Money Buys Happiness

Money Buys Health?

2008-06-08T16:55:00.001-07:00

Or at least lack of illness-causing germs?

As a general rule, the higher the price [of a hotel room] the cleaner the room. "I did a study about seven years that found if you paid more than $50 a night, there was a much greater chance that the room was regularly disinfected," [University of Arizona microbiologist Charles Gerba, PhD, a leading researcher better known in the science world as "Dr. Germ"] tells WebMD. "Rooms under $50 weren't." But no matter the price, the single place where you'll find the most surface germs: the TV remote. "It's never cleaned," he says.

Germs Are Everywhere - Really by Sid Kirchheimer, WebMD.com, 1/31/2005

Money Buys Happiness - When You Spend It On Others

2008-03-21T16:37:00.000-07:00

Money buys happiness - if you spend it on someone else, Reuters, March 20, 2008:

WASHINGTON (Reuters) - Money can buy happiness, but only if you spend it on someone else, researchers reported on Thursday.

Spending as little as $5 a day on someone else could significantly boost happiness, the team at the University of British Columbia and Harvard Business School found.

Their experiments on more than 630 Americans showed they were measurably happier when they spent money on others -- even if they thought spending the money on themselves would make them happier.

"We wanted to test our theory that how people spend their money is at least as important as how much money they earn," said Elizabeth Dunn, a psychologist at the University of British Columbia.

They asked their 600 volunteers first to rate their general happiness, report their annual income and detail their monthly spending including bills, gifts for themselves, gifts for others and donations to charity.

"Regardless of how much income each person made, those who spent money on others reported greater happiness, while those who spent more on themselves did not," Dunn said in a statement.

Dunn's team also surveyed 16 employees at a company in Boston before and after they received an annual profit-sharing bonus of between $3,000 and $8,000.

"Employees who devoted more of their bonus to pro-social spending experienced greater happiness after receiving the bonus, and the manner in which they spent that bonus was a more important predictor of their happiness than the size of the bonus itself," they wrote in their report, published in the journal Science.

"Finally, participants who were randomly assigned to spend money on others experienced greater happiness than those assigned to spend money on themselves," they said.

They gave their volunteers $5 or $20 and half got clear instructions on how to spend it. Those who spent the money on someone or something else reported feeling happier about it.

"These findings suggest that very minor alterations in spending allocations -- as little as $5 -- may be enough to produce real gains in happiness on a given day," Dunn said.

This could also explain why people are no happier even though U.S. society is richer.

"Indeed, although real incomes have surged dramatically in recent decades, happiness levels have remained largely flat within developed countries across time," they wrote.

Study: Even Small Copayments Deter Preventative Health Care

2008-01-23T22:42:00.000-08:00

Even small copay deters mammogram use, study says:

PROVIDENCE, Rhode Island (Reuters) - Requiring even a small co-payment dramatically reduces the likelihood that women will get regular mammograms to detect breast cancer, researchers reported on Wednesday.

Screening rates from 2001 through 2004 were nearly 11 percent lower for women who had to contribute a co-pay as low as $12, compared to women whose mammograms were free, researchers from Brown and Harvard universities found.... even though nearly all women know the value of mammograms...

Reuters, January 23, 2008

Money Quotes: Jim Cramer

2008-01-21T18:45:00.001-08:00

People always say money can't buy happiness, but I've never found that argument compelling. Money can buy peace of mind; it can take care of you and your loved ones, and to a certain extent money means freedom.

Financial guru Jim Cramer, Stay Mad for Life (2007), p. 17.

Inheritance Humor

2008-01-10T13:33:00.000-08:00

Dan was a single guy living at home with his father and working in the family business. When he found out he was going to inherit a fortune when his sickly father died, he decided he needed a wife with which to share his fortune.

One evening at an investment meeting he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away. "I may look like just an ordinary man," he said to her, "but in just a few years, my father will die, and I'll inherit 20 million dollars."

Impressed, the woman obtained his business card and three days later, she became his stepmother.

