Money and Happiness: Not So Simple

We've commented before on the 2010 study that asserted that more money does lead to happiness, but only up to a relatively modest level of income, i.e., $75,000 per year:

In 2010 Daniel Kahneman and Angus Deaton analyzed data from over 450,000 responses to a daily survey of 1,000 U.S. residents by the Gallup Organization. They found that money does influence happiness at low to moderate levels of income. Real lack of money leads to more worry and sadness, higher levels of stress, less positive affect (happiness, enjoyment, and reports of smiling and laughter) and less favorable evaluations of one’s own life. Yet most of these effects only hold for people who earn $75,000 a year or less. Above about $75,000, higher income is not the simple ticket to happiness that we think it is.

(WSJ illustration)

Since that 2010 study more research has been performed on the relationship between money and subjective well-being. Now it seems that more money in absolute terms does make higher-income people happier. [bold added]

A big raise provides significant boosts in happiness even at household incomes of $500,000, according to a new research report...according to a paper by Matt Killingsworth, a senior fellow at the University of Pennsylvania’s Wharton School, the bonuses and leaps in income high earners reap are so large that they keep adding to well-being in the same way that smaller pay bumps do at lower tiers of earnings.

“I think of this as a ladder across society. The rungs are separated by more and more dollars, but exactly the same amount of happiness,” said Killingsworth, who published his report on his Happiness Science website.

An academic paper in 2010 popularized $75,000 as the salary threshold beyond which earning more money didn’t make people any happier. More recent research indicates that there is no such plateau.

Killingsworth and other researchers stress that many things influence human happiness, including your relationships, your job and the country you live in.

“No single factor, including money, dominates the equation,” Killingsworth said.

Previous studies on money and happiness have consistently demonstrated two things: that richer people are happier, and that it takes progressively more money to keep generating a well-being boost of a given size.

It makes sense that more money always makes people happier, ceteris paribus.

However, as people age money's importance diminishes (caveat: as long as one has enough to provide for retirement and health care) and no longer is the measuring stick of one's life; family, legacy, and discernment of life's meaning become foremost.

I wonder if there's research being performed on that.

Oversharing

(Image from mobile app daily)

Facebook's rapid growth 10-15 years ago coincided with a rise in teen mental health issues. Young people were bombarded with images about the happy, fulfilling, exciting experiences of their peers; they were reminded how their own lives supposedly paled in comparison.

Depression, anxiety, and the fear of missing out afflicted millions (2019: "there were almost 42 million adolescents between the ages of 10 and 19 in the United States.")

A more recent (but not new) tech tool, location-sharing, has aggravated emotional problems: [bold added]

Location sharing has become such a fixture that many teens say they’d be overlooked socially if they didn’t use it...

Many teens say location sharing can make them self-conscious about where they live and where they go. Some fear being stalked. Yet, by far the biggest cause of anxiety, they say, is knowing when they’re missing out.

The already-acute youth mental-health crisis has worsened since the pandemic.

Teens feel worse knowing immediately that their friends are having fun without them.

Addison [Figel, 16] and other teens say they can shrug it off when they see a photo or video of friends gathered without them, posted after the fact. Witnessing exclusion in real time hits differently.

Your humble blogger has always believed that more information--even information that is fragmented and incomplete--is better than not having it.

But it does require both good judgment--to view the information in context and question what is being left out--and strength of character to withstand actual or perceived slights. Wisdom and character are attributes that take time to develop.

Adolescents' inexperience and powerful emotions make them particularly vulnerable. Perhaps tech can develop solutions--for example, requiring non-family users to opt-in to location sharing upon powering up--to lessen the dark side of social media.

It's Not Too Late

(Wikihow illustration)

Retirement is a time for reflection... and regrets. Chief among them is the failure to stay in touch with friends from long ago. The most stark examples are the friends who have passed away, where obviously no renewal of a relationship is possible.

The fears that hold us back from reconnecting are largely in our imagination. [bold added]

People also exaggerate the risks of reaching out to old friends, including awkwardness and rejection, and underestimate the pleasures, according to research by Nicholas Epley, director of the Center for Decision Research at the University of Chicago Booth School of Business.

