Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week’s episode continues our series about the search for money and happiness. This time, we’re talking about how much money you really need to be happy.
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If you ever believed that money can’t buy happiness — think again. Research from Matthew Killingsworth and Daniel Kahneman published in the Proceedings of the National Academy of Sciences in March 2023 shows that levels of well-being — measuring both how people feel about their lives in the moment and reflecting on the bigger picture of their lives — rise in tandem with incomes. One exception: People who are generally unhappy. For these people, research from Kahneman published in the Proceedings of the National Academy of Sciences from 2010 found that their levels of happiness plateau at around $75,000, which would be a little over $100,000 today if you factor in inflation.
That said, happiness can certainly be had without money playing a central role. Many who live frugal lives, for example, intentionally decenter spending money from their senses of joy and well-being.
Take Brandon Neth, a real estate investor from Tulsa, Oklahoma. Neth and his wife started living frugally years ago, hoping to achieve financial independence. Since then, they’ve built their lives around spending as little money as possible while enjoying the time they have. Creating the life they want through frugality is an ongoing dialogue. After recent health troubles, Neth now spends more on certain items, like organic food, to improve his quality of life.
Finding the right place for money in your search for happiness is likely to evolve over time, too. Think about whether the way you’re deploying your cash aligns with your values. If not, you can always make changes to become happier and more confident in your finances.
More about managing money on NerdWallet:
Sean Pyles: Sara, I think it’s time.
Sean Pyles: I think that we need to wheel out a tired, dusty, over-trodden cliche about money buying happiness, specifically how money can’t buy happiness.
Sara Rathner: I mean, we could also just live in the real world where money can, will and does buy you happiness.
Sean Pyles: All right. Well, I am with you in reality, but for the sake of a mental exercise, let’s sever the search for happiness from the craze for cash.
Sara Rathner: All right. I’ll humor you.
Sean Pyles: Welcome to NerdWallet’s Smart Money podcast. I’m Sean Pyles.
Sara Rathner: And I’m Sara Rathner.
Sean Pyles: Over the past couple weeks we’ve been diving into money and happiness, their relationship, our histories with them, and why we can’t get enough of either. But I want to make something clear. While money can absolutely buy you happiness, and being without money will surely make you unhappy, there are plenty of people living fulfilling lives where money plays a much less important role in their quest for happiness.
Sara Rathner: Sure. And at the same time, there is also research that discusses how much money you really need to be happy.
Sean Pyles: Exactly. So in this episode we’re talking about the extent to which money can really buy you happiness. And then I talk with someone who’s worked to build a happy life while spending as little money as possible.
So let’s start with that research that you mentioned, Sara. Back in 2010, two researchers from the Center for Health and Wellbeing at Princeton were looking into the role of income and how you feel about your life. Daniel Kahneman is a psychologist and economist who’s also a Nobel laureate. Angus Deaton is also an economist and Nobel laureate. They were measuring two aspects of “well-being.” Emotional well-being, defined as the emotional state of feeling good, and also looking at your life and thinking that you were doing well, so-called evaluative well-being.
What’s interesting about Kahneman and Deaton’s work from 2010 is that they found that levels of the emotional type of well-being stalled at when incomes hit around $75,000, while evaluations of life well-being continued to improve as incomes rose.
Sara Rathner: Right. This became a bit of a popular science phenomenon. A lot of people said, “See, money really can’t buy happiness.” And a lot of other people said, “I’m pretty sure money can buy happiness and that those who earn more money will be even happier.”
Also, $75,000 will get you a lot less today than it did back in 2010, which feels like forever ago at this point.
Sean Pyles: Yeah. Well, factor in inflation and $75,000 in 2010 would be like $100,000 now. But this research was the source of a lot of debate and it was made all the more contentious when another paper came out from Matthew Killingsworth, a researcher at the University of Pennsylvania who investigates the factors that affect personal happiness. In 2021, Killingsworth came out with a paper that said, actually shocker, levels of both emotional and life well-being do continue to rise when incomes exceed that $75,000 amount. And they continue to rise even for those who earn more than $200,000, something that to me feels intuitively correct.
