There comes a point in your life where earning more money does not necessarily make you happier. There is a certain sweet spot where you have just enough. Enough income and savings to feel comfortable and do the things you enjoy.
But what is this amount? How do you know when you are there? How do actually define your level of enough?
In other words, how much money do you really need to be happy?
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Happiness, money and Financial Independence
There is a relationship between the path to financial independence, or FI, how much money you need for FI and your level of happiness.
Every journey to FI is personal and unique. Everyone has their own unique freedom number, the savings or passive income necessary to no longer rely on a paycheck. And everyone has their own time frame in which to reach FI.
Additionally, frugality is defined differently for different individuals and families. Some can live quite comfortably maintaining a savings rate of 70% while others feel deprived at just 10%.
Some people love their job and wouldn’t be ready to leave their career early. A 10 year path to FI would be perfectly acceptable.
Others hate their work environment, the daily stress that goes with it, and their daily commute. These individuals can’t get out of the daily grind fast enough. 10 years could be an unacceptable wait.
So while this journey is different for everyone in the amount of savings and the time it takes to get there, there is one component that needs to be in place for everyone. That component is the level of fulfillment.
Because it doesn’t matter how much money you have if you can’t define your Enough and recognize what truly makes you happy and fulfilled.
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Earnings vs. happiness
In the book Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Fully Revised and Updated for 2018, author Vicki Robin reviews an exercise that she and fellow author Joe Dominguez would commonly perform at their live seminars. They would ask everyone to write down their income and then rate their level of happiness on a scale of 1 (miserable) to 5 (joyous), with 3 being “can’t complain”. They would then correlate level of happiness with income. The results were surprising.
Over 1000 people were polled across the USA and Canada. The average happiness score was between 2.6 – 2.8, regardless of income.
Not only were people unhappy, they were unhappy regardless of whether they earned a low income or a high income.
When asked how much money it would take to make them feel happy, the answer was always “more than I have now”.
Additional research demonstrates that there is an average income that yields the greatest amount of happiness. That number is $50k – $75k per year. No more and no less. It would appear that money can lead to happiness, but it’s the wanting of more money that will lead to unhappiness.
The solution? It’s time to define your enough. How much money do you really need to be happy in life?
How much is your Enough?
Introducing The Fulfillment Curve
At what point does your “stuff” fail to bring you fulfillment? Does a boat for weekend fishing and water skiing excursions bring you more happiness than a simple afternoon enjoying a picnic at the park with your family?
Going back to Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Fully Revised and Updated for 2018, authors Vicki and Joe introduce the concept of the Fulfillment Curve. If you plot spending vs. fulfillment you will see a bell shaped curve. As you earn and spend more money, you see a direct correlation to amount of fulfillment experienced. But at some point, you reach the top of your curve. More money doesn’t bring you more fulfillment, it does just the opposite.
The critical points along this curve include having enough money to survive, having enough money to feel comfortable and having enough to enjoy some luxury. Then there is the level of enough. Beyond this, the point of diminishing returns with overconsumption.
It is certainly true that money can and will buy you happiness. If you’ve ever experienced the stress of living paycheck to paycheck, just one health bill away from financial ruin, you can relate. This is the stress of not being able to make your rent or put gas in your car. Building debt and not being able to stay afloat. This is the beginning of the curve where there is plenty of room for improved fulfillment and quality of life.
Much of my drive to learn about personal finance and reach FI is my memory of being at this point on the fulfillment curve. It was the time in my life just after my husband passed away and I had no savings, no earnings and no skills to start earning the money necessary to improve my situation. I was in survival mode, taking life one day at a time, one crisis at a time.
Once you have basic living expenses covered for general survival, you can relax a little and feel comfortable. This is where you can cover your expenses. You have clothes and food, a roof over your head, but there isn’t anything left over to save or spend extra on. There aren’t any “dinner and a movie” nights. You live frugally because you have to.
Once I went through a training program to learn the necessary skills to land a great job, I was able to work full time and move my way up the fulfillment curve. Soon, I was able to move out of my parent’s house rent a little apartment for myself and my son. I was able to relax a little and enjoy a few small comforts. It was such a relief to cover all of my monthly expenses with a little left over for a meal out sometimes or some new clothes when needed.
The next step along the fulfillment curve is earning enough money to move beyond just feeling comfortable and begin enjoying some simple luxuries. The newer car, a nicer home to live in, increased savings rate and the occasional vacation.
Eventually I worked my way up to this level. It felt amazing! Money was definitely buying me more happiness.
