Can money buy you happiness? We know how we're supposed to answer that age old question, But even if it can't, having enough money should at least buy you a sense of security. Right as it turns out, maybe not that.
Either it's been very difficult, or I've started putting money in a savings account when I get paid, and then two days later I moved back into the checking account.
You know what I mean.
And that's not you know, it's not because of some big party, lifestyle or anything. It's really just general living.
You know. One of my concerns was I didn't want to have to start pulling too much from our retirement too soon. You don't want your money to run out before you don't need it anymore.
I just saved just so I could never be caught asked out for lack of a better terment. So if anything happens, I know I could pick myself up.
Bloomberg's Declaire, Ballantine and Craiggiemona surveyed people about how money makes them feel, and they found even having quote unquote enough money doesn't always bring relief from financial anxiety, and later in the show, I talked to Yale School of Management professor Michael Kraus about our complicated relationship with our bank accounts.
In common status on our well being is robust and consistent and is there across countries.
I'm west Kosova today on the Big Take. How many dollars would it take for you to stop worrying?
Claire?
Why did you write this story? Where were you trying to get at?
We wanted to look at just perceptions of wealth. I mean, I think we've all sort of spent a lot of time thinking about our own personal wealth and that of others comparison, thinking about what we can afford and when, and we sort of notice that whenever you talk to anyone, really everyone's sort of thinking that they're not as well off as they are. So I think we wanted to delve into how people actually feel about their money, which is pretty different than what the sticker price may imply.
And Craig, you went about doing this in kind of an interesting way, where you talk to people who you identify as being quote objectively rich. What exactly does that mean?
Basically, we use one hundred and seventy five thousand dollars a year as earnings, which roughly puts you in the top ten percent of US tax filers. So if you start to play that out, that means that these people earn more than ninety percent of other Americans, and by global standards.
These people are certainly rich.
I think we spend a lot of time talking about billionaires the one percent, but these are just regular rich people that make one hundred and seventy five thousand dollars a year. And I think the pandemic sort of opened up a lot of facets of life for re examination. You know, how we work, where we live, and again and again, we were sort of writing stories about people are leaving New York for Florida, people are leaving California for Texas, Everyone's going to Georgia, and again and again
the theme was my money can go farther. And in a lot of ways, this is an old question, These are old themes, but I think that the pandemic really put this stuff back into focus.
Again, how did you go about doing this? There's a lot of numbers in this story where you're able to quantify things that are often kind of anecdotal.
And we worked with an outside survey company who surveyed about one thousand people across the US a statistically relevant survey, and the basic question was do you make one seventy five or above? And they had to say yes. And then the first question we asked them was do you feel rich? The big things on this were do you own your home? What is your net worth? How much you have saved for retirement? And then the questions about
mobility was really where the key answers were. But really we were just looking for a way to kind of get at this fundamental question about wealth in a way that felt topical and relevant in the current moment.
So if you look at the thousand people who answered the questions, how does it break down how many of them fell rich, how many of them felt okay, and how many of them felt poor?
Twenty five percent said that they feel very poor getting vibe but things are tight, About twenty five percent felt rich, and about half described themselves as just comfortable.
Claire, when you set out to answer this question, what did you think you were going to find and were you right?
One thing we went into was thinking about this idea of comparison, and so we were thinking that people in areas with a lot of inequality, So you know, you think about New York, you have you know, people that are extremely wealthy next to people who don't make a lot, and how that would influence perceptions. We had this idea that maybe, you know, those people would feel not rich because they're comparing themselves to the billionaires flying their helicopters
in from the Hamptons. What we found was a little bit different, and I think what we ended up drilling down into more was people's feelings of their own wealth separated out into people who feel rich, people who feel comfortable, people who describe themselves as poor despite all being in this top ten percent range, and drilling down into those people and seeing in how their answers correlated with how much their home was worth and how much they had
in retirement savings, and sort of how that self perception was correlated with the assets that they actually had and how they described other aspects of their life.
