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> Of course, stepping from 40K to 100K in salary is practically life altering. Unless you absolutely suck at budgets you can easily get out of debt and start having real vacations. You can afford hobbies, etc.I live in the Netherlands where 40K is quite a reasonable income. I really dont get why you would need 100k to do the things you need. Perhaps people need to become a bit more frugal? People here in general don't have any debt (except for mortgages) and a vacation to an Asian country is 1-2k/month'(yes people sometimes do take 2 months vacations here). Even a month of Australia is only 3-4k. Hobbies? I don't know what kind of exotic hobbies people have in the bay area but even flying drones (relative expensive) is relative affordable if you get started with a cheap Chinese drone before you buy an Expensive one. Rent, family size, location, etc probably makes a huge difference but I really don't think 100k is the magical number that you need to become happy. |  | |
> I live in the Netherlands where 40K is quite a reasonable income. I really dont get why you would need 100k to do the things you need. Perhaps people need to become a bit more frugal?What I have found is that the majority of "happiness from money" comes from the financial security, not actually spending the money. The reduction in stress going from a chronically broke PhD student to having 5 years of living expenses in savings is huge. It's the knowledge that you can immediately solve almost every problem that pops up with a bit of money, and figure out the details later. Missed your flight? Book another one. Car trouble? Call assistance and take an uber. Lost your job? Take a short vacation and then hit up your network on LinkedIn. And in most countries in Europe, you can feel secure with a lot less in income/savings than in the US. You don't need to worry about what your health insurance does not cover, probably don't have any student loan debt - and probably don't need to worry about a college fund for kids, can commute by public transport in cities, have better unemployment protections, and so on. | | | |
> It's the knowledge that you can immediately solve almost every problem that pops up with a bit of money, and figure out the details later. Missed your flight? Book another one. Car trouble? Call assistance and take an uber. Lost your job? Take a short vacation and then hit up your network on LinkedIn.And then your expectations shift, you require more expensive things to acquire that base level of prosperity and satisfaction, and you have a whole new set of problems which feel just as stressful, relatively speaking. | | | |
This seems to be a common assumption but I have not found it to be true in my experience at all. My spending habits appear stagnant and mostly rooted in my childhood experiences, and it's a continual battle to spend more.There's that idea that giving poor people money will have them just spend it gambling or buying drugs, doesn't seem to be true, either. A lot of these just sound like justifications to pay people less, or an odd way to shame people for wanting something material. Money is power, and power is always valuable. | | | |
Do you mind me asking how your spending habits have remained constant? Do you rent or own? What part of the country do you live in? Have you any kids? | | | |
I am speaking about spending habits, you seem to be talking about relative cost of life events. I don't have kids but kids are usually not what people are referring to since kids are a cost increase for all parties, rich and poor.Basically, if I usually buy a certain Ikea table if I need a table, I still buy that Ikea table, and it still feels too expensive to me, regardless of the fact that I earn a lot more now. If I get an apartment that I like, I don't have any desire to get a more expensive one. I only want a more expensive one if the current one is really bothering me for some reason. I'm still uncomfortable with purchases of certain amounts, or buying things for myself in general (particularly, clothes and furniture). It's physically painful to spend certain amounts of money. There's a set point in my brain for how things are supposed to cost, and that point is very hard to move. I.e., it takes actual effort to explain to my brain that I can spend more now. There's nothing automatic like the general wisdom suggests. | | | |
Getting to that point of equilibrium takes some spending, however. Lots of college debt, rent, moving expenses to get where you want your career to be, etc. | | | |
This is probably not true based on what I have read. Of course some people get stuck on a hedonistic treadmill, but most people don't. I think when you can take time off from work and afford safe living and food is no longer a concern, indulge in hobbies, that is enough for most people to be happy. Studies I read say that experiences will provide longer term happiness over "stuff". You can always jump off the treadmill of needing the next better possession. | | | |
I agree except with the "most". I see far too many people driving new BMWs and Mercedes that I know on average make sub $100k salaries. I'd say most are in the treadmill, but definitely "many" are happy living within their means. | | | |
Fair enough. It is a common "problem".Just an edit: I think it goes back to our shortening attention spans and modern conveniences quite a lot. Being bored and comfortable with it at some level is an important life skill. | | | |
