blog for a long time and I would agree. Most commentors seem to have a firm grip on reality and are down to earth.This alone is unusual and refreshing.I find the comments are just as entertaining as the article. This is by far my favorite money/ finance blog.
Keep up the good work.

[kim]

I make $62K my husband makes about $75K. I would be happy making $0 income and not go to work! Unfortunately I have to work!

Kim

[Old Limey]

$335K

$70K

[Andy]

I think there must be a point, which will be different for each individual, where you can buy everything you reasonbly want without running out of money.

Sure, my expenses have gone up every time I have earned a raise. However, I also put more into retirement each time or add a little insurance, or buy something that reduces my longterm costs and every raise makes life just a little bit easier.

I make about 65K right now and money seems tight again just one year after a 20% raise. But at this point, my debt is gradually going down and I think we could live just fine on what I make, and buy the things we want, as long as I can keep my job for another couple decades. It's the uncertainty of the future that drives my desire to earn more now and not a question of making ends meet.

[Terry]

I consider this sort of exercise potentially dangerous to one's mental health.

Thinking about money usually makes me more depressed than I already am, since I am profoundly unhappy with my ongoing paucity of money and don't see realistic ways to improve the supply.

So this is territory I tread with trepidation.

[Terry]

p.s. annual income $10,680.

[LotharBot]

Net take-home plus 401k: about $90k/year
Financial contentment: about $45k/year would allow us to maintain a comfortable lifestyle and continue saving for retirement in this city. About $35k/year would allow us to do it in the city where I'd like to live.

[RDS @ Smart Financial Values]

I'm very happy with my income these days. However it, is interesting to think how I would have answered question number two several years back. I probably would have put in a lower figure than I would today. It is amazing how easy it is to get used to a higher income.

[Moneymonk]

$100K

60K

I am so fortunate I have more than I need

[El Cheapo]

80K

200K

Currently I'm able to save 15% pre and 35% post-tax. So I consider myself pretty comfortable. But c'mon now, its never enough is it?

[AZnOUT]

$350K

$200K

Mid-thirties, key to reach compensation goals are to work at my profession as I did directly out of graduate school (work ethic, continue to develop/refine skills, and most importantly, help others reach their goals). While I'm fortunate to earn a high salary (really can meet all of our financial goals without ever receiving a raise), the additional income will better the lives of family members that work hard to help themselves, but struggle with lower incomes.

[Phil]

$59K

$30K

Really if I made more it would be a plus. But only because then I could retire sooner. I said 30 to be happy because I figure thats all I would really need after I retire to live happily enough. I own my house. I have no dept. For vacations I love to camp (in my camper) and I've been all over America doing that. I've been to Europe several times. I stay in hostals and such. Have meet lots of interesting people staying in such places. I have great friends and family that make me happy. Their free. Most of what I do I look for the bargain. If I end up with more that would be a plus. But really I think I can be happy spending just 30 K a year.

[StL Pastor]

70K (two spouses)
60K
I went back and forth on number 2-it sort of depends on how you define the question. We can (and did) live happily and save for retirement on 45K (my salary), but we would need to pay pretty close attention to the budget, the wiggle room feels very good.
I suspect when we add kids, the number will creep up somewhat.

[aaktx]

over 500k
much less then 500k

Spend less then you earn no matter what your salary and happiness will ensue. Kids are not cheap but a lot of fun.

[Crystal]

MY VIEW:

1. $78K (married couple, combined income before taxes)

2. $50k (after taxes for a nice retirement)
or $75k (after taxes for an awesome retirement)

We are currently living on about $40,000 a year and saving the rest.

MY HUSBAND'S VIEW

1. Same

2. "I'd live in a dumpster if I could retire right now."
My response, "Being homeless is an option, but I wouldn't be coming along."
His response, "Well then, that won't work. Just put $40,000 a year."

I love my husband and I truly hope he likes his next job (librarian) alot more than he likes this one (middle school Science teacher).

[Mike Hunt]

1. $260K

2. $50K

-Mike

[garyatk]

We are comfortable with our current level of income. We earn about 60k between two of us. Our bills are paid, and our house will be paid off in a couple years. However, with the uncertainty in the world today, we have decided to build a side income. Not for today, but for tomorrow. The cool thing is we are seeing changes in us that are worth much more than money, and I am confident that in the years to come, we will be able to do things that we never considered before.

