“How much income is enough?”
How much income is enough?
Submitted by Charles A.
We would all like to know this! What is the income we need to lead a happy life? To find the true answer to this question, let’s take a tour of our personal habits.
Enough? For who? Where? With what lifestyle? Will it be enough forever or will it change? How do we achieve this?
Numerous studies indicate that the more income we have, the more we are willing to spend. Thus, if someone loves to buy jeans and increases their income, they will spend more money either buying a more expensive brand, more pants, or both. Does this sound familiar?
The real question we should ask ourselves is: to what extent will I let an increase in income become a new expense? If we experience a sudden increase in income and we increase in equal proportion our expenses, we will have a new standard of what is necessary to live. The problem with this vicious cycle is that it’s easy to acquire a new spending habit but a lot harder to abandon it. At the same time, we also can’t guarantee that we will always maintain our “higher” income.
Income is One Piece of the Puzzle
The question becomes more psychological than financial. While being human gives us the ability to adapt to changes, the process is rarely simple. For example, we can always sell our vehicle and travel by public transportation, but this may make us spend more time getting from Point A to Point B and cause stress for various other reasons.
Finding a balance between our income and our expenses determines our financial success. We have to differentiate between what we want and what we need to live. We may not have enough income for everything we want in life, but can almost certainly say that we’ll have enough to satisfy our needs.
There’s no mathematical equation or magic response that can answer the question of how much income you need. Common sense must reign in each of our decisions. So now, what is your next move?
Alex Nerguizian is a nationally recognized financial educator who has over 17 years of experience in the field of personal finance coming from both the private and the nonprofit sectors. He strongly believes that even though knowledge is important, action is everything.