- Source unknown

Study: Money, Mental Health Strongly Related

2007-11-30T12:19:00.000-08:00

A Gallup study reports that there is a strong relationship between income and mental health:

While the substantial majority of Americans rate their mental health today as excellent or good, there are significant variations in this self-reported mental health measure by one's socioeconomic position. Those with higher incomes are much more likely than those with lower incomes to report excellent mental health, and this relationship persists even when other variables such as age, education, gender, and marital status are taken into account.

Wealth inequality 10 times income inequality in United States

2007-11-05T22:50:00.000-08:00

The wealth inequality between the bottom 10% and the top 10% in America is greater than ten times the income inequality between the bottom 10% and the top 10% in America, suggesting, perhaps, that much wealth is tied up in unrealized appreciation of family businesses, real estate, and securities portfolios, that higher earners put their money to work while low earners do not, and/or that the low income earners do not have enough money left over after meeting expenses to invest or save:

The best way to give people a sense of where they stand is to lay out some data. Every three years the Federal Reserve Board conducts a national survey that tracks the financial health of American households.

The Fed slices and dices this stuff with the vigor of an Iron Chef; the result is a rich, if dry, array of offerings on household net worth, pension and income levels, plus other demographic side dishes.

Whenever I slip these tidbits into cocktail party chatter, people are surprised to realize how little money it takes to win a gold star from the Fed. If you and yours are bringing in $40,000 a year, you're doing better than half the households in America.

Or, as a Washington think tank recently pointed out: If you're a teacher married to a policeman, your combined household income puts you in the top 25 percent of all households in the nation.

Below you'll find the average income picture sliced into income levels. Think of this chart as a parking ramp. If your household income is $170,000, you're among the nation's top 10 percent wage earners and get to park on the top floor.

Anything in six figures means you're in the top 20 percent and get to park on the floor right below.

Annual income parking ramp
Income level (percentile) Median income (rounded)

Level VI (90 to 100) $170,000
Level V (80 to 89.9) $99,000
Level IV (60 to 79.9) $65,000
Level III (40 to 59.9) $40,000
Level II (20 to 39.9) $24,000
Level I (less than 20) $10,000

Source: Before-Tax Family Income, 2001 Federal Reserve Board Survey

So does making $170,000 a year make a person rich? Last year a plurality of respondents (29 percent) in a survey by The New York Times said that "rich" was making between $100,000 and $200,000 a year. Unfortunately, the survey didn't break out how many people in that salary range considered themselves rich. If the people I talk to are any indication, very few do.

Of course, income is only one part of the equation defining where you stand. Net worth is more telling. Net worth, as every financially precocious schoolchild knows, is the sum of one's assets -- home equity, investments, savings accounts, retirement funds, cars, furnishings and such things as jewelry, furs, wine collection, old baseball cards -- minus all outstanding liabilities such as mortgage balance, revolving and credit card debt, college loans and so on. Across all households, the national median net worth is $86,000. Half of your fellow citizens have more than that, half less. As you see, there's a massive disparity between the haves and have-nots.

Net worth parking ramp
Net worth (percentile) Median net worth (rounded)

Level VI (90 to 100) $833,600
Level V (80 to 89.9) $263,100
Level IV (60 to 79.9) $141,500
Level III (40 to 59.9) $62,500
Level II (20 to 39.9) $37,200
Level I (less than 20) $7,900

Source: Family Net Worth, 2001 Federal Reserve Board Survey

Where Do You Stand On America's Wealth Spectrum?, Bankrate.com, 11/1/2007

Also clear is that the distinction between wealth and income remains lost on the vast majority of Americans and most journalists, as well.

Why Money Doesn't Buy Happiness

2007-10-15T23:13:00.000-07:00

Why Money Doesn't Buy Happiness, Newsweek Web Exclusive, 10/14/2007, by Sharon Begley:

All in all, it was probably a mistake to look for the answer to the eternal question—"Does money buy happiness?"—from people who practice what's called the dismal science. For when economists tackled the question, they started from the observation that when people put something up for sale they try to get as much for it as they can, and when people buy something they try to pay as little for it as they can. Both sides in the transaction, the economists noticed, are therefore behaving as if they would be more satisfied (happier, dare we say) if they wound up receiving more money (the seller) or holding on to more money (the buyer). Hence, more money must be better than less, and the only way more of something can be better than less of it is if it brings you greater contentment. The economists' conclusion: the more money you have, the happier you must be.

