I was discussing money with a friend from CompSci, who feels that the more money he has, the happier he is, and that there’s no limit to this. His model would look something like this:
I was thinking about how I see the graph, and I can’t decide whether I think it’s this:
Or this:
The more interesting question, however, is what is the value of point X in either case? Where is the optimum, or the point past which things don’t get any/significantly better?
So I’m going to tot up my wants and needs per month:
- Rent/mortgage payments on a nice sized house/flat; my half: £500 including DIY and furnishings and bills
- Food, supposing I ate at a nice restaurant every night and had lunch at a cafe: £20 a day = £600 a month (pretty excessive, but we’re looking at wants as well as needs, here)
- Clothes, I’d like to buy a nice new outfit once a month, plus replacing old things £200
- Tech, I’d like an upgrade or a new toy at about the rate of £100 a month
- Going out, I’d like to be able to go out twice a week and spend £30 a night, so 60 * 4ish = £250
- Travel, I’d like to go abroad once a year, and visit family and stuff, so about £600 a year = £50 a month
- A nice new small car every few years, tax and insurance for that, at £7000 over 3 years = 7000/36 = £200 a month + petrol at £50 a month
- Gifts for various people, birthdays, Christmas… at £50 a month
and I think that’s it. That tots up to £2000 per month, and I think I’ve been quite extravagant in places. £2000 pcm after tax means I’d need to be earning £36′000 gross yearly. If I had more, I don’t know what I’d do with it. Perhaps I’d put it into savings and give it to the children later (You notice I didn’t include children because I’m not sure they’d add to my happiness). Perhaps we’d buy a really big house, but then it’s really hard to maintain a huge house, as my Dad found out after he ended up living alone in a 4-bed detached in the middle of nowhere. But essentially, after £36000 a year, any extra money is no use to me in terms of making me happier. I’m sure I’ve missed a few things, but I think much more than that and I’d just give the extra away to charity anyway. The question is, would I be happier having the millions and then giving it all to charity, or not having the hassle? Does it even count if you give it all away? I’m not sure. Maybe I’ll know, when Dan and I are both earning £36000 ish, whether it’s made me happy or not and whether more money would. I’ll let you know when I get there.
I know that when my Sims have too much money, it’s boring to play the game, everything’s too easy. Struggling with your limitations is fun in itself.
Scatman Dan | 15-May-06 at 1:20 pm | Permalink
Very well-written and thought-provoking article. Personally, I’ve always been of the opinion that the second graph is the most likely, but I’ve never tried to calculate - in real terms - where point X is located.
My happiness-based-on-finances-level peaks where I reach the point that I can live a modest-to-comfortable lifestyle without thinking about money any more than I have to. Thinking about money, IMHO, is a pretty shitty way to spend time, and the less I have to think about it, the happier I am.
What to do after point X, though? I don’t know. Given my choice, I’d rather work less hours to keep my income down to point X, if that was a possibility, rather than hoarding money or investing. After all, once I’ve got all the money I want, there’s no point in having more: what I’ll want at that point, I imagine, is more time! Economy lasts forever but you’ve only got one life! I’d like to use that extra time to experience more things - in particular, things I haven’t done before - spend time with people I enjoy the company of, and lend my time to charities I feel that I can help (I’ve always been far more in favour of donating my time than my money - it’s usually worth more).
Of course, this is all pure speculation. I’ve no idea whether the second graph is correct, where point X is, if I’ll ever reach it, or how I’ll feel about the whole thing at the time. But that’s something to think about another day.
Statto | 15-May-06 at 1:59 pm | Permalink
I hate to personify the nanny state, but there’s a crisis coming when the current generation retire: what about a pension?!
I’m not convinced that I would ever find this limit: there’s always something one nicer. A nicer PC, a plasma TV, a bigger house, a yacht, a Harrier jump jet…you can spend a hundred thousand on a decent video camera if you’ve really got money to burn, and I’d certainly get one just to fiddle with the knobs if my disposable income were ridiculously huge enough…
That said, I’ve never really seen the attraction of a vast range of fuel-guzzling cars and, in the more realistic limit of my lifetime earnings, I’d certainly rather have more time off.