[Old Limey]

I fail to understand why very young people are so anxious to retire. I am 75 and I retired at 58, my wife is 76 and retired at 60. Don't wish your life away when you are young, enjoy the energy and vitality that comes with youth. It -IS- essential however to have a career that you thoroughly enjoy. If getting up, dragging yourself out of bed in the morning, facing a very long commute, and wishing you didn't have to go to work is where you are at, then you have made a huge mistake in your career choice.

It doesn't have to be that way. You should never feel that you go to work just for the paycheck. You need to enjoy working because you like your colleagues and even more, you enjoy your work and the sense of accomplishment that it provides. Obviously if you work at Togos or Subway making sandwiches all day long or as a bagger at a supermarket then, unless you are a student you have made some bad choices along the way to have ended up in that position.

My wife worked with young children as a teacher and it was the vivaciousness, excitement, and eagerness of the young children to learn and the camaraderie that existed with her fellow workers that kept her very happy at work. Some of her ex co-workers are still her best friends.

In my case it was all about the challenge and satisfaction that comes from writing a computer program that can perform what used to be a tedious, time consuming task for someone else and thereby allowing them to spend their time doing more challenging and interesting work. I also really enjoyed the fellow engineers that I worked with and learned a lot from them, particularly three that had PhD's.

Don't wish your life away - enjoy it to the fullest extent possible - you will be old sooner than you think.

[Terry]

Old Limey -

Perhaps young people are so anxious to retire because they have crummy jobs? When I was young I and all my friends had crummy jobs. I think it's a sort of phase or rite of passage for young people generally.

p.s. Earlier you related a success story about a man you know who founded the largest photo finishing company in New Jersey and made millions - you said it was not the kind of story I wanted to hear. What kind of story did you think I wanted to hear? And I knew a guy (now deceased) who founded a photo finishing company in New Jersey and made millions - I thought his company was the largest in New Jersey. I love stories like this, please tell us more.

[Crystal]

Old Limey,
I understand why you would be worried, but speaking for my husband and myself, we aren't wishing to skip ahead to age 55-65 and be retired. We want to be retired now...definitely not wishing our lives away.

Some of it is the fact that my husband doesn't like his current job (which is why he's going to graduate school to qualify to be a school librarian instead). BUT, mostly we want to be retired ASAP so we can pursue our hobbies and interests at our leisure instead of just "fitting" them in.

I love helping animal rescue groups and cannot currently help as much as I would like simply since most of their major needs occur during work hours (like picking up the Pugs from wherever and taking them to the PuHearts vet). I also want to be involved in Meals on Wheels, but I can only participate on the weekends that we don't have family obligations.

My husband would love to ref until he dies and take some lessons he keeps putting off since our time is pretty much accounted for on any given day. He also enjoys golf, board gaming, and video games, but he does not have time.

We also want to travel more, but I'm limited in vacation time (10 days), so we can only fit in one big trip a year.

Yes, since we can't retire right now, we strive to find careers we enjoy. But as soon as retirement/financial independence is an option, we will jump on it like a Pug to food. This doesn't mean we will never work again, but it does mean that we could do it on our own terms.

Living as you wish is a goal for everyone, right?

[Old Limey]

It is possible to live out some of your dreams while you are still working, providing you have the desire and sufficient vacation.

My vacation maxed out at 5 weeks after 10 years and we took full advantage even while we were still saving hard for retirement and maxing out on our IRAs. At one period, after watching a TV program, we fell in love with Bali in Indonesia, and made 5 long memorable trips there and to other islands including Java, Sulawesi, and Lombok, other great trips we took together were to Peru & Ecuador, China (Climbing the Sacred Peaks, coast to coast by train with the Smithsonian), Africa (Kenya, Botswana and Zimbabwe), an unforgettable trek in the Annapurnas in Nepal, Hawaii several times, and many trips all over Europe, not forgetting backpack trips close to home in the Sierra Nevada. We had a cabin built at Lake Tahoe in 1967 and the five of us would go up there many weekends and every major holiday for winter skiing and summer hiking and enjoying the beaches. The cabin had no TV and no telephone and we did everything as a family. We paid $4K for a pristine 1/4 acre lot, adjacent to a wilderness area, and $11K for a 3BR, 2Ba cabin and when the kids were of the age when they wanted to do their own thing, we sold it for $90K in 1979. There are lots of great things that we could easily do in our 40's and 50's that would be out of the question at this age, especially since my wife now has two artificial hips, is dependant upon inhalers and would not want to go to high altitude, so don't wait too long to take your exciting trips or the window of opportunity may have closed. Aging is a process that you have little control over, genetics play a large role. Now we mainly take leisurely river boat trips in Europe (including one in Russia from Moscow to St. Petersburg that was great).