Right around the level of having enough money for some simple luxuries in life, you reach a level of enough. This is the level where you have peace of mind, you’re debt free, saving for FI or already at FI. You discover an appreciation for the life you live. Oftentimes this includes the feeling that you have a purpose by which you live your life. Family, community and skills with which to contribute.
#5: Overconsumption and drop in fulfillment
Beyond this point you experience overconsumption. The added stress of keeping up with the Joneses. A lack of appreciation for the things you already have and the dissatisfaction of never having it all. The need to continue working to earn “more” so that you can keep up with the latest luxuries.
The last 10 years my life have been consumed with the need to build my career and establish a better place for myself and my son along this fulfillment curve. As I earned more, I was able to socialize more and spend time with other friends that had higher incomes. And then I fell into the trap of wanting more. I wasn’t as appreciative of what I had.
It was at this point that I realized I had crossed over from simple luxuries and my own personal Enough, and actually had too much. I went from feeling proud of my accomplishments to feeling deprived because it wasn’t what so many others had.
Instead, I started working less and spending time with the people that matter most to me. This lead to spending less and saving more. Then, I found a partner and experienced what I had begun to believe would never happen again, I fell in love. And I made a pivotal realization: I had my Enough and I was happy!
Defining your Enough and your path to FI
Defining your Enough is critical if you want to reach FI. Financial independence isn’t just about having enough in savings or passive income to cover your current paycheck. It’s not just about quitting your job and victoriously claiming retirement.
FI is about reaching a point in your life where you have Enough. It’s understanding what it is that makes you happy and the freedom, through your savings, investments and passive income, to truly live a fulfilled life free from the need of a paycheck.
It can even be reaching part time FI. Where you have most of your living expenses covered but maybe feel a little financially tight. At this point you can easily add to your passive income by finding side projects or jobs that continue to bring fulfillment.
It’s a delicate balance and it takes some trial and error to find your right level of savings vs. spending as it corresponds to your level of fulfillment. How aggressive or how slow your journey to FI will depend on how you define your Enough.
Think of the things that really make you happy. When do you feel fulfilled and satisfied, passionate and energized? What makes you close your eyes and smile because you just want to soak that moment in?
It may not be about simply replacing your current paycheck. You probably don’t need nearly as much as you think you do. This is because the things that bring you fulfillment probably don’t cost that much. When you already feel fulfilled, you aren’t constantly reaching for more.
Defining my Enough on my path to FI
My biggest lesson learned since I’ve started my personal journey to FI is that my greatest fulfillment comes from the time I spend with the people I love. It’s enjoying that great glass of wine with friends and family or sitting on the patio in the morning sun with the man I love. The low cost experiences like a bike ride in a beautiful area, eating fresh bread, or hiking trails right near my house are better than the shopping trips I once indulged in.
These are the moments I remember and savor. It isn’t money that buys me happiness. It’s freedom. Freedom from stress and a busy schedule. Freedom in my day to stop and enjoy the life I’m living right now.
So now when I focus on the very things that bring fulfillment and save for the future I want, it becomes more and more clear that this future doesn’t require nearly as much money as I originally thought.
- Everyone has a unique path to FI
- Along the journey, it’s important to define your Enough. How much money do you need in order to feel fulfilled and happy?
- The fulfillment curve demonstrates that there is a clear point at which you earn enough money to feel fulfilled in your life and anything extra bring diminishing returns. The points along the fulfillment curve include
- Having enough money to survive
- Spending money to feel comfortable
- Earning enough money to enjoy some luxuries
- Having the money to feel a maximum level of fulfillment and happiness
- Spending too much money and beginning to feel stressed, unfulfilled and consumed with the continual need for more
- It’s important to understand your personal definition of how much money you need in order to feel fulfilled. This will help you define your personal pathway to FI with the ideal balance of savings vs. spending.
- Once you reach Enough, you can enjoy what you have in your life right now and know that you are on the right path.
I highly recommend the book Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Fully Revised and Updated for 2018. You can order on Amazon here:
Use the following fill-in-the-blank sentence to evaluate different things that you spend money on over the next month:
I spent money on _______ and it gave me ________ amount of fulfillment.
Include the thing you spent money on and then rate your level of fulfillment
- Negative for decreased fulfillment (overeating at the new ice cream shop because if was novel and everyone else wanted to try it but instead you just felt sick afterwards)
- None for no level of fulfillment experienced
- Small for a little fulfillment experienced
- Medium for a decent amount of fulfillment experienced
- Large for the most amount of fulfillment experienced
When you apply this type of evaluation to the things you spend your money on, you begin to get a sense of what really brings you joy.
This exercise will help you define your Enough, where that is on the fulfillment curve and then help you design your personal path to FI.
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