# Does Peak Happiness Really Come at $75,000/year?

## By Mr. Money Mustache

## Thu, 06 Sep 2012 12:00:30 +0000

Mr. Money Mustache endures the deprived life of a frugal person with no motorboat during a recent 2-month summer vacation to Canada.

There’s quite a bit of interesting stuff circulating in the mainstream media these days on the topic of personal finance.

You’ve got the Whiny articles, where high-income people with terrible spending habits talk about the crushing cost of living these days, and how “we’re the first generation that will never be able to retire”. Waah, Waah. We already made fun of those articles and the people they profile in this old MMM Classic Article.

Then there is the debt angle. Consumer debt has been rising as a percentage of income for decades, as increasing numbers of people are fooled into trading future freedom for current overspending. In the US, this debt escalation is temporarily on pause due to the after effects of the great financial crash, but in other countries (including Canada) the party has continued.

In fact, I recently participated in a CBC news interview along with two MMM readers, where the reporters contrasted the modern debt-based lifestyle, with the life of people on track to retire before they hit 40. The show is a national TV/Radio/Web combo and it in production as I type this, but it will probably appear at this link when it airs on September 6th*.

Student loan debt has joined the fray, racking up at record levels as universities raise tuition at rates faster than general inflation. Meanwhile, economically uneducated students and parents select out-of-state and private schools with higher tuitions and live far-from-frugal lives during those four years, resulting in fairly large loan balances upon graduation.

School debt has become a popular feature in US media, to the point where my friend No More Harvard Debt has become a national TV personality** – just by making the effort to pay off his Harvard Business School debt at a reasonably quick pace. As opposed to stretching it out over decades like many people do while simultaneously buying cars, houses and iPads for themselves. Joe from NMHD did the right thing by realizing that, duh, you pay off your debts FIRST before buying additional stuff. But the practice is so rare these days, that you get to be on TV if you do it.

Finally, there is the occasional counterpoint in the media, where psychologists and other researchers pipe up and suggest that maybe we’re all chasing the wrong dream, and that just perhaps our goal should not to be to earn the maximum possible income at all costs. Stories like these are always controversial, because when you ask US residents whether they would rather have more free time or more money, they always say “More Money”.

One of the concepts that pops up in these discussions is that “peak happiness occurs at $75,000 per year“. The basic idea is that studies and surveys show that households don’t get noticeably happier when they exceed this threshold of earnings. And thus, we should all relax because $75,000 is a pretty attainable goal, much less than we thought we even needed to survive!

The researchers are clearly onto something here: the hidden-in-plain-view secret that once your needs are met, buying extra stuff does not make you happier. But they’re also missing a much bigger point: where did that $75,000 number come from? What is it about that level that makes people happy?

I believe it’s a combination of two things:

- $75,000 per year puts you in the top third of household incomes nationwide – so you’re better off than most people around you.
- The survey participants were completely untrained in the Art of Mustachianism, so on average they lead highly inefficent lives.

Once you understand these two factors, you get a little “Aha!” moment. Because if some novice Antimustachian off the street can achieve peak happiness at $75,000, an even remotely Badass person should be able to do it easily with a fraction of that amount.

Maintaining exactly the same level of material luxury, but avoiding debt and making purchases more consciously (buying quality used items instead of new ones, not commuting to work in a pickup truck, doing occasional math before buying things, etc.) can generally cut a person’s annual expenditures by at least 50%. So we’re down to $37,500.

Moving to the next level of avoiding unnecessary stuff in the first place (owning one car and a bike instead of two cars, living close to where you work, and tinkering just a bit with minimalism), can probably cut 10-20 grand off of that already-reduced figure.

So in other words, the $75,000 Peak Happiness number is a measure of social norms, rather than the actual usefulness of that much money. If median income were lower, and especially consumer insatiability, the amount you need for peak happiness would be lower too.

Therefore the purpose of this blog is to allow you to fine-tune your own Peak Happiness number to whatever you need it to be, to allow you to heap on the added boost of complete financial independence.

What is your own number? What’s the ideal household spending budget that would allow you to be as happy as possible? It’s worth thinking about on a regular basis.

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* Hmm… now that I see the little web article, CBC seems to be focusing on this “living on a tiny amount” issue and “forgoing almost all material luxury”. Which is not what Mustachians generally do. I also like how they have a weird little washed out and vertically stretched frame capture from my skype interview, while the other Mustachian pictured is all super-handsome in front of a foresty background. Oh well – all publicity is good publicity as they say..(?)

** Joe/NMHD was even a competitor in a reality TV show recently, although I am not sure if that odd development is related to the blog.