One of the stereotypical post-Oxford-physics things to do is to work 80 hours a week in an investment bank in London pulling in silly money until you burn out at 28. As it stands, now way: I’m not wasting my life selling money for slightly more than it’s worth. I’d almost be up for it, though, if you could earn a normal-ish wage but only do it three days a week.
Eskoala | 15-May-06 at 2:19 pm | Permalink
Dan, yes, I think you’re right about the more time thing, you want to get that nice amount of money for less effort/time than before. However, I think you can also have too much free time, especially if you really enjoy your job. There’s something wonderful about knowing you are being paid to do something you really enjoy, and you’re honestly earning a living through one of your favourite things. If you were paid to sit at home, you’d go and do it anyway, but it wouldn’t feel the same as being paid specifically for that purpose.
Statto, pension is one thing I noticed I’d left out, mostly because I’ve no idea how to calculate it! I’d like to have the same luxury in later life, but of course the mortgage would be paid off so I wouldn’t need as high a pension per month by £500 or so. So yes, the salary would have to be slightly higher to accommodate for making pension savings whilst still living the life of Riley.
Regarding buying the most ridiculously expensive camera with knobs on, or equivalent toy: I don’t think that would increase my happiness, I think I’d actually enjoy more buying a medium camera at the edge of my limitations.
I don’t think it’s the amount of money you’re spending that creates the buzz, I think it’s the proportion of your income. If you spend half a years wages on a new car, that’s a huge spree, but if you buy the same exact car for 5% of your year’s income, it’s not the same buzz at all, so you have to go more upmarket for the same feeling. Spending just within your means is the most fun, I think. It’s enjoyable trying to find the best price for the features you need, or the best features for the price you can afford, and if you could just have the best of the lot it would be pretty boring.
Gareth | 15-May-06 at 2:39 pm | Permalink
Yeah, pensions. Big money sink, that one. I’m a late starter as far as pensions are concerned (I’ve only just started contributing to my first pension this month) but to ensure I can retire on a “decent” amount, I’ve worked out I need to be putting in around 500 quid/month at the very least. Still, at least that figure will be lower for you if you start earlier…
Jon | 15-May-06 at 4:13 pm | Permalink
@Dan: I’d have though that when you make so much money, the thing you start to crave, especially in the current Footballer/Paris Hilton/Roman Abramovich culture, is privacy?
–Jon
restlessboy | 15-May-06 at 5:33 pm | Permalink
Without reading the other replies I’d suggest one possibilty for Point X.
Point X may be the point where the amount of money you accumulate (assuming you get it by working and not winning the lottery) exceeds what you can think of to spend it on. Because you’ve a money driven person (not you personally claire, a rhetorical ‘you’) you feel anxious that you’ve got this money that you’ve been working for and it doesn’t seem to be doing anything. Yet you’re working so hard to get it, and you can’t stop working because you don’t want to have less money.
So you start buying stupid crap, like massive TVs or SUVs thinking about your initial graph and your prediction that money is directly proportional to amount of money. Perhaps now your expectations have been confounded. Perhaps your happy but there’s a nagging feeling that you’re not as happy as you should be? Perhaps you see your hippy friends from university who still work in a cafe and spend the rest of their time sat on the beach not worrying about money. Whereas you have so much of the stuff you can’t think about much else. Your house goes up and down in value. And you might want to build a conservatory but will it be worth it for the amount of sunshine we get in the UK. and what if you want to sell the house in ten years and it’s not significantly added to the value of it?
