Why Would You Choose to Earn Less?

In March 2008, I quit a full time job that earned around $50,000 per year. I did not return to the workplace.

My wife’s closest friend has a marketable college degree and a substantial amount of successful organizational experience. She’s made the active choice to be a stay at home mother to her two children, giving up that income.

A friend of mine had a factory job that paid $12 an hour. One day, he turned in his resignation, replacing that job with another where he swept floors for $8 an hour.

In each case, a person walked away from a job or a career, actively choosing another route that earned significantly less. In our modern world, what would possess someone to make this unorthodox choice? Why are there millions of stay-at-home parents out there? Why do people walk away from jobs that pay well and take jobs that pay less?

It’s simple. Money isn’t everything.

A long while back, I read and >reviewed Daniel Gilbert’s excellent book Stumbling on Happiness. Today, when I reflect upon that book, I realize that one little point he made stuck in my mind. Gilbert wrote about a study that showed people’s happiness with their lives and correlated that information with their salary.

What did he find? $40,000 is a truly magic number. Below that number, people were much less happy with their lives – people with a household income of $20K or $30K were generally less happy with their state of living than people earning $40K.

What’s interesting, though, is that people earning over $40K were not any happier with their lives. Additional income did nothing to increase people’s happiness with the state of their life.

Gilbert offered a bunch of his own conclusions from that study, but my conclusion was pretty simple: any income above a certain surprisingly-low threshold does not make you happier. I won’t say that threshold is exactly $40K – it’s not, because that number varies a lot based on location, number of dependents, and so on – but I will say that the magical amount of “enough” income is much lower than many people think.

What does that “enough” income represent? It represents the amount of money needed to keep a roof over your head, food on your plate, a car in your driveway, and a little bit of breathing room to enjoy life. Income beyond that does nothing more than inflate our basic standard of living – a nicer house, a nicer car, a nicer vacation.

But over the long run, those “nicer” things don’t contribute at all to lasting happiness. Once we have those “nicer” things, we’re right back where we started, wanting something nicer yet. Our Honda becomes the Acura we’ve wanted, and then before long we want a BMW. Our 1,000 square foot house becomes a 1,600 square foot house, then we want a 2,400 square foot house. Our camping vacation in Minnesota becomes a weeklong trek through Yellowstone, then we want weeklong treks through every national park. Our freebie cell phone becomes a Razr, then we want an iPhone.

Once our bases are covered, more of the same doesn’t bring us fulfillment. Instead, fulfillment comes from the things that make you happy and bring you value in life. It might be that your “value” comes from having a big bank account or the corner office – and that’s great.

But for a lot of people, whether they’re acting on it or not, fulfillment comes from other sources. Perhaps it comes from being a parent. Perhaps it comes from work that they’re passionate about. Maybe it comes from minimalist living.

Whatever that fulfillment is, it rarely comes from acquiring more of the same things you already have.

People ask why I’m so interested in personal finance. “It’s got to be incredibly boring to read about 401(k)s all day.” To me, personal finance is just a series of techniques that allows you to widen your horizons, to make things in your life secure so that you can take that leap and fall headfirst into the things in your life that bring you fulfillment. Whatever they may be. It’s a story that I never get tired of investigating or talking about.

Whenever I see someone making the active choice to earn less, I usually smile. Why? Because there’s no clearer sign that they’ve figured this all out for themselves on some level.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.