Depressed debutantes, suicidal CEOs, miserable magnates and other unhappy rich folks aren't the only ones giving the lie to this. "Psychologists have spent decades studying the relation between wealth and happiness," writes Harvard University psychologist Daniel Gilbert in his best-selling "Stumbling on Happiness," "and they have generally concluded that wealth increases human happiness when it lifts people out of abject poverty and into the middle class but that it does little to increase happiness thereafter."

That flies in the face of intuition, not to mention economic theory. According to standard economics, the most important commodity you can buy with additional wealth is choice. If you have $20 in your pocket, you can decide between steak and peanut butter for dinner, but if you have only $1 you'd better hope you already have a jar of jelly at home. Additional wealth also lets you satisfy additional needs and wants, and the more of those you satisfy the happier you are supposed to be.

The trouble is, choice is not all it's cracked up to be. Studies show that people like selecting from among maybe half a dozen kinds of pasta at the grocery store but find 27 choices overwhelming, leaving them chronically on edge that they could have chosen a better one than they did. And wants, which are nice to be able to afford, have a bad habit of becoming needs (iPod, anyone?), of which an advertising- and media-saturated culture create endless numbers. Satisfying needs brings less emotional well-being than satisfying wants.

The nonlinear nature of how much happiness money can buy—lots more happiness when it moves you out of penury and into middle-class comfort, hardly any more when it lifts you from millionaire to decamillionaire—comes through clearly in global surveys that ask people how content they feel with their lives. In a typical survey people are asked to rank their sense of well-being or happiness on a scale of 1 to 7, where 1 means "not at all satisfied with my life" and 7 means "completely satisfied." Of the American multimillionaires who responded, the average happiness score was 5.8. Homeless people in Calcutta came in at 2.9. But before you assume that money does buy happiness after all, consider who else rated themselves around 5.8: the Inuit of northern Greenland, who do not exactly lead a life of luxury, and the cattle-herding Masai of Kenya, whose dung huts have no electricity or running water. And proving Gilbert's point about money buying happiness only when it lifts you out of abject poverty, slum dwellers in Calcutta—one economic rung above the homeless—rate themselves at 4.6.

Studies tracking changes in a population's reported level of happiness over time have also dealt a death blow to the money-buys-happiness claim. Since World War II the gross domestic product per capita has tripled in the United States. But people's sense of well-being, as measured by surveys asking some variation of "Overall, how satisfied are you with your life?," has barely budged. Japan has had an even more meteoric rise in GDP per capita since its postwar misery, but measures of national happiness have been flat, as they have also been in Western Europe during its long postwar boom, according to social psychologist Ruut Veenhoven of Erasmus University in Rotterdam. A 2004 analysis of more than 150 studies on wealth and happiness concluded that "economic indicators have glaring shortcomings" as approximations of well-being across nations, wrote Ed Diener of the University of Illinois, Urbana-Champaign, and Martin E. P. Seligman of the University of Pennsylvania. "Although economic output has risen steeply over the past decades, there has been no rise in life satisfaction … and there has been a substantial increase in depression and distrust."

That's partly because in an expanding economy, in which former luxuries such as washing machines become necessities, the newly affluent don't feel the same joy in having a machine do the laundry that their grandparents, suddenly freed from washboards, did. They just take the Maytag for granted. "Americans who earn $50,000 per year are much happier than those who earn $10,000 per year," writes Gilbert, "but Americans who earn $5 million per year are not much happier than those who earn $100,000 per year." Another reason is that an expanding paycheck, especially in an expanding economy, produces expanding aspirations and a sense that there is always one more cool thing out there that you absolutely have to have. "Economic success falls short as a measure of well-being, in part because materialism can negatively influence well-being," Diener and Seligman conclude.