Sara Rathner: Totally. Like $75,000 a year is probably enough to have a decently comfortable life depending on where you live, especially a decade ago. But you can get a heck of a lot more well-being from a million dollars than you can get from $75,000.
Sean Pyles: Exactly. So in a showdown that only the nerdiest could get excited about, Kahneman from the original paper and Killingsworth from the 2021 paper got together to duke it out, which for academics means another study.
Sara Rathner: I’m actually weirdly excited about this.
Sean Pyles: Right? So in the new paper, which came out in March of 2023, they worked to resolve the conflicts between their two papers.
Sean Pyles: Well, the culprits were, to put it simply, misinterpretation of data and a group of unhappy people. I won’t get too into the nitty-gritty here. For those who really want to read the sexy details of the new report, we’ll have a link to it in this episode’s show notes post at nerdwallet.com/podcast.
But the gist of it is that in the original paper, there was a handful of unhappy people in the data set whose unhappiness diminished with rising incomes up to a certain point. Beyond that, not even more money could make them less unhappy. In case anyone’s curious, those unhappy people accounted for about 20% of the studies’ participants. For the majority of folks though, more money meant more happiness.
Sara Rathner: This reminds me of what we talked about in the first episode of this series about how for many people, happiness can be a matter of expectations and mindset. And once you have your basic needs met, the role money plays in creating a happier life is kind of up to you and the way you craft a happier life or not.
Sean Pyles: Yeah. So the data are clear: Higher incomes equal happier life, both emotionally and evaluatively as long as you’re a reasonably happy person to begin with.
But that got me curious about how the way people use their money can relate to their happiness. Say you have a decent living but aren’t living a luxe life. Does that mean that you’d be less happy than someone who is leaning hard into lifestyle inflation every raise they get? To help me think this through, I talked with Brandon Neth, a real estate investor and all-around frugal person who lives in Tulsa, Oklahoma.
Brandon Neth, thank you for joining us on the Smart Money podcast.
Brandon Neth: I’m happy to be here. Thanks.
Sean Pyles: So, Brandon, you intentionally live a life of frugality. Can you describe what living a frugal life means for you? Are you cutting coupons, living without a car in a tiny house maybe?
Brandon Neth: So yeah, my wife and I have always been frugal. I guess I shouldn’t say I’ve always been frugal. She’s always been frugal and she converted me to the lifestyle. But we are kind of extreme to the point where we’re kind of a running joke amongst our friends and the online community because we kind of do everything. We do coupon, we do use the shopping apps, we do live in a small house, we do drive older cars. We kind of do everything combined all into one. And for us it gives us a sense of freedom, it gives us a sense of something happens or the economy goes bad, we don’t need to stress, we don’t need to worry. So we kind of do everything above the sun to stay frugal.
And I think a lot of people, when you think about frugality, they don’t think of the other side of this. So a lot of us that are crazy frugal, we also look for other ways to make money. So we are also kind of side hustlers. We enjoy making money in a bunch of different ways. People always say have multiple strings of income, which we’ve followed, but we have multiple strings of saving money as well, and that’s really important to us.
Sean Pyles: It seems like you’re really focused on financial security. Was that your motivation for living a frugal life?
Brandon Neth: It really was. And this kind of came about — we were almost forced to do this. 2009 we got out of college, the economy in the U.S. got really bad. We had only been out of school for a year or so, and we didn’t really have an option. So we ended up having to move to Thailand and then China, then Australia. We had to move overseas to make money. And living through that fear of not being able to get a job, nobody was working, having student loan debt and all these problems kind of forced, really kickstarted me. Again, my wife was always like this, but really years of her pushing and this happening really forced us into wanting this sense of security in case something happened, and just the ability to make our own decisions down the road because if we had this money, we didn’t have all this overhead and all these things that we wanted, we could pick up and move at any time we wanted. That was really important to us.
Sean Pyles: So you’ve been living a frugal lifestyle since 2009, 2010?
Sean Pyles: OK. And it was a deliberate decision for you to move into a frugal lifestyle because of all those concerns that you just mentioned?
