How Much Money do you Need to be Happy?

Today, I was randomly Googling something (like I always am) and ran across an interesting article from 2010 on GetRichSlowly. It talks about a study from Princeton that concludes a $75,000 household income it the sweet spot for life satisfaction.

Can Money Buy Happiness?

Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone. We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.

Source: http://www.pnas.org/content/early/2010/08/27/1011492107

How Much Money do you Need to be Happy?

This article really got me thinking about how much money I would really need to be happy, or satisfied with my possessions. How much money would it cost me to have my “dream” life and what I could do with $75,000 per year.

Just last year, while I was still married, I remember feeling like we had everything we could ever need. I felt rich and was very happy with what we had. I feel like, at that point, we made enough money to be very happy – around $60,000/ year gross.

My $75,000 Sample Budget for a Family of 4

Obviously, the first thing you have to think about is taxes and withholding from your gross pay. Below are the results from PayCheckCity, a very accurate net pay calculator.

According to this calculation, my family would have a net pay of $62,557.50 per year. If my family used a standard deduction and any qualifying credits based on the expenses below, we would get a tax return of  $4,764. This makes the total cash amount received $67,321.50 per year, or $5,610.125 per month. Let’s see how I would spend it.

Budget Assumptions:

• 2 working adults.
• 1 child in school, and 1 in daycare.
• Living in Fort Myers, Florida. (Cost of Living Index = 92)

The Budget

• Mortgage: $692 (Based on a gorgeous 4Br/2Ba, 2,070 sqft house with a pool. Price-$179,900. Down Payment- 20%. Interest Rate-4.06%.)
• Homeowners Insurance: $100
• Property Taxes: $187
• Groceries: $400
• Credit Card/Debt: $0
• Cable/Internet: $100
• Cell Phones: $140
• Electricity: $200
• Water: $100
• Trash: $20
• Health care: $300
• Vehicle Gas: $400
• Daycare: $620
• Auto Insurance: $230
• Vehicle Payment: $300
• Spending Money: $500
• Retirement: $920
• Life Insurance: $100
• Savings: $300

 

Now, lets be realistic.

My true “happy” budget if I wasn’t currently living with my parents.

Budget Assumptions:

• 1 work at home mom.
• 1 toddler.
• Living in Fort Myers, Florida. (Cost of Living Index = 92)

The Budget

• Mortgage: $368 (Based on a gorgeous 2Br/2Ba, 1,035 sqft condo. Price-$79,900. Down Payment- $9000. Interest Rate-4.06%.)
• Homeowners Insurance: $33
• Property Taxes: $89
• Homeowners Association Fees: $30 (Yard maintenance does NOT make me happy.)
• Groceries: $200
• Student Loan: $50
• Cable/Internet: $90
• Cell Phones: $70
• Electricity: $120
• Water: $50
• Health care: $100
• Vehicle Gas: $300 ( I drive halfway to meet my daughters dad every month).
• Daycare: $0
• Auto Insurance: $115
• Vehicle Payment: $0 (Paid Off Car -2010 Model)
• Spending Money: $300
• Retirement: $450
• Life Insurance: $0
• Savings: $200
• Total: $2565

The budget above shows how much money I need to be satisfied with my specific life circumstances. It is only myself and my daughter. I often create a “dream life” budget much like the one above. This gives me motivation and something to shoot for. My goal is to make enough money to live with that budget and not have a “real” 9 to 5 job.

Since I work from home, I tend to budget backwards. I make a list of all my expenses and decide how much money I need to make every month or day based on that. According to my goal budget, I need $2565 in net pay every month. This comes out to about $37,200 per year. With my deductions and expenses, that would bring my tax return to about $3094. So let’s just say I need to make $34,106 gross to be “happy”.

 

How much money do you need to be happy?

Let me know in the comments. If you are a blogger, write a post responding to this study and leave a comment with the link.