If money doesn't buy happiness, what does? Grandma was right when she told you to value health and friends, not money and stuff. Or as Diener and Seligman put it, once your basic needs are met "differences in well-being are less frequently due to income, and are more frequently due to factors such as social relationships and enjoyment at work." Other researchers add fulfillment, a sense that life has meaning, belonging to civic and other groups, and living in a democracy that respects individual rights and the rule of law. If a nation wants to increase its population's sense of well-being, says Veenhoven, it should make "less investment in economic growth and more in policies that promote good governance, liberties, democracy, trust and public safety."

(Curiously, although money doesn't buy happiness, happiness can buy money. Young people who describe themselves as happy typically earn higher incomes, years later, than those who said they were unhappy. It seems that a sense of well-being can make you more productive and more likely to show initiative and other traits that lead to a higher income. Contented people are also more likely to marry and stay married, as well as to be healthy, both of which increase happiness.)

If more money doesn't buy more happiness, then the behavior of most Americans looks downright insane, as we work harder and longer, decade after decade, to fatten our W-2s. But what is insane for an individual is crucial for a national economy—that is, ever more growth and consumption. Gilbert again: "Economies can blossom and grow only if people are deluded into believing that the production of wealth will make them happy … Economies thrive when individuals strive, but because individuals will strive only for their own happiness, it is essential that they mistakenly believe that producing and consuming are routes to personal well-being." In other words, if you want to do your part for your country's economy, forget all of the above about money not buying happiness.

New York Woman Seeks Rich Husband on Craigslist

2007-10-10T15:18:00.000-07:00

An anoymous New York woman, apparently presuming that money will buy her some sort of happiness in Manhattan - she termed $1 million per year as middle class in the Big Apple - posted a personal ad on newyork.craigslist.org seeking a rich husband and managed to stir up some controversy in the process:

NEW YORK (Reuters) - Deal or no deal? An online exchange between a woman looking for a husband who earns more than $500,000 a year and a mystery Wall Street banker, who assessed her potential for romance as a business deal, has cause quite an Internet stir.

The anonymous 25-year-old woman recently posted an ad on the free online New York community Web site Craigslist, http://newyork.craigslist.org/, appealing for advice on how to find a wealthy husband.

"I know how that sounds, but keep in mind that a million a year is middle class in New York City, so I don't think I'm overreaching at all," the woman, who described herself as "spectacularly beautiful" and "superficial," wrote.

"I dated a business man who makes average around 200 - 250. But that's where I seem to hit a roadblock. $250,000 won't get me to Central Park West," she said, asking questions like "where do rich single men hang out?"

The mystery banker, who said he fit the bill, offered the woman an analysis of her predicament, describing it as "plain and simple a crappy business deal."

"Your looks will fade and my money will likely continue into perpetuity ... in fact, it is very likely that my income increases but it is an absolute certainty that you won't be getting any more beautiful!" the banker wrote.

"So, in economic terms you are a depreciating asset and I am an earning asset," he said. "Let me explain, you're 25 now and will likely stay pretty hot for the next 5 years, but less so each year. Then the fade begins in earnest. By 35 stick a fork in you!"

"It doesn't make good business sense to "buy you" (which is what you're asking) so I'd rather lease," he said.

Woman seeks rich husband, banker says "crappy" deal, 10/10/2007

Money, Dating, Marriage

2007-09-29T13:18:00.002-07:00

Opinion and commentary on dating and marriage by the well-to-do and wealthy:

Rich People Have Dating Problems:

But why is it that money and dating go hand in hand? Yesterday, a reader sent us a post from Craigslist written by a "spectacularly beautiful" woman who is looking for men making $500,000 or more. The post has since been deleted, but you can see it below one of the many responses it prompted. She may have been honest about her search, but she was ridiculed and lashes out at her detractors, "the reality is in New York there is only so much of the 'pie' and I didn't understand why plain or dumpy women are getting away with all the pieces." What ever happened to making your own cash and being satisfied -- and proud -- of your own accomplishments? Has nothing changed in the last fifty years? Because a woman once said, "Don't you know that a rich man is like a pretty girl? You don't marry her just because she's pretty. But, my goodness, doesn't it help?" Yeah, that was Marilyn Monroe, in Gentlemen Prefer Blondes... 1953.

Money Quote: Relative Wealth

2007-09-11T21:41:00.001-07:00

"A wealthy man is one who earns $100 a year more than his wife's sister's husband." - H.L. Mencken

Research: Money Makes You Happy When...