[aaktx]

I understand the theme. Life is a journey and enjoy the trip. I enjoy my work and feel truly blessed that is the case. Worrying about money while young may spoil the fun times you may have.

[Crystal]

I enjoy thinking about money...

Worrying about which bills to pay or if you are going to lose your house would be my definition of bad stress.

Worrying about how to invest in our 20's so we can retire in our 50's is my definition of good stress...I mean, if that's our biggest worry, I don't think we're ruining our fun times right now.

Until I get more vacation days, we can't take more than one big adventure a year anyway. Socializing with friends and taking little weekend trips to make memories is how we are trying to make the best out of work life. We'll work up to bigger adventures as our jobs allow us the time. :)

[Old Limey]

aaktx & crystal:
Life is an ever changing journey as you point out and the trick is to enjoy every phase while you have good health and to not think about the final stages. The "Bucket List" with Jack Nicholson & Morgan Freeman was an interesting and humorous theme about two terminally ill men that met in the hospital and decided to bust out of the cancer ward and enjoy life to the fullest before they kicked the bucket.

In 1957, at age 22 the first big shock that I experienced was when I was in the waiting room at the doctor's office and the doctor came out, came over to me and said, "Congratulations Mr. S....., you're going to be a father!" Life changed a lot after that moment but it goes on, and there were other surprises later, mostly good.

As Crystal pointed out, saving and planning for the future is a must for responsible people, and it does require balancing enjoyment of the present while still planning for the future. Currently we are in the worst of times since the great depression and the best of planning has gone out of the window for many unfortunate, hard working and conscientious people that have been hit hard through no fault of their own.

Youth has its advantages, especially if you don't have children. When you have them the responsibility grows a lot heavier. I was fortunate that I never had a single day of unemployment in my life and that my working life took place during times that were very good in my industry which was national defense, due in very large part to the Cold War.

While we were raising young children our vacations were confined to trips within a few hundred miles of home with the exception of one trip back to England to visit relatives. We didn't start our adventure travel until the three of them were old enough to look after themselves or had moved out.

One of the problems with planning for the future is that you have no idea what the future holds, in particular in the case of jobs, the stockmarket, or the housing market, plus there are totally unanticipated events that transpire during your life that can produce the effect of either overestimating or underestimating how your savings grow. I ran several retirement scenarios on the computer in the months before I retired and even the most optimistic ones underestimated actual growth by a large margin. How often does an event like the introduction and rapid growth of something like the Internet happen in an economy? I was introduced to the Internet when it was in its infancy, at work one day shortly before I retired. It wasn't available to the public at that time, and although it amazed me I never anticipated how it would develop. Thomas Watson, the founder of IBM was once quoted as saying in 1953 that there was a world market for about five electronic computers - how wrong was that?

[Crystal]

This reminds me of the saying I read a few months ago, "Live like there's no tomorrow, but save for it anyway." :)

[GenXer]

Currently making $85k as a household.

Would hit our no worry point if we pulled in $150k-$200k. We have almost $50 k in student loans and just bought a new house (baby due in 3 weeks!) so debt reduction is a key goal for us now.

With that level of income we could pay down our debt much faster. That said, we're making progress now and our net worth is on a nice upwards path, and we put away over $1300 into savings/401k each month. So we're going to pay down our debts either way. $150k would just greatly accelerate the process!

[aaktx]

I like the question because it clearly has philosophical meaning. The question asks are you satisfied? Do you have enough, and would you like more? Money is just a small, but essential, part of the happiness equation.

[Kim]

Old Limey -

Appreciate your insight! Sometimes the day-to-day stuff seems like drudgery. But the years do fly by and we might as well enjoy our time on this earth!!

I felt that I missed out on alot because I was a working mom, etc - and now my children are nearly 21. It is too late to be a stay at home mom at this point -but I still wish sometimes!

Thank you for your wonderful viewpoints!

[Concojones]

$50k
$50k roughly, but my ego tells me $150k...

@Old Limey: fabulous comments!