“Failure to recognize how interested others are in engaging with us keeps us overly avoidant in ways that harm our well-being,” he said.

"Make a new friend" is a goal that's too vague and more difficult to achieve.

"Connect with an old friend" is more concrete and likely to bring you happiness.

For Richer, For Poorer

(Time photo)

Researchers say that couples who combine their finances are happier. [bold added]

deciding to move your money in together can have a big impact on future wealth. Couples who combine bank, credit-card and investing accounts are happier in the long term and find that pooling resources helps clear the path to traditional money milestones such as buying a house and saving for retirement, studies have found.

Married couples hold four times as much wealth as unmarried couples who live together, and researchers point to combining finances as one reason why.

Trust is one of the most important elements in a relationship, but circumstances can also dictate one's financial arrangements. For example, newly-formed older couples who have significant assets may wish to keep them separate for estate purposes, especially if there are children already in the picture.

For the record we owed $thousands in student loans and had negligible assets when we tied the knot, so it was an easy call to start off with joint accounts in everything. (In a community property state like California half of each spouse's income is the property of the other.) It's not clear whether joint finances augmented the balance sheet, but our life has been simpler because of it, and that's worth something in itself.

Final comment: this research may suffer from the basic flaw of survival bias, that is, it looks at existing couples, their financial relationship, their wealth, and their happiness. It doesn't include couples who took the risk of combining their finances and broke up. (Bet they're quite unhappy.) If these couples were included, the conclusions might not be so compelling.

Wealth Survey

On a day like this I feel wealthy, and it's not from owning one of those houses.

Eighteen years ago my work colleague, Phil, and I were musing about retirement over a beer. The question before the panel: what should our financial situation be to have a comfortable retirement? The initial bid was $1 million + a paid-up house + Social Security and Medicare coverage.

Then we thought about the traveling we would like to do, the 3-years-old-or-less cars we would like to have in our driveway, and the need for long-term care, and the bank-account objective was raised to $2 million, which is easy to do when the sun is shining and you're on your third beer. The conversation was only half-serious--after all, we weren't yet on Medicare--so we had to keep working anyway.

In the intervening years Phil retired, sold his Bay Area house, and moved to Palm Springs. Whether he hit the goals we set on that distant afternoon, I don't know, but I hope he's happy. Happiness, and its relationship to wealth, is a subject more for philosophers, psychologists, and priests than accountants, but we hone in on wealth because financial measurements are objective and easier to obtain.

In the Bay Area one needs to have $3.8 million to be "wealthy". [bold added]

Respondents to the 2021 Modern Wealth Survey from Charles Schwab said it takes an average net worth of $3.8 million to be wealthy in the Bay Area, down $700,000 from $4.5 million in 2020. If you’re just aiming for “financial happiness,” that carries a price tag of $1.8 million in 2021 compared to $2.1 million in 2020.

A mere $1.3 million is enough to make you “financially comfortable” in 2021, versus $1.5 million in 2020, according to the survey responses.

Speaking from personal experience, I can tell you that "financial happiness" was not achieved at $1.8 million (the Schwab survey amount includes one's house).

While having enough money to make ends meet is necessary, it's not a sufficent condition for happiness. For that you have to look elsewhere, maybe in Palm Springs.

Mother's Day, 2021

I haven't visited Mom for over a year, but I "see" her on FaceTime nearly every day.

Now that retirement homes in Hawaii allow for in-person meetings when vaccinated, I will be heading to Hawaii soon.

Meanwhile, Mom's spirits have picked up because people have been coming to see her. Yesterday she called me twice to talk about relatives who visited recently.

A couple of my brothers brought her the food she enjoys. It has every unhealthy ingredient--fat, sugar, flour, salt--that the facility feeds her only sparingly.

On Mother's Day, dear reader, may you and the mothers in your life do what pleases you.

Choosing Bravely

We think of optimism or pessimism as an affect of our circumstances, that is, as an emotional reaction determined by what's happened in our lives. Academy Award winning director Guillermo del Toro (The Shape of Water, 2018) says that it's a willed choice:

A love story with an
amphibian won Best
Picture. No wonder
he's optimistic.