Brandon Neth: 100%, yeah. I grew up terrible with money. There was no education. My parents, they were always like middle-class earners, maybe middle upper class, but we were always broke, constantly, and it was a thing that was always talked about in my household. And it was just something that was ingrained in me. You had money, you spent it. You tried to look a certain way, you tried to be a certain way. My parents worked really hard, but they didn’t work hard at saving money and making good financial decisions.
When I first met my wife, she picked up on that real quick and she tried to do everything she could to beat that into me. And it didn’t work for years and years. But little by little, it did. And then when this, like I said, 2009, and we kind of got to a point where we couldn’t make money, we had all this student loan, it came out of necessity.
Sean Pyles: It’s interesting; we talk in an earlier episode in the series about our money histories and how a lot of what we do with our money is a result of our upbringing. And it seems like you hit a point where you recognized, “Hey, I have some kind of bad habits that I learned from my parents and the way that they manage their money.” How was that process of breaking those habits to live in a different way that’s more intentional?
Brandon Neth: It took a lot. I want to be very clear that anybody listening to this, it didn’t happen overnight. It didn’t happen over a month. It took years and years and years. Even today, every now and again, I’ll say something to my wife, will look at me and she’s like, “You’re crazy. What are you talking about? That’s not right from a financial perspective.” She always tells me I’m wrong in other ways as well.
But I think with anything, it was a psychological change. And in a lot of ways sometimes it was a physical change. I wasn’t going to the movies, I wasn’t going out to eat. So there was a physical side of it as well. The closest thing I could relate it to is almost like an addiction, like an addiction to do something, to be a certain way. So it took a whole lot for me to get there. And I think it was also really important that I had my wife and I had a support system to do this. If somebody is trying to do this on their own, just reading up on the internet, I think is pretty easy to get off track. But having somebody there to be your support and to be your friend that says you need to do X, Y, and Z to get there, it really helped. And I think without that, I honestly don’t know if it would’ve worked.
Sean Pyles: You’ve been describing how your mindset has changed since you’ve adopted a more frugal life. I’m wondering how your emotional state has evolved since you’ve been in inhabiting this more frugal way of living.
Brandon Neth: It’s been ups and downs to be straight with you. Again, I’ve got the sense of freedom, the sense of I got to make my own decisions. It’s really nice that I can choose when and where I want to work because I don’t have to worry about all these expenses. I’ve turned down jobs that I think a lot of people would be very happy to have. So from that perspective, there’s a lot of freedom. There’s a lot of clarity that I get to do what I want to do when I want to do it.
But at the same time, I get a lot of grief. I really do. I’ve got a lot of friends that call me crazy, call my wife crazy. We’re kind of the butt of jokes on the internet all the time from some of these communities I’m in. I’m in the points and miles community. I run a relatively large Facebook group. And it’s consistent that people kind of give me a hard time and that does cause stress. And regardless if you do or don’t want to talk to these people online, when people start trolling you and saying negative things, it takes a toll on you. It does.
Sean Pyles: I think there can be an assumption sometimes that if people are living hyper frugal lives, they must be miserable and not really enjoying things in their lives. How do you view the relationship between money frugality and your own happiness?
Brandon Neth: It’s something that’s very important and I think everything in life, unless you are born with a silver spoon in your mouth and you’re super, super wealthy, you’re going to have to make sacrifices in your life at some point. None of us get exactly what we want all the time. So for me, I got rid of what I needed to get rid of. I do what I want to do. So to answer your question simply, that relationship, they let society or friends or family make that decision.
But I do want to touch on something that you said. A lot of people assume that if you live a frugal life, you’re miserable and you’re giving up things. I don’t want people listening to this thinking, I’m living this frugal life, or if I want to become frugal, I have to give up everything. I think it’s very common to hear, “If you don’t want to be poor, give up Starbucks or don’t buy the new iPhone.”
But I think most people probably live 10% to 15% above their means, the people that are having issues. Figure out a way, buy discounted Starbucks gift cards, use credit card points and miles to subsidize things. There’s all these different ways to save and make money and not have to give everything up.