It's probably important to note the Netherlands has a high degree of decommodification (i.e. a lot of state provisions), with the US having some of the lowest in the developed world.The result of that is that distributive justice is a lot stronger, and the impact of a regressive tax system is magnified. A median salary in the US might generate unsatisfactory, whereas in the Netherlands even a below-median salary has quite good outcomes because of this. For example, the median healthcare insurance expenditure in the Netherlands is about $1.5k a year, and healthcare outcomes are quite good. Tuition fees in university for undergrad and graduate degrees are about $2.5k a year across the board, with a tiny fraction of students being the exception like dental or piloting schools. Student loans are currently at 0% and set to go to 1% next year. Tuition-waving subsidies exist for children of poor parents. Childcare is heavily subsidised. Traffic policy and public infrastructure is such that a car is not necessary, and employers tend to reimburse all public transportation costs for most employees. Lastly, it just feels like culturally the Netherlands is slightly more sensible with its consumerism and interest in toys. Most seems to be spent on things with higher lifetime values, meaning the effective value of money seems to do a bit better, but that's just intuition from anecdotes. In short, when you get your after-tax income, you tend to be able to spend a very large portion of it on things you don't really need, but just enjoy. Nice food, vacations, hobbies. There just isn't an need for a $100k salary for your kids to go to a nice school, have childcare or a good insurance, or a car to get your family places. Nor do you need $100k to cover interest payments + principal on 6% student debt of $100k. That having been said, your numbers on Asian/Australian vacations definitely cater to a certain tourist. I've done a month in Asia on 1k, but I was 19. Similarly I could do 3k in Australia, but I'd be a certain kind of vacation. You AirBnb and eat some simple Asian takeaway like food and travel by bus. That's not everyones idea of a holiday. It's a different vacation from getting taxis to hotels and eating in restaurants. | | | |
It's cultural, I think. In the US, we are very consumer driven. We are bombarded with propaganda constantly telling us that the one thing missing from our lives is whatever that person is selling. Some of those people are selling credit. That wouldn't be so bad, except that Americans are also highly competitive. We hate losing, and someone else having more stuff than us is losing. Our entire measure of the value of a human being is their wealth.Consequently, many Americans spend nearly everything they make on stuff that ultimately contributes very little, if anything, to their contentment. Since buying those things didn't actually make them happy, they figure they need more money, and more debt, to buy more things. It's a trap we've created for ourselves. Oh, and our health care system is ridiculously expensive. | | | |
I guess that is the whole point? I.e., you stop needing to be frugal and/or don’t have to count € when spending money on basic things like food or transportation. Also, more things become ‘basic’.Another point that makes a difference is that if you ever want to get a mortgage and buy a house, the maximum the banks will give you is a constant multiplier times your annual salary. In Ireland it’s 3.5x — good luck trying to buy a house on a €140k budget in Dublin. In my case, my total effective comp increased about 8x in the last 5 years after being corrected for taxes and CPIs of the countries I lived in, and I kind of concur with the OP in that it’s more of a log curve than linear. Things get progressively ‘easier’ but less lifestyle-changing over time. | | | |
> the maximum the banks will give you is a constant multiplier times your annual salary.The multiplier isn't constant or fixed but dependent on interest rates. So there are certainly multipliers that work in certain periods, like about 4x now in the Netherlands. But that'll go down once rates rise, it's only a constant insofar as the long-term interest rates appear somewhat constant (or rather, sticky) in a given period of time. At the end of the day they look at ability-to-pay, and interest rates factor in to that, which are variable. | | | |
So, I think a difficult aspect of frugality is that is borders close with cheapness. Cheapness is a problem, and imagine if all your customers became cheaper and you lost a few. Well, you would have to become more frugal which means firing providers of services. It becomes a negative trend.I live near Seattle where $100K is probably a reasonable income (give or take $30K). Now, I make more than that by a large margin where my cash target side of the house is roughly $300K not including stocks. I live pretty well, so what do I do with the extra money? Well, I trickle down. I have four employees for my house and land. When you not only provide for yourself, but you provide for others then I claim that there is extra happiness to be had. My house keeper, for instance, makes $40K with an average of 20 hours of week, flexible timing, and a monthly stipend for benefits. You can buy happiness, but only if you spend it on people rather than things. | | | |
Wow, that's an awesome salary! What do you do for a living, and how did you get there? | | | |
Principal Software Engineer: I write ridiculous amounts of code, and I lead teams with an emphasis of building up people. | | | |
I also live in the Netherlands and feel the same. I make less than 2k a month and already don't know what to do with my money. That being said, it probably helps if you have a reasonable healthcare system. If you get ill in the US, you're basically screwed. | | | |
I make less than 2k a month and already don't know what to do with my money.In my experience, the best way to fix that "problem" is to get some kids :) | | | |
Just a house for your family will eat up all of that 40k here in Toronto (that’s basically interest-only on the average $1m house in the suburbs). You’d have nothing left.Although we still live very well in absolute terms, a lot of people I know have and will have a worse quality of life than their parents did, despite being more successful and earning more money! It’s kind of depressing. | | | |