Optimism is radical. It is the hard choice, the brave choice....

History and fable have both proven that nothing is ever entirely lost. David can take Goliath. A beach in Normandy can turn the tide of war. Bravery can topple the powerful. These facts are often seen as exceptional, but they are not. Every day, we all become the balance of our choices—choices between love and fear, belief or despair. No hope is ever too small.

If you ask most people what their hopes are for themselves and their children, it is that they find happiness. Guillermo del Toro seems to be saying that all they have to do is to choose to be happy. Can it be that simple?

Ancient Wisdom

Aristotle (NY Times)

There are innumerable contemporary books on happiness. Classics professor Edith Hall of King's College says that a philosopher who lived 2,300 years ago has something meaningful to say about the subject.

What is happiness? [bold added]

Aristotle didn’t equate happiness with wealth, pleasure or fame. For him, happiness was an internal state of mind—a felicity or contentment that we can acquire only by living life in the best way possible.

How do we become happy?

In his treatises, Aristotle analyzed a wide range of traits of character—in Greek, ethos, from which we derive the word “ethics.” These included libido, courage, anger, how we treat other people and how we regard money. All of us possess these properties, and happiness comes from cultivating each one in the correct amount, so that it is a virtue (arete) rather than a vice.

The golden mean is a term associated with Aristotle:

It is in this notion of the “mean” that Aristotelian ethics differs from other ancient moral systems. Aristotle does not teach, for instance, that anger is a vice and patience a virtue. Rather, he believes that when we feel anger in the right amount, at the right time and toward the right people, it is virtuous. Without it, we wouldn’t stand up for ourselves or for important principles. Failing to feel anger when we are wronged is a vice, but then so is excessive, misplaced or gratuitous anger.

And the same goes for every other quality. Fiscal responsibility, to take another example, is the virtue lying between the vices of parsimony—which Aristotle despised, especially in the rich—and reckless spending.

From the anger on display in the public square, I get the feeling that there are many people who are not happy, even though their side is "winning."

Garbage Out

After months of procrastination, I called Recology for a bulky-item pickup. The original strategy of sorting the trash and clutter then calling the garbage company wasn't working. I needed a deadline--which was today--to focus.

Once started, the process was easier than expected. The guideline for the household was: don't agonize over an item, when in doubt, keep it. Even so we had enough for two pickups.

Out to the curb went an unrepairable exercise bike, used carpet, a beat-up particle-board cabinet, a Samsonite suitcase that had served us for 30 years but wasn't immortal, cracked plastic containers, and a tattered office chair, not to mention six trash bags. There was momentary suspense when the truck came: did we set out too much? was there an item that didn't fit the criteria? No, they took everything.

We spend most of our lives acquiring stuff, and happiness is achieved by getting rid of it.

Don't Fight It, Embrace It

(from sherylcrow.com)

In 2006, 13 years after she became an international star, Sheryl Crow was diagnosed with early-stage breast cancer. It caused her to re-assess her life.

The best lessons in life are the ones that stop you in your tracks. I was staring down a beast in the mirror, and it was saying, “You need to start changing some things.”

She let go of her belief about the way life's supposed to be ("You fall in love, you have a great relationship, and then you have children") and adopted two sons. She also embraced her age.

In the past 10 years, once I let go of trying to be younger and needing to have a pop-radio career, I’ve found the space to write about things that really matter.

Accepting one's age is different from determining what is the perfect age: [bold added]

Researchers like Dr. [Jay] Olshansky are trying to understand the mysteries of longevity and at what ages we feel our best and why. They measure worry and stress levels at different times in our life and peak years for having fun...

If people could live forever in good health at a particular age, it would be 50, according to a 2013 Harris Poll.

There are also arguments for 70 ("when people are less anxious but still healthy") or 30 ("when they are at their physical peak or have the most friends"). Of course, the answer will vary according to individuals' preferences, e.g., wealth, physical attractiveness, mental acuity, etc.