Sean Pyles: Well, we should also point out that you are in a pretty solid spot financially. You’ve saved a lot of money and you have a number of real estate investments. In this process as you’ve worked to build this sense of financial security, was there a turning point where maybe you felt yourself to begin to relax and not be as anxious about money in particular, but also in general?
Brandon Neth: It was the day I went to zero debt. So I do believe that debt is necessary to build wealth. So I don’t want to have anybody listening to this saying, I don’t think that you shouldn’t use credit cards, I don’t think you don’t need debt. But I do think you need to get rid of bad debt. And I was able to get rid of bad debt, specifically at the time it was credit card debt, student loan debt and debt on cars because like I said, early on I was terrible with money. I was that person that was out blowing money.
When I finally got through, got all that paid off, the sense of relief was crazy. It’s like a pressure lifted off your shoulders. And I lived with completely zero debt for years and years. I bought my first couple pieces of real estate completely in cash, and then I got to the point where my real estate got me to financial independence. So I was making enough money off that to live. Because I lived such a frugal life, just a couple of properties, that money coming in was more than enough to cover my bills.
But I decided through a bunch of research, and I also got sick, I got cancer a little while back, I realized real quick that you need to have a much bigger nest egg. So we did take on some debt. We took on debt to acquire more properties. But that money that we took on, that debt that we had allowed us to buy more and make more money. So I don’t want to say all debt’s bad, but the thing that really changed, the day that everything kind of came into place and really changed our mindset was when we got debt-free of all bad debt.
Sean Pyles: Yeah. Well, you mentioned that you had a cancer diagnosis and have had some health issues. How has that changed the way that you viewed money and how you use it to create the life that you want?
Brandon Neth: Well, to be honest, before I got it, I was going pretty hot and heavy in real estate. I was in the mindset I want to bring in a hundred thousand dollars a month in rent and that was my goal. I’m going to bring a hundred thousand dollars a month in rent. Of course, that’s not net, right? We all have expenses and pretty heavy overhead, but that was my goal.
And I got sick and it changed how I looked at life, because I am spending a lot of time and effort in real estate. And I stepped back and I said, you know what? I can do what I want to do for much less. I kind of almost feel like I was falling into the adverse of trying to keep up with the Joneses by spending too much money. I was trying to keep up with the Joneses by making too much money. I was trying to be something that I wanted to make so much money and it didn’t matter. I don’t need that much money. So actually getting sick helped me out.
Sean Pyles: So you’ve been shifting your priorities to focus a little bit less on earning money, but maybe spending more time with your wife, doing things like that?
Brandon Neth: Yeah, spending more time doing things. Again, I think we’re super lucky. We don’t have a 9 to 5 job. We haven’t had 9 to 5 jobs for, I don’t know, 10 years now, something like that. But I was spending a lot more time on job sites, drawing up plans, doing my bookkeeping, all the things that come with running a business, and a real estate business especially. So when I got sick I just kind of said this isn’t worth it. We travel a ton, we use credit card points and miles. We’ve been to like 82 countries, but I was still high stress. I was still a ball of energy, just always wanting to go, go, go, go, go. And after I got sick and realized I didn’t need it, it’s been a relief that I don’t have to do that.
Sean Pyles: Yeah. I want to focus again on your spending habits. I’m wondering if you ever find yourself in periods of time where you just want to buy a bunch of stuff. Have you broken that habit completely or do you still get that occasional urge to spend money on maybe a new iPhone or whatever it may be?
Brandon Neth: Absolutely. So I’m a car guy. That’s where all my money went. The running joke was I’ve been with my wife since we were kids, since we were 18 years old. So I went through cars instead of through girls. That’s what she always said. So I had so many cars, I had 15 cars in the first two years we were together.
So yeah, I still catch myself. I look at my bank account and I’m like, man, I could afford a lot nicer car than my 1995 salvage title Toyota Corolla with a bunch of dents in it. I could actually have a nice new car. Maybe I could drive a Tesla, I could drive a BMW. But I definitely have times where I want to do it.
The one thing I will say, we’ve had a little bit of lifestyle creep. And anybody that doesn’t know lifestyle creep, just when you start making a little bit of money, you start buying nicer things, you start doing things a little bit different. We have started buying organic food. So that’s kind of the thing I fall back on.