A month in Australia for 3-4k? I want a cost breakdown for this. Say you get a deal and airfare is $500, that leaves about $100/day for the month. You could probably find a hotel at that rate, but then you're left with nothing to spend on food and activities. What am I missing? Friends and relatives who'll let you stay with them? | | | |
I believe it would only be possible to maintain yourself as a backpacker on $100 per day. This might be lower in the bush but true in most urban locations in Australia. | | | |
Van rental is $40/day. Leaves a budget of $60/day for fuel, food and fun. Quite easy if you prepare most meals yourself and limit purchases that are prohibitively expensive in Australia, e.g. alcohol, cigarettes, taxis, restaurants, etc. | | | |
I don't know how health care works anywhere else, but health expenses can range from $250 for a standard checkup, which I just got (note: it's supposed to be covered for free, but apparently insurance companies are now rejecting claims willy nilly in order to save money) to $10,000 for delivering a baby, to astronomical numbers for anything else.It really leads to a persistent feeling of danger, so yes, making 100k instead of 40k could literally save your life, or at least keep you from being an indebted loan shark victim for the rest of your life. | | | |
> It really leads to a persistent feeling of danger, so yes, making 100k instead of 40k could literally save your life, or at least keep you from being an indebted loan shark victim for the rest of your life.Right, that problem just doesn't exist in the Netherlands. Basically everyone pays, I would guess, around $150 a month median for insurance, with a standard deviation of probably around $25. That covers anything life threatening and quite a bit more. There's a bit of co-pay on things like dental and there's a mandatory own-risk of about $500 a year on certain procedures. If you're about 10% below the median income in the Netherlands you get an insurance subsidy which tops out slightly above $100 a month. | | | |
And also, most importantly, even if you lose your job you are still 100% covered. If you get some weird condition that requires a dozen operations and expensive medicine, it won't have any effect on your payments either. There's no such thing as denied coverage due to preexisting condition or anything silly like that - essentially if you are a lawful resident you can just go to hospital and get treated for free, regardless of your financial status. | | | |
But on the other hand taxes are significantly higher than in US, in order to finance that system. It's a trade off... | | | |
Absolutely.The point I'm trying to make here though, which I lightly implied, is that regressive tax systems and distributive justice lead to overal higher happiness. i.e., if there are diminishing marginal returns of happiness from money, it makes sense that Total Happiness in a country is optimised through a substantially regressive system. That's one of the interesting things about it. | | | |
> regressive tax systems and distributive justice lead to overal higher happiness.I suspect by "regressive tax" you mean "a tax rate that increases as the amount subject to taxation increases" . Wikipedia defines "regressive tax" to be the opposite one- where the tax rate decreases as the amount subject to taxation increases. Or you're making a fairly non-obvious and interesting claim! | | | |
I believe NL taxes are in fact regressive in the usual sense of the word. I'm curious what the justification for this claim is as well. | | | |
> I believe NL taxes are in fact regressive in the usual sense of the word.They're definitely not? > I'm curious what the justification for this claim is as well. My claim makes no sense cause I used the wrong (opposite) word! Apologies, please read it the other way around. | | | | |
Very interesting, thanks!I looked into the Dutch case. It indeed appears that there's no progressive effective tax, but rather a flat tax. Each group pays about an equal share of the tax burden as their share of the income. The study published in EBS is a great start, but it is omitting some important elements. Taxation of cars is left out, despite them being a luxury good whose costs are carried by the more affluent class. Transaction tax on real estate, same thing, omitted and mostly a rich-people thing. Real estate taxes, same thing. Nor are capital gains taxes or company's income taxes included, thereby omitting income effects from entrepreneurship and ownership in companies, these capital effects and its taxes of course scale with affluence. What it does include on the other hand, are various insurances. e.g. insurance to unemployment (including the 'final unemployment': pensions) and sickness. These aren't really taxes per se, but rather individual insurances earmarked per person. Finally, it hints at combining tax rates with redistribution. For example, healthcare subsidies get deducted from medical insurance premiums in the study. But it's only one of many different forms of redistribution. They don't make similar deductions for rent subsidies (which are quite substantial). I felt that was lacking, either include it all or nothing at all. Which brings in perspectives... this study essentially adds sales tax to the traditional income tax as a way of determining collective burdens, which is super interesting. But the authors do not change the denominator from income to something else that's related to sales tax. So it's a claim about income+expense tax, as a percentage of income. Rather than say taking all your taxes, including those related to expenses, as a percentage of total expenses. If you did this, you'd see tax systems become progressive again, as rich people have a higher savings rate (i.e., income that's not spent, and thus not hit with sales tax). The authors do mention in the beginning of the article, but don't discuss the implications after. If you wanted, you could see this as a form of deferred taxes.After all, un-spent after-tax income isn't taxed with sales-tax, until it's spent. When its spent, it's taxed, removing the regressive element. And if it's not spent but saved/invested instead, you don't pay sales tax, but you do have to pay tax on capital in the Netherlands. Which is exactly the tax that this study left out! So, extremely interesting and it's definitely the case that we can't blatantly call the Netherlands progressive without sales tax context. But to make the opposite claim, to say the Netherlands is regressive or flat, probably can't be made as easily either. It really depends on your perspectives. | | | |
