Yes I know what you’re thinking. Most people think “No that’s not true!”, “You don’t need money to be happy”.
And yet the vast majority of people are constantly worried about money issues.
Financial issues is the biggest reason for divorce and couples splitting up. It’s also the biggest source or arguments between couples and family.
So does money really make happy?
The answer is YES is does make you happy if you have a certain amount.
If you have enough so that monthly bills and expenses are always paid and some left over for hobbies and entertainment or travel, most people will be fairly happy.
Those that don’t and can barely make expenses or even worse can’t cover their bills will be always worrying about money, income and where the next dollar is coming from.
In a couple situation it will most likely be the main source of conflict. And with a family to feed, much worse.
The real question to ask is “How much money will it take to make me happy?”
There have actually been many studies on this matter which have found that there is a minimum amount of income that makes people happy and above which their happiness doesn’t increase with amount.
The general minimum amount is $50,000 USD or equivalent per year net after tax. That’s $4,170 usd per month.
Above 50k happiness may improve but 100k will not necessary double your happiness unless you have expensive hobbies or a travel bug with a penchant for nice hotels. Or if you want to live in the middle of a big city where it will barely cover rent and food.
There’s also a small percentage of people that like living off the grid for which the amount may be less regardless of location.
This of course is for those living in the ‘Western world” or first world countries. Places like USA, Canada, EU, UK Australia, UAE, Hong Kong.
It may take less in other nations depending on the location.
And so the minimum amount for a single person to retire and be reasonably financially independent and happy is $50,000 usd or equivalent. This is for one adult.
Two people living together can achieve economies of scale bringing the amount down around 75k pa.
Sure many will protest “I can live on much less than that” or “Our family lives on xx”. Many in FIRE blogs and forums seem to be doing so as well.
And they will also be constantly thinking and accounting for every dollar spent. Fretting over how much they saved this week by not buying a xyz and instead getting an abc for five dollars less.
Some like to blow up the savings by using percentages. “I save 80% on a blah blah”. Nice click bait until you keep reading and it turns out to $6.85 for the week.
Really….?
Is that what being Financially Independent and retired is about?
It’s not and those that do will eventually find out.
The minimum target amount of income needed for a fairly happy FIRE is $50,000 usd or equivalent per year, plus 25k per other person or adult.
If you like nice things and food, living in city and eating out then it will be more.
My personal target is around $100,000 per year or about $8,300 per month.
Achieving this through ETFs would require around $4 million invested.
Fortunately I believe there are other methods of getting there which will be for future posts.