To admit it, we were wrong about a big part
of the premise. I think we went into this thinking there was going to be a big geographic breakdown that places like Boise and Salt Lake, where you don't have the fabulous wealth that you find in San Francisco, La, New York, Boston, even Miami, that people would feel better people making one seventy five would feel content in Salt Lake City because everybody in their suburb has the two cars and the same amount of money, and that the people in New York would be the ones that sort
of were discontented at that price point because they see people they see finance guys and tech founders who make way more money.
That really wasn't the case.
The geographic breakdown was not the interesting thing in the results, and what we really focused on was this high level of dissatisfaction across this group. Twenty five percent of these people making one seventy five K and above are describing themselves as poor, very poor, or getting by, which really is the thing that jumped out at.
Us and Claire.
For this project. You spoke to a number of the people who answered the survey and they told you they were experiencing what they were feeling what you find.
We talk to a wide range of people that were by this one hundred and seventy five a year income bracket and found some really interesting examples. The ones that struck me the most were the people that were doing really well on paper but still didn't feel rich.
My name is Jane Edwards. I currently live in Brooklyn, and basically I'm a market data person, So I'm kind of one of those you know, Wall Street weirdows that sits between the you know, the dealing floor and the technology. I've been working in banking for about thirty years. I'm very fortunate, you know. I'm up in the like you know, one hundred and eighty hundred and nineteen early two hundred thousands,
which is a lot of money. It's a lot of money, it's also a lot of tax I love the job I'm doing, and I love the team I'm working with. If it wasn't for that, I would probably pick up and maybe hit the West Coast, maybe Florida. I flirt with the idea, you know, I always find myself back in New York, but it's become more difficult to live.
One of the most interesting was a guy who lived in Texas. He had a home worth almost four hundred thousand dollars there and a condo in Hawaii. He's making more money than he ever has. A household income is about four hundred and fifty thousand dollars between him and his wife, but they don't feel rich. They have these bills for their mortgages on their homes, they have three car payments, their son is going to college. You hear that and you think condo in Hawaii. How could you
not feel rich? More money? It's just resulted in more bills. And then one man who moved from New York to Texas where he could get a much bigger apartment for his money.
My name is Tioba Paris, originally from Trinida and Tobago. Grew up in Brooklyn, New York, and a current resident of Houston, Texas. I'm thirty three. I'll be thirty four and about a month, and I work in pharmaceutical advertising. I make about one fifty a year. The one thing I like about Texas and one good thing about me being able to move out, was able to keep my
New York pay. So when I was having that conversation with a Wiltor and I'm giving him my like raw numbers, He's like, are you sure you want to buy a house? And I was like, no, I don't even know if I like Houston. And he was like so flabberghat. He was like, no, are you do you sure you don't want to buy a house? Like you can? I can get you in the house a slap, and I was like, nah, I don't want I don't.
By all accounts doing very well, has a great sneaker collection as a side hustle, but he's still concerned about what happens, you know, if he loses his job and his lifestyle expenses have gone up even despite moving to a cheaper location.
I've never felt rich, Like to me, rich is like extreme wealth, Like I don't. I've never had that. I don't even think that's in my stars to have one day, Like just looking at the trajectory of my life and you know, just being being honest with myself, I think I'm doing well compared to my peers, you know what I mean. But at the end of the day, like I still know exactly when I get paid, right, Like that's very front of mine, you know what I mean, Like if I go forbid not going and lost my job,
like I would have to get another job immediately. I don't even know that I answered your question, like, I don't feel poor. I'm not poor, obviously, but I am far from what I would consider rich.
Then on the flip side, though, one of the women that we talked to who did feel wealthy lived in Minnesota and had raised five kids on a pharmacist salary. She was in a spot where her kids are out of the house, they're all set up, she's retired, her husband is retired, and they're sitting back, you know, as homeowners with retirement savings, really feeling comfortable right now.
My name's Mary Phipps and I live in Saint Cloud, Minnesota with my husband. I was a registered pharmacist and director of pharmacy for twenty some years up here in Saint Cloud. I'm sixty six. Hired at age sixty four just before my sixty fifth birthday. The first year was a little nerve racking for me because I had been used to working my whole life and having that regular paycheck coming in. I've been tracking our monthly expenses since retiring,
just to get a better handle on it. Boy, it's really hard to know, but I think it's starting to feel comfortable now where we have a good handle on what we need on a monthly basis, and yet still have some to put aside for bigger expenses such as trips and taxes and things such as that.