Maybe Sheryl Crow has the right attitude. Accept how you are now for maximum happiness.

Good News, So Not About Russia

WSJ: Low-Income Earners See Weekly Pay Gain Faster Than Other Groups:[bold added]

Weekly pay for earners at the lowest 10th percentile of the wage scale rose at a faster rate last quarter, from a year earlier, than any other group measured by the Labor Department—including those at the top of the income scales who earn five times as much.

The shift for low-income workers—including restaurant workers and retail cashiers—who make about $10.75 an hour, is a sign that a tightening labor market is delivering better pay to workers who largely haven’t shared in gains since the recession ended eight years ago, according to economists and government data. Last quarter marked the first time since late 2010 that this earning group’s gains outpaced all others.....

The recent improvement for low earners coincides with a downward trend in the unemployment rate, which stood at 4.4% last month, versus 4.9% a year earlier. The unemployment rate for those with less than a high-school education—who make up much of the low-wage workforce—fell even more sharply, to 6.4% last month from 7.5% a year earlier. Tighter labor supply in theory should push up wages.

Rising pay for the lowest-paid without a government mandate on the minimum wage---how is that possible?

We'll wait for the analytics. The factors behind higher pay packets could be business growth from reduced regulation, fewer immigrants in the labor pool, less "unfair" trade competition against domestic employers, the wealth effect from a booming stock market, higher consumer confidence, or any combination of the above.

Rasmussen: Americans Are Happier Than They Have Been In Years

Americans are feeling better about their own lives than they have in over a decade.

People are happier now than any time during President Obama's two terms....That's hard to believe with Russian collusion happening and Republicans trying to kill 40,000 people a year under their health care bill. And we're not even talking about the millions (billions?) of people who will perish because President Trump pulled out of the Paris climate accords.

The people are happy in their ignorance, and the media needs to try harder to set them straight.

Money Isn't Everything

The WSJ columnist cites a seven-year-old study that merits revisiting. The question: Can Money Buy Happiness? [bold added]

In 2010 Daniel Kahneman and Angus Deaton analyzed data from over 450,000 responses to a daily survey of 1,000 U.S. residents by the Gallup Organization. They found that money does influence happiness at low to moderate levels of income. Real lack of money leads to more worry and sadness, higher levels of stress, less positive affect (happiness, enjoyment, and reports of smiling and laughter) and less favorable evaluations of one’s own life. Yet most of these effects only hold for people who earn $75,000 a year or less. Above about $75,000, higher income is not the simple ticket to happiness that we think it is.

This study is another confirmation of the hierarchy of needs that Abraham Maslow postulated over 60 years ago. A certain threshold of income---on average $75,000 p.a. in 2010---is necessary to provide for physiological and safety needs. Higher-order, "softer" goals (love, belonging, social- and self-esteem) are harder to achieve and often impossible to "buy".

It sounds corny, but these higher-order objectives usually cannot be attained by explicitly seeking them. For example, a man may try to impress a woman, the woman sees through him and may go along in the short term, but a bond that results in lasting happiness depends upon factors other than money. In other arenas, if making partner or earning tenure is openly transparent, the candidate, regardless of merit, often fails because of his visible ambition.

For whosoever will save his life shall lose it: and whosoever will lose his life for my sake shall find it.--Matthew 16:25

A Cheap Date

We attended our first game of the season on April 22nd with no enthusiasm. The Giants had suffered their fifth straight loss Thursday night and were performing poorly in all phases of the game.

Happy times often result, however, when expectations are low.

The Giants beat the Marlins, 8-1.

We joined the crowd's rousing ovation to Barry Bonds, Florida batting coach.

The predicted rain did not materialize. The night was clear and cool, perfect for baseball.

The tickets for our group cost $16 each. The low price rationalized buying $12 beer (pictured).
Yes, we're definitely a cheap date, multiple meanings intended.

Marriage: It's All About Expectations

A study has confirmed common sense--marital happiness is dependent upon expectations:

having high standards only makes people more satisfied if they’re in strong marriages—and having lower standards is better for marriages that aren’t as secure. [snip]

...higher standards were a bad thing for spouses who didn’t work as well together or were more indirectly hostile. Conversely, when couples like these had lower standards, they tended to be happier in their marriages.