Sean Pyles: So I’m wondering how you see this pattern of spending, of frugality continuing in your future, and what do you think your retirement looks like?
Brandon Neth: So to that point, we consistently look for what our future’s going to look like. I think we probably plan more than most people, being like, what’s the next thing we can do to save money, what’s the next thing we can do? And we do know we’re stuck here for at least 10 years because that’s the term of our loans on most of our properties.
But our next step has been, a big thought process here has been got to think about health insurance. As we get older, obviously more things are going to come up. I have cancer, it’s going to be something that I have to deal with the rest of my life. What can we do? And it’s expensive. That’s one of the biggest things. When you talk and get involved in the FIRE community, you consistently hear people worry about insurance.
So what we’ve looked into, and to answer your question, what is the future, we are going to try to get the Golden Visa in Portugal. It’s got crazy, over-the-top low cost of living. So it’s very, very possible to go there, live significantly better than you do in the U.S., have universal health insurance, and you can buy private insurance for pennies on the dollar compared to the U.S. So that’s what our future looks like. I think that’s the path we’re going to go.
Sean Pyles: Nice. Well, you mentioned that you are a part of the FIRE movement. Some listeners may not know what that means. It stands for “financial independence, retire early.” Can you talk about your decision with your wife to commit to this movement and what that journey has been like?
Brandon Neth: I’ll actually say we started doing FIRE before I really knew what FIRE was. So we had no idea. It was just her being cheap, not buying things and having a backup. I remember when we first moved to Thailand, before we really got into this, I had $2,000 in the bank when we moved to Thailand and I thought that was a lot of money. And she had like $15,000. And it was me, her, and a friend and his girlfriend. And we were just like, “God, you’re so rich.”
And she was like, “No, I’m not. I just do X, Y and Z.”
And this turned out to be the FIRE lifestyle. She was living the FIRE lifestyle before Mr. Money Mustache made it a thing. So we actually made the commitment to do this before we realized what FIRE was. And then once we started realizing what financial independence was and financial freedom was, it kind of became a cool thing. So it was kind of like, oh, feather in a hat. We have a community to talk to. So we made the commitment even before we knew what it was, just because it was the right thing to do financially for us.
Sean Pyles: So earlier in the episode we talked about research showing that, perhaps not surprisingly, emotional well-being continues to improve as income goes up. Have you had that experience or do you feel like your happiness has plateaued over time while your income has continued to go up?
Brandon Neth: I think generally speaking, yes. As I’ve had more money, my stress level and my happiness has gone up, because it’s one less stress. And my wife’s on board and we don’t have any issues. But I will say it kind of feels like recently we’ve gotten to a plateau, it has. I feel like you get to a certain point, and I’m not extremely wealthy. I don’t have a yacht and I don’t live this crazy lifestyle. Even if I wasn’t frugal, I don’t have the ability to do that.
But I’m to the point where we’re comfortable and I don’t know what else — we talk about this all the time — I don’t know what else we could want. If we were making a million dollars a day, we don’t even know how to spend money. We don’t know how to do that lifestyle. So I will say, yeah, we’ve plateaued, but I think we’ve plateaued at a really good place where we’re really happy.
Sean Pyles: Well, I feel like when you get a lot more money, the tendency is to spend that on things. And the things that you have been deciding to spend your money on are more organic fruit and vegetables versus that new Tesla.
Brandon Neth: Yeah, you’re 100% right. It’s hard for us. My wife jokes, we can’t go out to a nice restaurant regardless of how much money we have, because it bothers her so much because she’s spending money that she could — she’s like, “I can cook this at home and it’ll taste better and we’ll spend a quarter of the money.”
Sean Pyles: That’s so interesting because you get peace of mind from having all of this financial security, but then at the same time it can sometimes be maybe a burden in some ways because you feel like you do have to uphold these ideals. How do you manage that where it actually can be perhaps more stress inducing to have to commit to this frugal lifestyle?
