Having more money typically makes people happier until they hit about $75,000 in annual earnings. After that, additional income doesn't necessarily lead to increased happiness, suggests research from Princeton University. However, increasing overall happiness with more money isn't impossible. Certain types of spending increase life satisfaction more than others. Here's what to do with extra income to create lasting benefits:
Don't buy more stuff. Most high earners fail here, because pretty much everybody will buy more stuff when they make more money. The problem with this approach is that we are amazingly talented at getting used to the good stuff. The dream house you buy will quickly turn into just your house, so it's never enough. Instead, you should aggressively save toward your retirement goal to reach financial independence sooner. The joy of knowing you won't need to work in order to put food on the table is overwhelming. At the very least, it will melt away stress caused by tight financials. Even if you love your job, you'll get to love it even more when you simply don't care about the paycheck. And when salary isn't the major consideration of career choices, you can switch to a more satisfying job when the opportunity presents itself.
Trade some of the money for convenience. This seems like the opposite of saving more, but I don't mean buying stuff here. There are time-consuming chores that can be outsourced, which ultimately buys you time. Consider hiring a house cleaner if you hate to mop the floor, or a gardener if you don't like to take care of the front lawn. Even laundry can be outsourced. With the extra time, you can afford a bit of relaxation, as long as it's truly giving you breathing room to feel relaxed.
Invest passively. The only real reason to invest actively is to try beating the market. When you are earning more and investing more, then the need to outperform the market also decreases. When you don't need to take the risk, give passive investing a try. The beauty of the strategy is that you are betting that the economy of the world will continue to expand, which is a much surer bet than any company continuing to prosper indefinitely. Without the need to worry about the noise of daily gyrations of the market, you'll feel less stress and your nest egg will almost certainly grow over the long term.
Take a chair, relax and remember the good old days. Do you remember the life you had when you were making 20 percent less money? Compare that life to the one you're living now. Don't you feel fortunate because of everything you can afford now with that extra income? You are already doing much better than you were when you started out, so smile a little. And if that extra spending isn't making you smile, then you can safely eliminate those expenses because they aren't increasing your quality of life.
Consider giving some away. The power of giving is life changing. Not only will you realize how fortunate you are to be worrying about all these first world problems, but you'll also get to see the joy of the recipient whenever you decide to give. I often tell people that those who feel like they are blessing others by giving are often the people being blessed. Donate some of your extra income and be ready to be transformed. You will be surprised by how much happier you will feel.
It can be tough for most of us to believe that more money isn't making high earners happier. But research has shown that many of us aren't taking full advantage of the extra cash flow. If you get to the enviable position of having more money than you need, plan ahead and spend wisely.
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