It really runs the gamut, and so many factors go into whether you feel rich or not. But I think we really did see some common themes and got into the psychology a little bit of how people think about their money.
Look as we know, like we're just talking about expensive if you have two kids in private school.
A lot of these people cited college.
I mean, the cost of higher education has absolutely skyrocketed the last twenty or thirty years. I mean we're approaching one hundred thousand dollars a year at the very high end.
The ivs are over ninety.
So that was a big part of it. That's where I think the tension is in this story.
And definitely worry is a big through line through all of it. These people that describe themselves as poor are just getting by. I think that they recognize that they are doing okay. They're surviving, they're paying their bills, they're living their lives, but there's always this worry about money. Some of these people maybe they make a high salary now, but they grew up when things were really tight. Some
of them have been through the financial crisis. And people would constantly tell me that all feel rich when I don't have to worry about money, when I don't have to think about money.
After the break. Why should we care if the time ten percent doesn't feel rich? And there's another really interesting aspect to this project. It wasn't only surveying Americans, but you also created a tool with Bloomberg's graphics and data team that lets people put in their own information and see how they compare.
Yeah, that's right.
We had some help from some very smart, talented people here at Bloomberg. And basically there's a tool within this story that will let you put in your salary, put in your zip code, which then takes you know, to the median wealth in your metro area, let you see where you rank where you live, and then lets you see where you would rank if you moved somewhere else. You know, we were just trying to hit this topic, which is such a hot one during the pandemic of
should I move? And this puts some numbers behind, you know, how things would look in different parts of the country.
And what's interesting about that too, though, is, as you describe it, even when people are living in areas where their dollars go further, that doesn't necessarily translate into happiness.
You're right, I mean, there's still problems in Texas. There are problems in Florida. It's not like things magically get better when you stop paying state income tax. And I think our interviews in the survey data really bring that out.
And I think too, the people who are moving and who have these possibilities of moving and the pandemic in generals made people think about what would make them happy. And you know, it's not like there's been this magic bullet where everyone's suddenly happy now, but people are thinking about that more maybe than they used to with all that happened.
What were your big top line conclusions? What were the things that leaped out at you in these answers that the people.
Gave Some of the stuff that we found, you'd expect, like ninety percent of these people own their home. We didn't find very many renters. That didn't shock us. It makes sense that these people, on paper should be feeling richer. A home is often the thing that for most people. You use debt to buy an asset that's going to appreciate. That's how most regular people think about it. It's their biggest purchase, it's the highest percentage of their net worth.
And ninety percent of the people in this survey were homeowners. The other key thing I think not shocking is that the people that said they feel rich or very rich tend to have a lot stored away for retirement, which is I think probably the number one thing most people would identify as a thing that makes them worry when they do have to stop working, will they have enough
to have a comfortable life. We were living way longer these days, so I think housing and retirement were really two of the big things that jumped out at us in the results. The housing market is very, very tough. I mean, mortgage rates right now are about seven percent, and there's no inventory because a lot of people refinance
in the pandemic. You know, some very high percentage of mortgages are under four percent, under three percent, And what's happening in the housing market is that it's basically frozen. The person who is paying two point seventy five they don't want to move and take.
On a seven percent mortgage. So there's just no inventory.
And I think there's a growing number of people who are let's say under thirty, who are renters, often cases making good salaries in coastal cities, who are saying to themselves, I don't think I can ever buy a home. That's a fundamental shift in the US. I mean, home ownership has been the path to wealth creation since forever, since World War Two. That was how we built the middle class in this country. And again, I think there's a growing number of people under thirty or so who think
that they are shut off from that avenue. And it raises fundamental questions about how we're going to think about money and wealth in our society over the next twenty or thirty years.
And it's all about, you know, young people thinking, you know, maybe I don't need to go to college anymore, maybe I do something different, Maybe I don't spend you know, two decades of my life in this banking job. And we are seeing that more and more with younger people, and I think that does stem from just them looking at one, this isn't possible for me, and two if
they're miserable, why would I follow that traditional path? And that has the potential to really upend higher education and traditional industries like banking and finance and have all these implications for what our society looks like when those people are of age to really be the movers and shakers.