Brandon Neth: You’re 100% right. So I got a small confession here. So the term “Neth Class,” my last name is Neth, has become synonymous with flying in the back of the planes. I fly all over, I travel all over. And I just booked a business-class trip. And my community became aware of that. And man, I have not heard the end of it for about three days because I did not commit. I went off brand. I’m justifying it to myself in a bunch of different ways. I’m going to get sleep. So I’m going to be able to do more work and see family and yada yada, but it does not matter. So I have gotten a lot of grief about it not committing to that lifestyle that I have preached for years and years and years.
So it can be daunting to commit to it and do it all the time, every day, day in and day out, especially when you get to the point where you’ve got a little bit of money and you could afford to do things. But like I said, I feel like so much of it’s ingrained me.
Sean Pyles: So when you and your wife are talking about ways to simply have a fun day, to go out and maybe do something that you really enjoy, how do you plan that even when money is something that you have a hard time deploying for that purpose?
Brandon Neth: It’s a really good question because I think it really varies on where we are, what we’re doing. And I almost think this is something that’s flawed in us. I won’t say everybody in the community, but definitely in us. It’s really hard for us to have a good time if we’re spending a lot of money. It just is. It’s hard, probably more so for her. Every now and again I’ll be like, “It’s OK, we can spend $25 and go out to dinner. Or we can go to the farmer’s market and buy honey or try some food from a food truck.”
It almost never is OK with her. So it does get hard. It is a conversation we have to have. But I’ll tell you, we’ve become really good at finding free things. We travel, we find free things. We just got back from Paris and I feel like it’s part of my mentality now. I’m such a hustler. I’m looking for ways to save and make money. We went to the Louvre for free because if you have a certain credit card out there that gives you access to museums for free. We went to the Catacombs for free. We do all these different things around cities and don’t spend money, and it’s very, very rare that we’ll actually go and spend money even if we’re going to have a good time.
Sean Pyles: Well, Brandon, if you could give one piece of advice to those who want to create a good life for themselves, but maybe not have to spend a bunch of money to do that, what would that advice be?
Brandon Neth: Find your people. Find your community. Find people that can support you and give you ideas. Because I don’t know it all, you don’t know it all, nobody’s going to know it all. But if you have a community of people that are like-minded and are willing to help you, it’s going to accelerate everything you want to do. It doesn’t matter if you want to make more, you want to save more, whatever that is to people in that community, find that community, be a part of it, contribute, give and take. It’s also going to make you happier, right? When you have people telling you what you’re doing is great and they support you, it feels really good. So find your community. That’s really important.
Sean Pyles: Well, Brandon Neth, thank you so much for talking with me. I really appreciate the time.
Brandon Neth: Yeah. Thank you guys for having me.
Sara Rathner: Wow, that was super interesting. I loved hearing about how Brandon has worked hard to get to a place of financial security and has also found a sense of liberation in being frugal. But also that it could be a source of stress for him as he balances enjoying life while sticking to his principles.
Sean Pyles: Totally. And I really appreciated him sharing about how his cancer diagnosis shifted his priorities. He and his wife still live a life where possessions have a marginal role in their happiness, but they spend more money on quality of life things like better quality food. I think it shows how the relationship between money and happiness is an ongoing dialogue and negotiation that evolves over time.
Well, that is all we have for this episode. Next time in our nerdy deep dive into money and happiness, we’re going to talk about how you can build the happier life that you want and how your money can help you get there. [Here is a preview from guest Dan Harris, author of “10% Happier: How I Tamed the Voice in My Head, Reduced Stress Without Losing My Edge, and Found Self-Help That Actually Works”]:
Dan Harris: Life is not predictable, most things are not in your control. But can you learn over time to get more supple and skillful at surfing the waves rather than drowning in them? And that all speaks to this notion of happiness being a skill that is developed all the time throughout your life. You can just keep getting better and better at this.
Sean Pyles: To share your thoughts about money and happiness, call or text us on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected] This episode was produced by Tess Vigeland and me. We had fact checking help from Courtney Neidel and Liz Renter. Kaely Monahan mixed our audio. And a big thank you to the folks on the NerdWallet copy desk for all their help.
Sara Rathner: And here’s our brief disclaimer. We’re not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Sean Pyles: And with that said, until next time, turn to the Nerds.