The "happiness index" probably isn't what you think it is

The "happiness index" probably isn't what you think it is
(AP Photo/Kamran Jebreili, File)

Most of us are familiar with the old saying which instructs us that ‘money can’t buy you happiness.’ For the more cynical among us, that’s usually followed by the phrase, ‘but it makes life a lot easier while you’re feeling miserable.’ A shorter version might be, “money can’t buy happiness, but it sure doesn’t hurt.”

Is this something that we can really measure, though? That may sounds like a crazy idea, but there have been people working on what’s known as the “happiness idex” in recent years and combining a deep analysis of the wealth of various Americans into the mix. One of the first questions to answer is precisely who we’re talking about when we reference “the rich.” At the New York Times, author Seth Stephens-Davidowitz takes a deep dive into these questions. In terms of who is truly rich, the author ignores the big tech giant names that immediately leap to mind for most of us. He focuses on those who manage to pull down more than $1.5 million per year. And those people probably don’t fit the profile you are imagining. They’re mostly people you’ve never heard of who are the owners of “boring” but highly profitable regional businesses. These aren’t the flashy businesses that make headlines, but rather the staple dealers in goods and services that almost everyone needs.

The study didn’t tell us about the small number of well-known tech and shopping billionaires but instead about the more than 140,000 Americans who earn more than $1.58 million per year. The researchers found that the typical rich American is, in their words, the owner of a “regional business,” such as an “auto dealer” or a “beverage distributor.” …

What are the lessons from the data on rich earners?

First, rich people own. Among members of the top 0.1 percent, the researchers found, about three times as many make the majority of their income from owning a business as from being paid a wage. Salaries don’t make people rich nearly as often as equity does.

Okay. That makes sense so far. The owner of a profitable business that sticks around for generations is going to do much better than the hourly workers who keep it going. One interesting factoid is that one in five auto dealerships (20%) have an owner who is bringing in more than $1.58 million per year, landing them in the top 0.1 percent of American earners.

But does money actually produce happiness? That’s where the supposed happiness index comes in. If the study being examined here is to be believed, being below the poverty line isn’t making many people happy, but beyond a fairly modest income level, happiness doesn’t really seem to increase nearly as quickly. The maximized level is an income of $75,000 per year. Beyond that, the rate of increase in happiness slows considerably.

Money is not a reliable path to happiness. Matthew Killingsworth of the University of Pennsylvania has studied data from more than 30,000 adults, far larger than previous studies of money and happiness. He debunked a popular myth that there is no effect of money on happiness beyond $75,000 per year, but he did confirm a law of diminishing returns to money. In the end, Dr. Killingsworth found, the effects of money level off: You need to keep doubling your income to get the same happiness boost.

So if it’s not money, what is the real secret to happiness? According to this study, it’s being married. Being with a marital partner provides more than double the “happiness boost” seen from a net worth of $8 million. (Clearly, I was not contacted for this study when I was with my first wife.)

So a certain amount of money is definitely a key to happiness. The problem in the current national climate is that it’s harder to hang onto your money and build up that wealth when everything keeps getting more expensive. So what can you do about that? At the Washington Post, Michelle Singletary thinks she has the solution. You should go back and live with your parents. No… I’m not kidding.

Singletary actually makes several valid points about the high cost of rent and/or mortgage payments these days, and shouldering costs such as those can seriously impact your ability to save money and plan for your retirement. But housing has always been a significant part of anyone’s budget with few exceptions. Also, not every parent is going to be wild about seeing their offspring arriving back home with their suitcases, particularly if they just finished converting your old bedroom into an office or personal gym. If you have parents who are both willing and able to take you back, feel free. I’m sure you’ll save a lot more money. But going out and making your own way in the world is all part of what’s now called “adulting.” And you’re going to have to do it sooner or later.

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