Another solution: just have patience (Image from davenan)

The study didn't define what makes a good marriage in the first place, i.e., when spouses can use criticism as a way to make their partnership stronger instead of worse, but if it were that easy society would have a much lower divorce rate.

Anyway, one doesn't need science, just a bit of Reinhold Niebuhr:

God, give us grace to accept with serenity
the things that cannot be changed,
Courage to change the things
which should be changed,
and the Wisdom to distinguish
the one from the other.

A Life's Work

The Lombardis (yourtango.com)

They've been married 72 years, and Mr. and Mrs. Lombardi, both 95, give advice "about love, life, and staying together" (many of these tips apply to unmarried folk, too.):

1. Just love each other.
2. Compliment each other often.
3. Have a good sex life.
4. Live near family.
5. Limit eating out, eat good food, watch your sugar intake.
6. Never cheat.
7. Never go to bed mad.
8. Be okay with arguing.
9. Respect each other.
10. Keep a nice home.
11. Be good parents.
12. Marry good genes.
13. Be sure that your faith beliefs bring you together and don’t divide you.
14. Take the good with the bad.

Happiness isn't just a matter of luck, a lot of work--and thinking outside oneself--is involved, too.

Don't Hurry Up, Wait

According to psychological research

the purchase of experiences appears to bring more happiness than the purchase of things.

"The anticipatory period tends to be more pleasant, more exciting, and less tinged with impatience for experiential purchases."

(Image from Schmoop.com)

Science confirms what the poet said 200 years ago about two lovers, frozen in time, who can never meet:

Bold Lover, never, never canst thou kiss,
Though winning near the goal—yet, do not grieve;
She cannot fade, though thou hast not thy bliss,
For ever wilt thou love, and she be fair!

From politics to sex to tech gadgets to books and movies, often it's not the experience itself but the anticipation that gives the most pleasure.

It's All About the Tradeoffs

Economist Justin Wolfers, who studies money and happiness, cites his own experience in a Money interview (sorry, no link):

Q. Are you happier now that you make more money than you used to?

A. Unquestionably, yes. When I was in graduate school and I went into a store, I was always looking at the prices. I was constantly calculating. You ask yourself, "Can I afford to buy this box of cereal?" You think, "If I buy more of this, maybe I can afford less of that." You're making these tradeoffs and you're constantly aware of these tradeoffs. And it's tiring.

The first thing I did when I had a well-paying job is I stopped looking at those price tags. Now I never really feel stressed about money. Even if I lost my job tomorrow, I have my degree, and I can get another job. I get to live free from stress and worry and the constant calculating of tradeoffs that I had earlier in my career.

Q. So would I be happier if I became a hedge fund manager?

A. Don't let an economist bully you into believing money's all that matters. And don't let a psychologist bully you into believing that money is completely unimportant. How you manage that tradeoff is going to require a lot of experimenting and thinking and introspection. People choose occupations based not just on money, but also on meaning. There's nothing in my research that says that's a bad idea.

Justin Wolfers is happy, and not only because he has more money (NYT photo)

Almost All Would Decline

This year's hot economist has proclaimed

rising inequality over the past few decades [in the U.S.] has been quite spectacular

From a historical perspective today's moguls aren't on the leaderboard. The richest Americans in history, as measured by the size of their estates relative to the economy of their time and adjusted to 2013, are:

1. John D. Rockefeller ($253B)
2. Cornelius Vanderbilt ($205B)
3. John Jacob Astor ($138B)
4. Steven Girard ($120B)
5. Richard Mellon ($103B)

Bill Gates ($74B) and Warren Buffett ($64B) are ranked 12th and 14th, respectively.

Ask any middle-class American, however, if he or she, with access to better medical care, the world's knowledge at one's fingertips, and the capability of being in Paris or Tokyo tomorrow, would trade places with John D. Rockefeller.

I daresay that all but the most power-hungry, ego-centric, and status-conscious would decline. © 2014 Stephen Yuen