OBSERVATIONS FROM THE FINTECH
ECH
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How much more money would you need to make you “happy”? That’s the question financial services firm Empower put to Americans in a recent survey which revealed:
- Financial happiness means different things to different people. Two-thirds of respondents associated on-time bill payment and being debt-free with financial happiness. Half said happiness was being able to afford everyday luxuries without worry, while others said it’s found in spending on experiences with those they cherish and in optimism for what’s next.
- More money=less problems. Seven in 10 respondents said that having more money would solve most of their problems. A third said that $15,000 would have a “meaningful” impact in their lives, and boost their feeling of financial happiness for six months. For 42% of Americans, $25,000 would be needed to have an impact, but for 17%, all they would need is $5,000.
- Americans need a lot of money to be happy. Overall, Americans said they’d need an annual income of $284,000 to be happy—about four times today’s median salary of $74k. Men need more than twice as much—$381k vs. $183k as women do (clearly, my wife and 3 daughters weren’t surveyed). Millennials put their number at a whopping $525k per year, with Gen Zers, Gen Xers, and Baby Boomers expressing a need for $125k to $130k annually.
- There’s a magic net worth that produces happiness. The generations also diverged on their perspectives on what net worth would be required to produce happiness. Half a million would make Gen Zers happy, Baby Boomers want twice that, and it would take $1.7 million to make Millennials happy. My, how things have changed. A 2019 study from Department26 found that “Millennials don’t believe in money, they believe in themselves.”
Other findings from the study included these nonsensical results:
- 62% of Millennials say they’re willing to pay $7 for a daily coffee because of the joy it brings. They can’t get the same level of “joy” from a $5 cup of coffee?
- 73% of people say they’d give up social media if it meant financial happiness. With the exception of a small percentage of people who generate income from their social media efforts, social media participation doesn’t impact financial happiness, so why ask about this nonsensical connection?
While We’re Getting Rid Of Junk Fees, Can We Also Ban Junk Research?
Kudos to Empower for touching a nerve with this study which earned it coverage in major news outlets like CBS, Fortune, and, yes, Forbes. The “research,” however has some flaws which impugn its legitimacy:
1) Happiness is neither a binary nor measurable concept. Asking someone what would make them “happy” implies that there is a level that can be attained, or a bar to be cleared, that would make them change from “unhappy” or “not happy” (which are not the same things) to a state called “happy.” This isn’t how “happiness” works, however.
2) The research doesn’t break out happiness by income and net worth. The study captures the percentage of respondents who are happy with various aspects of their financial life. But it doesn’t report results by income and net worth. It’s possible that there are a lot of Americans who make and have a lot of money but are financially unhappy, and those that don’t make or have a lot of money but are happy. It’s also feasible that there are many people “happy” with what they already have, and that might still be happy with less than what they currently have.
3) The questions are impossible to answer accurately. If you don’t make (anywhere near) $500,000 today, how could you possibly know what it’s like to make that kind of money? You might be better able to meet the financial commitments you currently have, but what’s not to say that you wouldn’t have new commitments that would be equally hard to meet at a $500k income level?
To underscore the self-serving nature of this “research,” Empower’s write up of the results concludes with the following point:
“The secret to experiencing more happiness? Having a plan of action: 73% believe that ‘a solid financial plan would bring me happiness.’”
Really? A financial plan—in and of itself—isn’t likely to produce happiness if you need to make four times more than you already do and need $1 million more in net worth.
Realizing the plan might do that—but the plan itself won’t.
But, as they say…whatever makes you happy.
Read the full article here