I know it’s unpopular to say so in some circles, but yes, money can buy happiness.
Certainly, as my mom’s experience of poverty early in her life taught her, having less money than you need buys misery.
Then there’s that research people love to bandy about, that they claim proved happiness stops increasing once you earn $75,000/year.
As I wrote elsewhere, that research doesn’t quite say that making more than $75,000 doesn’t increase happiness. What it does say is that one of two measures of happiness plateaus at $75,000 as a global average, while the other continues rising until income hits $95,000.
- Those figures depend strongly on region, and in North America they were $95,000 and $105,000
- The figures were for an individual, not per family
- The figures were published in January 2018, based on research conducted earlier, so inflation would raise them by over 12%
Scaling to a family income today moves the peak happiness number to just under $200,000.
Chances are, you earn less than that.
There are also a few other things more money buys you that are arguably more important than happiness.
- Freedom of choice
- Control of your own time
- Margin of safety if something goes wrong
Now that we’ve established how important income is to your happiness, let’s dig into the 3 reasons your next raise is so important (and a few tips on how to maximize it).
Prices, They Are A’risin’
Unless you’ve been living under a rock for the past year plus, you’ve seen prices rise faster than they have in decades.
According to the US Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) went up 6.8% in the 12 months ending Nov 30, 2021.
The increases are especially high in gas and fuel oil (nearly 60%!); used cars and trucks (over 30%); natural gas (over 25%); meats, poultry, fish, and eggs (nearly 13%); and new vehicles (over 11%).
Your next raise will determine whether your income keeps up with (or better yet, outpaces) that inflation.
If it doesn’t, you’re looking at a grim choice – tighten your belt or reduce your savings rate (and if it’s already at 0%, drawing down savings or going into debt). Unhappy results all.
Your Next Raise Does More than Increase Your Immediate Income
Sure, a raise means your next paycheck will be higher than your last, which is a great thing.
However, it does much more than that.
It raises the bar for all your future paychecks and all your future raises. If you get a 10% increase now, and another 10% next year, that second 10% builds on the first one, so it’s actually 11% relative to your last paycheck.
If you start from $50,000 and get a 10% raise each year for 10 years, your first raise gives you an extra $5000, but your 10th raise gives you almost $12,000. If you didn’t get that first raise, and did get the next 9, the 9th would be worth $1072 less.
Do as I Suggest and Accelerate Your Journey to Financial Freedom Without any Belt Tightening
Budgeting is no fun (at least for normal people).
The only thing less fun is cutting expenses and living a more frugal lifestyle (again, for most people).
What if I showed you a simple way to save more and accelerate your way to financial freedom without tightening your belt or pinching pennies?
You can read the full details here, but the gist of it is simple – assign at least half (I personally strive for 2/3) of each increase in income to your savings and investment for the future. This lets you build wealth faster while also increasing your standard of living.
Your next raise?
That’s right, half to 2/3 of it goes into that financial freedom express bucket.
Bonus – How to Improve Your Chances of Getting a Bigger Raise
As promised up top, here are a few ways you can improve your chances of scoring a higher raise.
- Think from your boss’s perspective – she doesn’t care about what you need or want (e.g., that your commute costs jumped 60% in the past year) – she cares about how you improve the company’s bottom line. This means you need to figure out how to make yourself more valuable to the company – learn new skills, take on more responsibilities, support high-priority projects, etc.
- Think some more from your boss’s perspective – make her (professional) life easier and she’ll be more likely to hand out merit raises to you than to your colleagues. This means figuring out what she’s worried about, what she hates to spend time on but has to, etc., and then reducing the time, effort, and stress these things cost her.
- Finally, the simplest one – ask! But do it intelligently. Don’t just say you want or need more. Share a list of your achievements in the past year, and how they impacted the company’s bottom line. Then, ask for a raise that’s commensurate with that level of effort and impact.
The Bottom Line
It’s not hard to believe that your next raise is good for your happiness, but the above shows you more reasons why that’s so, beyond the simplest – more dollars hitting your bank account. Once you know how important that next raise is to your happiness, present and future, you’ll be well armed to overcome any trepidation in pursuing the biggest raise you can achieve. Then, the bonus tips will help you strategically pursue it.
This article is intended for informational purposes only, and should not be considered financial, business, or legal advice. You should consult a relevant professional before making any major decisions.