It’s that telling time of year: Our W-2 forms remind us just how much money we’re not making.
I usually receive a handful of these forms in January and it’s always a humbling experience.
The W-2 form, if you don’t know, is required from employers to report employees’ annual wages and the amount of taxes withheld from our paychecks. I open these envelopes with trepidation. I hope for one thing. I get something else.
I’m thankful for the jobs I have, but for some reason, I habitually think I’m making more money than I actually do. It happens every year at this time. I should know better by now.
There is a term called gross earnings. And then there is net earnings. What I’m talking about is something I’ll call perceived earnings. It isn’t written in cold, hard numbers like the previous two. It’s tabulated by feelings, not figures. Feelings typically come up short in life’s financial ledger.
I’m not sure exactly how much money would make me happy each year, so I did some research to find out. Studies have shown that for the average American, it takes around $75,000 a year to be “happy.” Yes, I know, that word is subject to interpretation.
One man’s happiness is another man’s misery. Contentment is something else entirely. Putting a dollar amount on happiness can be like putting a price tag on love.
The study citing the $75,000 figure was conducted by Princeton University’s Woodrow Wilson School of Public and International Affairs in 2010. So, with inflation, that magic figure may be up to $80,000.
Regardless, the lower our annual income drops below that figure, the unhappier we feel, the study states.
“Low income exacerbates the emotional pain associated with such misfortunes as divorce, ill health, and being alone,” according to the study. “We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being.”
But our happiness doesn’t skyrocket in direct proportion to our earnings above $75,000, the study contends.
In other words, if you’re earning that much cash annually, other factors in life begin having more worth than money. Still, the study doesn’t nail down why $75,000 is the magic number. To test its accuracy, I casually asked my fiancée how much annual earned income would bring her perceived happiness.
She thought about it for a second and confidently replied, “Between $70,000 and $80,000.” Her response reflected similar estimates from more than 450,000 polled responses that were analyzed for the study.
“It does seem to me a plausible number at which people would think money is not an issue,” said one of the study’s authors, economist Angus Deaton.
That figure does seem to hover around the idea of happiness, I guess. Still, my W-2s don’t add up to it and yet, I’m generally happy year in and year out.
For comparison’s sake, the federal poverty level for a family of four is $24,600, which would make me pretty darn unhappy, I’m guessing. A threshold of sorts is crossed at some point above that figure, though I know plenty of “poor” people who seem reasonably happy.
In fact, I know a few people who earn well more than $70,000, yet seem anything but “happy.” Maybe they simply hide their happiness better than those who have less money. Or maybe their money gives them only the illusion of contentment.
“High incomes don’t bring you happiness, but they do bring you a life you think is better,” the study concluded.
I found another more recent study from Harvard Business School, which asked more than 4,000 millionaires to rank their happiness level, as well as their satisfaction in life. You’d think every one of them would rank their happiness level as off the charts, right? Not so fast.
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The price of happiness, according to their rankings, is between $8 million and $10 million. This seems laughable to the rest of us, but everything is relative in life, including the happiness of millionaires.
Only at such a high level of wealth are some millionaires happier than other millionaires, “though these differences are modest in magnitude,” the study states. More interestingly, millionaires who have earned their wealth are happier than those who inherited it.
All of us have dreams of hitting the lottery and becoming an instant millionaire. These past few weeks, the Powerball jackpots have grown so enormous that I stopped caring whether it’s $5.59 million or $55.9 million or $559 million, as one New Hampshire winner nabbed (before taxes) earlier this month.
Will he or she become instantly happy or just instantly wealthy? We would all like to try and find out. And, most likely, anyone reading this column will never get that opportunity. So we’re stuck with our annual income, and our annual reminder called a W-2.
Does yours make you happy? And what is happiness anyway?
Amid my research, I stumbled on the Secret Society of Happy People. No kidding.
Founded in 1998, the organization asked similar questions and it has since attempted to answer them.
“I wanted to know if our conversations about what made us frown were disproportionate to the ones about what made us smile,” founder Pamela Gail Johnson states on her website.
“What I learned was that although you can’t be happy all of the time, you can be happy most of the time. You just need to recognize more of the happiness that’s already happening.”
So there you go. Words of wisdom from an expert. My only words of additional wisdom would be to avoid looking at your W-2 forms when they arrive in the mail. Just hand them over to your tax preparer and smile happily.
Twitter@jdavich