Meanwhile everyone else is just happy spending time with their friends, knowing that money was invented for convenience and is only a metaphor anyway. Having more money just makes life more convenient. If you’re happy simply by having money then that’s not happiness that’s a fetish. Most dreams in life are more easily achieved by having money it’s true. but if your only dream is to have money without any specific goal of what to spend it on then that’s like saying you want to have lots of food but no one to invite for dinner.
This came out a lot more garbled than I planned.
MisterJTA | 16-May-06 at 1:19 pm | Permalink
Hm. I’d like to stick my oar in and say I like graph 1 better than graph 2.
There’s two main reasons I think this:
Firstly, if you’re happy when you’re earning £36,000 pa, I don’t see that you’d suddenly get a promotion to a £50,000 pa job and realise you’re really fed up because you now earn more money than you feel you can spend.
After all, you’re not obliged to spend all you earn, or even give it away; if there comes a point at which you can’t get any more happiness from spending extra income, you can just shove it in a bank and forget about it. You don’t gain happiness, but I don’t see that you lose it.
Secondly, I’m not sure the Sims comparison is that vaild, simply because the Sims (like, actually most of the Sim games apart from ‘Sim Tower’) isn’t as realistic as it pretends to be.
[tangent]
My main grounds for this involves the comparison of two scenarios:
Scenario a) you wake up 40 minutes later than you intended, with only 20 minutes until your lift comes to take you to work. You know if you don’t get to work today you risk being fired.
Result: You get up really fast, have either a quick shower or a bit of a wash in the sink, guzzle some cereal and make it out of the house in 20 minutes.
Scenario b) your Sim wakes up 40 minutes later than intended, with only 20 minutes to go before they leave for work, usual drill about losing jobs, etc…
Result: Although the game knows perfectly well that the Sim’s lift is on its way, and it knows the Sim has no paid holidays left, and it knows the Sim will be fired (and, by the way the game works, the Sim mus also know this, because it’s stupid to assume all the stuff about ‘job performance’ is information given by the game to the viewer but somehow hidden from the guy whose job as a team mascot it supposedly is) …the sim still takes five minutes to get out of bed, ten to go to the toilet and find their way to the fridge, half an hour to pour some flakes and milk into a bowl, find a seat, sit down, eat it, and abandon the bowl to fester, and then wanders to where the lift was… …except it left ten minutes ago, and they lose their job.)
Very tiresome, and not at all realistic…
[/tangent]
So, yeah: In the Sims, more money gets boring, because although you can buy a huge screen with +8 to all Fun attacks, you don’t really get to enjoy it beyond saying “Hey, that matches the wallpaper really well!”.
In real life, material goods come with a greater level of appeal than “that’s going to make me happier when I loll on the sofa,” and whilst that still might not give a boost to your general level of joy, I don’t see why it would induce the reduction in happiness suggested by graph 2.
So, yeah: graph one for me. Above the level of “x” I don’t see myself gaining any additional happiness (certainly not the infinite / of the Comsci student) but I don’t see why my happiness level would start to decline once I began to earn more than the “x” at which my contentment begins to level out.
Strokeyadam | 16-May-06 at 2:22 pm | Permalink
I think another thing worth considering is a sort of safety net - you need to have enough money to not have to worry if this goes wrong or that breaks down, especially if you’re owning your own home, running a car, having children, or not wanting to wait months to catch MRSA in an NHS hospital should you (or anyone you care about) fall ill.
From what I can see - people all seem to live to their means anyway (unless they’re on really sill money) so any amount of money seems like it isn’t enough.
dad | 28-May-06 at 12:50 pm | Permalink
I got paid and lived on £14 50 a month then we bought and mortgage for 33 years, and when our time came, we adopted children to give then a better chance in life, and swore an oath to look after them, love has no charge and when life ends and families go on the own way, we must adapt to what life throws at us and that is why I sold up and moved to a smaller place.
if you make money your god you will not have time for love, ask your self how did I get here, who Loves that much!
Love dad
The Pacifist | 27-Jun-06 at 8:41 pm | Permalink
Those images should really be GIFs or PNGs…..