The Very Important Relationship Between Income and Quality of Life

How Much Money Do You Have to Make to Enjoy a Really Good Life?

“In terms of quality of life,” my accountant told me 20 years ago, “there are really only two income levels: less than a hundred grand per year and more than a hundred grand.”

A hundred grand back then would be worth $250,000 today. So let’s use $250,000 as our dividing line now—the “income barrier” you would have to break through today in order to enjoy the best quality of life that money can buy.

This is an income based on a family of four. For single people, couples, and one-child families, it could be lower. And it would vary somewhat depending on your location. For example, it costs a great deal more to live in New York City than it does in Boise, Idaho.

That said, $250,000 is a good target number for us to work with as an illustration of how your quality of life might change as your income rises.

Income Level 1: You’re making less than $50,000.

For a family of four with a household income of less than $50,000, life is tough. You are renting a crappy apartment or dilapidated house, driving a car that breaks down regularly, clipping grocery coupons (if not food stamps), and accumulating debt. Debt is always a huge, omnipresent problem because—for some incomprehensible reason—credit has been extended to you.

Income Level 2: You’re making $50,000-70,000.

You are living in a small but decent place and driving an okay car. But you are struggling to pay your bills on time. You are trying to save money, but “emergencies” keep eating it up.

Income Level 3: You’re making $70,000-120,000.

You are living in a nice house, driving a nice car, and paying your bills on time. You want to save a decent percentage of your income, but to do that you have to forgo regular dining out and nice vacations.

Income Level 4: You’re making $120,000-250,000.

Things are good. Your house is not showy, but you have everything you need… and a lot of what you want. You can drive a luxury car, but you may prefer to drive something more sensible. As you move up in this income range, you can go out to dinner whenever you like and take a nice vacation every year. Debt is manageable, even minimal. You’re putting money away for the kids’ college education and for retirement. You expect to be able to retire at 65.

Income Level 5: You’re making more than $250,000.

You’ve got it all: a nice house, luxury cars, dinners out, very nice vacations, and a growing savings account. In other words, a financially worry-free life. If you are smart with your spending, you can retire early.

Income Level 6: You’re making millions!

You can pretty much buy whatever you want without worrying about the cost. You’re happy and comfortable—but no happier or more comfortable than when you were making $250,000.

The takeaway is this: If you’re already earning more than $250,000, relax and enjoy it! If you’re making less than $250,000, take full advantage of the advice I give you each week to help you increase your income. 

Most of the popular books on generating income and creating wealth fall into one of two categories: books that talk about budgeting and saving (Suze Orman and David Bach), and books that talk about investing.

I’m not opposed to budgeting, and I’m a big fan of saving. But neither of these strategies is going to change your life if you are in the under-$250,000 income group.

Forget the four-hour workweek—it’s not going to happen. To get yourself to the next income level, you have to work overtime, get a second (part-time) job, or start your own home-based business.$

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