Happiness Costs £8,500 Per Year

Neil Faulkner looks for the answer to one of the most important questions we have ever asked at The Fool: what is the cost of happiness?

After several weeks off for good behaviour, I recently took part in one of our regular podcasts (Should You Overpay Your Student Loan?) with fellow Fools David Kuo, the host, and Szu Ping, one of our new writers. To put this group into context, as a result of my 'pro-consumer' articles, David frequently calls me a communist which, to that home-owning, father-of-two shareholder, is about as terrible an insult as he can hand out. Szu Ping meanwhile is a fashionable graduate with student debt (albeit a modest, responsible amount of debt). She therefore has nothing whatsoever in common with her elder, David, who feels the need to wash his face and hands when he hears the word 'debt' and has a £6 pair of jeans. At one stage during the podcast, Szu Ping mentioned something along the lines of how money isn't everything, and that she didn't need loads of money to be happy. At that moment, I really wished we were doing a vidcast. David's expression was one of total incomprehension, and for a change he wasn't deliberately pulling funny faces to throw us off what we were saying. He is a man to whom money might not be everything, but it's certainly everything that tastes, smells and sounds great, unless it's one of his (admittedly very good) anecdotes. The link between money and happiness What I'm leading to here is one of those very awkward topics to write about. 'You don't need money to be happy' has become a cliché, because, like all clichés, it is regularly said without any real understanding of its relevance or what it actually means. But if money doesn't equal happiness, as we so often say, then why do the majority of us always strive for more success, more money and more possessions? Regardless of whatever we have at any given moment, there is this push and strain to have more. It's never enough. How can the poor be happy? I have some friends with low-stress jobs and not a great deal of money who are happy people. It makes me think of the story of the fisherman who sits at the lake fishing all day. I think this is another of David's stories. It goes: A millionaire comes up to the fisherman and asks, 'Why do you fish like this? If you bought a boat and a net you'd catch a lot more, and make more money.' The fisherman responds, 'I like sitting here and fishing. I don't need a boat or more money.' The millionaire says, 'But if you bought a boat and caught more fish, you'd make enough money to buy more boats and hire more fishermen. Then you'd be able to sit here and fish as much as you want.' The fisherman replies, 'But I can do that already'. My mum lived in Uganda for much of her childhood and she always used to say that we are backwards compared to every one of her poor, TV-less, gadget-less, very happy neighbours. The village she was referring to merely survived and lived happily ever after. They balanced the books and never dreamed of success or gadgets. Not one of them did, as far as my mum could discern. What if...? What I think might be quite interesting, if cruel, would be to see what would happen if you gave the villagers lots of money and things, and then took it away from them. They would be no poorer than they were before, but after their expectations had been raised they would now be unhappy. I have my own story on such raised expectations. Earlier this week I wrote an article on pensions. (A Pension Scandal Worse Than Maxwell.) It was about how terribly long it has taken for workers whose occupational pension schemes went bust between 1997 and 2005 to be saved by the government. However, not unexpectedly, some readers were critical of the government's bail out. They said that the government shouldn't bail workers out. My opinion is that it's not so important whether the government should bail people out. What's important is the level of expectations the workers had. The government had promised, a decade ago, that these workers' occupational pensions were 100% safe. All the workers then had an understandable level of expectations for the future; you can't get a better safety net than a government-backed scheme. But then, many schemes started going bust and the government failed - for many years - to help. It's not that the government failed to help that is, to me, the biggest issue. It's that they set expectations so high and then destroyed them. If they'd said all along 'Whatever you do, don't count on having a pension for the next ten years,' I don't think it would have been so shattering for the workers. Being wealthy and then made poor has got to be far worse than being poor all the time. Where does £8,500 come in? For the first time ever, I've left the actual evidence till the end of my article. I use the word 'evidence' loosely, because all I have to go by, other than my own experiences and conjecture, is a very interesting and amusing message from Fool jimsusan three years ago. You can read it; it's called Lessons from Frasier. Towards the end of the message he reveals the results of two different studies into how much we need to earn to be happy. Depending on which study you believe, we either need £6,000 or £7,500, and that if we earn any more than that, we won't be any happier. These studies were conducted four or five years ago, so the figures now, after inflation, would be more like £7,000 and £8,500 respectively. Like jimsusan I think those average figures might be a little low, but not by that much.