Oops, thanks for the correction! | | | |
This is the big mistake people always make: focusing on the tax rate. Wake up. The tax rate does not matter. At all! What matters is the end result: your buying power. How much good stuff (goods and services) are you getting in return for the time you spend working? THAT is what matters. | | | |
Only if you plan to live in that country for the rest of your life, and you're absolutely sure that the economy will never change, so your buying power always stays the same. | | | |
Had to get a TB test prior to starting a new job. Everything was covered for me but there's the cost of health care itself in the US plus the little cuts that add up to. If can't get validation, parking is expensive. A little sign above the check-in desk said that there would be a $25 charge to fill out worker's comp forms.At least they had movies on and weren't blasting Fox News. | | | |
>I really dont get why you would need 100k to do the things you need. Perhaps people need to become a bit more frugal?No one said you need it. They're saying at that income a lot of pain points go away. As others pointed out, much of it has to do with a reduction of stress. A lot of small problems can be solved with money. It doesn't mean that people will solve them with money - but knowing that you can eases the brain quite a bit. And then of course, there's health care. With good employer paid insurance, the deductible for a couple is about $3300. So if you have any kind of chronic medical condition, you'll pay that much each year at least. If your employer did not pay and you had to purchase it (e.g. you are self-employed), it'll cost perhaps $500/mo for the premium, with a deductible anywhere from $6000 to $10K. >Perhaps people need to become a bit more frugal? There is that as well. People here tend to change their smartphone every 2 years, and always buy a brand new expensive one. They'll pay a pretty high fee for cable TV. They'll insist on 50-100 Mb/s Internet, when, in my experience, 15Mb/s was fine for a couple (no degradation in quality for services like Netflix). They'll generally pay $15-30K for new or recently new cars. And many people change cars too often. | | | |
student loan debt. there are many that graduate with $20k-$100k+ of debt. I'm frugal/cheap, got by with 30k salary in big city a year out of school was tough. Many coworkers that were more normal in spending habits were breaking even or using savings to make ends meet.At 30k salary, I was able to save $400-$500/month in Boston. It would have been near zero if I had student debt (6%+ interest). Frightening thinking back, but I was always one major repair on my car or mid level health issue away from spending an entire years worth of savings. | | | |
The obvious fix is that graduating shouldn't require someone to go into 100k+ debts.The entire cost for my graduation is probably come in under 1000€ total, 800€ will be tuition and the rest directly university related spending. (There is an additional 2k€ spending on stuff like a new laptop, software, etc. that wasn't necessarily required but made things easier). | | | |
Fixes are obvious, implementing it is the hard part. The propaganda for everyone to get a college degree is ingrained into the system. This sprouted countless for profit colleges charging obscene rates of $20k-$30k per year.Another obvious fix would be to spread good jobs around the country so we don’t have such concentrated HCOL cities. That’s as easily done as the suggestion of lowering cost of graduation to your sugessted price point. We have an entire political party against free or near free education, which means more taxes to pay for it. I don’t fully disagree with some of their stances. Many degrees don’t provide financial value, and can be learned online or have meet ups to discuss topics. A college degree for a college degree sake is what’s happening to much of the populous. | | | |
Obviously it wouldn't be easy. The US education and employment system would have to ease of college degrees. Where I live, about 80% of my class had a job by the time they graduated secondary school. 20% went on for a higher education afterwards, of which only about 30% (or 6% of the original class) moved into College/University (the difference is muddy here).And at every step, people jumped straight into employment from school. US High School should focus on that. If a student graduates they should already have a job offer signed, that should be their primary target. If they don't they should be moving into higher education. College and other Institutions should have the same goal. | | | |
> but I really don't think 100k is the magical number that you need to become happy.-> Most thorough study yet about the subject comes out, says 100k is the magical number. You: Well I'll keep believing my thoughtless, data less opinion anyway. Me: Rolls Eyes Sure, you can be skeptic, but at this point, if you needed to take a decision based on this, you'd do better go with the 100k magic number, the odds are definitly more in its favor then your belief. | | | 