Claire Craig, thanks so much for coming on the show, Thank You, Thank You. For another perspective on why we think about money the way we do. I sat down with Michael Kraus. He's an associate professor of organizational behavior at Yale University's School of Management, and he studies this question for a living. Michael, we've been talking about this survey are reporters conducted, and people who were objectively well off, some of them still said they felt poor. Have you
seen that before? Do you know why people would feel that way.
A lot of subjective feelings about how I'm doing economically they have to do with comparisons. One of the comparisons that can be happening is to you and your past self.
A lot of times it can be a reflection of how I feel about how how much things cost these days, a feeling about how much maybe people are doing better than I am, and so I think both of those processes are comparative and they're likely to play a role in people feeling like, even though I have a lot of money, I'm not doing as well as maybe I was in the past, or maybe that person who lives next door to me who I think is doing better
than me. People are thinking about wealth in terms of things like paying for health care, having a nest egg to afford college, maybe for their kids. So there's a lot of ways that, like you make those calculations uniquely for you that are likely to lead you to feel like, well, the one hundred and seventy five a year that I'm pulling in is not necessarily as much as I might need if one thing goes wrong.
And you ran a study researching how people's subjective socio economic status affects their own happiness, and what did you find?
What we did is it's called a meta analysis. What it is is you just basically take anybody who studied this topic of income, perceptions of income and status in society, and how it relates to people's feelings of happiness and well being. And so we looked across all of these studies, across many countries, two million people in the total sample, and what we find is subjective perceptions are more strongly related to feelings of happiness and well being than you know,
how much you make a year. At least a part of it is about comparisons to relevant others. A lot of times when people make their ratings on their status in societ, and you ask them, like, what were you referring to when you were making these ratings. People are referring to relevant comparisons, co workers, neighbors. They're saying they're thinking about how people around them are doing, and they're
basing their own status on that kind of information. Often in social psychology, you know, psychology in general, we're thinking about how people do relative to us, and we can be strategic about who we compare to. When we're thinking about and trying to get information about, like do I need to change my behavior? Do I need to try to earn more money? Do I need to change jobs?
You're likely to compare upward, right, because you're looking for information about how people who are doing better than you are a fairing and what I need to change to be maybe more similar to them so that I can do better as well. The other piece, though, is about past selves as well, right, So any kind of fluctuations and how how you feel like you're doing relative to maybe yesterday or last year, those are going to matter
as well in terms of subjective perception. So your status can change as a function of if I feel like my money's not going as far as it once was.
When we come back, how does wealth inequality affect how we think about our own money? Michael, You've also researched people's perception of wealth inequality when it comes to race, and what did you find there.
This is a different set of studies that we did using General Social Survey data, which is just a large yearly panel survey of American attitudes. So we look at that data and we look at changes in perceptions of status bi racial groups. When you hold income constant. What you find is that white people in the United States since the seventies have a reduction in their perceived status in society relative to racial minority groups at the same income level. But that strikes us as a bit of
a misperception of status in American society. That this perception that white Americans have lower status would be actually inconsistent with the historical record of where folks stand in society, And so there might be a role for education of our racial history in not only getting people to not have this misperception, but it might be a road to
greater happiness too. That people haven't really tapped that it would affect happiness is perhaps unsurprising given how central racism is to the history of the United States, but also to politics.
Are we then finding that the perceptions of wealth by people of in America are rising?
No, it's people of colors perceptions of their status is pretty flat across from nineteen seventy to now. It is white Americans perception their own status income match that is declining over time.
What's the most surprising thing about this that you've found in your research?
You know, I think it's in people's reactions to the work that we've been doing on status and happiness. I find it actually kind of surprising that people would come to that research thinking that money doesn't matter as much as it does. I think it's maybe surprising and might be neat and interesting to think that the amount of our resources our perceptions of status would matter less for
our happiness and well being. But you know, I think, if anything, from all the work that we've been doing and all the work that other people have been doing that we've been surveying, it really seems that the effect of income and status on our well being is robust and consistent and is there across countries with different kinds of socio political circumstances.
Michael Kross, thanks so much for talking with me.
Thanks for having me on.
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