2007-09-11T21:27:00.000-07:00

While the various studies on money and happiness frequently conclude that the correlation between income, wealth, and happiness is weak or not as strong as 'people' may assume, one study found that "wealth generally allowed 'substantially better well-being, and less sadness and loneliness' [for those with disabilities]".

When Money DOES Buy Happiness, Robert Roi Britt, LiveScience.com, 4/6/2005

PS: When MBH comes across news articles, research, opinion, etc., related to our theme, we will post it - even when, like here - we're a little late to the game! Chances are you missed this story, and if you didn't, here's another chance to reconsider it.

Getting by on a Few Million

2007-09-11T14:20:00.000-07:00

By almost any definition — except his own and perhaps those of his neighbors here in Silicon Valley — Hal Steger has made it.

Mr. Steger, 51, a self-described geek, has banked more than $2 million. The $1.3 million house he and his wife own on a bluff overlooking the Pacific Ocean is paid off. The couple’s net worth of roughly $3.5 million places them in the top 2 percent of families in the United States.

Yet each day Mr. Steger continues to toil in what a colleague calls “the Silicon Valley salt mines,” working as a marketing executive for a technology start-up company, still striving for his big strike. Most mornings, he can be found at his desk by 7. He typically works 12 hours a day and logs an extra 10 hours over the weekend.

“I know people looking in from the outside will ask why someone like me keeps working so hard,” Mr. Steger says. “But a few million doesn’t go as far as it used to. Maybe in the ’70s, a few million bucks meant ‘Lifestyles of the Rich and Famous,’ or Richie Rich living in a big house with a butler. But not anymore.”

Silicon Valley is thick with those who might be called working-class millionaires — nose-to-the-grindstone people like Mr. Steger who, much to their surprise, are still working as hard as ever even as they find themselves among the fortunate few. Their lives are rich with opportunity; they generally enjoy their jobs. They are amply cushioned against the anxieties and jolts that worry most people living paycheck to paycheck.

But many such accomplished and ambitious members of the digital elite still do not think of themselves as particularly fortunate, in part because they are surrounded by people with more wealth — often a lot more. ....

In Silicon Valley, Millionaires Who Don’t Feel Rich, Gary Rivlin, New York Times, 8/5/2007

Money & Work in the Virtual World of Second Life

2007-09-11T13:57:00.000-07:00

A New York Times article, Even in a Virtual World, 'Stuff' Matters reports on consumerism and materialism in the online fantasy world of Second Life:

When people are given the opportunity to create a fantasy world, they can and do defy the laws of gravity (you can fly in Second Life), but not of economics or human nature. Players in this digital, global game don’t have to work, but many do. They don’t need to change clothes, fix their hair, or buy and furnish a home, but many do. They don’t need to have drinks in their hands at the virtual bar, but they buy cocktails anyway, just to look right, to feel comfortable.

Second Life residents find ways to make money so they can spend it to do things, look impressive, and get more stuff, even if it’s made only of pixels. In a place where people should never have to clean out their closets, some end up devoting hours to organizing their things, purging, even holding yard sales. ....

Second Life exclusives do exist: A magic wand was a hot item at one point, and the sex bed is currently in demand. (“If you lie on it with more than one avatar, it’s like you’re in a porn movie,” Mr. Au explained.)

But the more mundane items are what really drive the economy: clothes, gadgetry, night life, real estate. “People buy these huge McMansions in Second Life that are just as ugly as any McMansions in real life, because to them that is what’s status-y,” Mr. Wallace said. “It’s not as easy as we think to let our imaginations run wild, in Second Life or in real life.” .... “The average person wants a ranch house or a beach house” ....

Second Life players are evidently discovering what inheritors have struggled with for generations: It’s not as much fun to spend money you haven’t earned. Apparently, despite the common lottery-winning fantasies, all play and no work is a dull game, after all.

“People don’t take jobs just for the money,” said Dan Siciliano, who teaches finance at Stanford Law School and has studied the economies of virtual worlds. “They do it to feel important and be rewarded.”

And to buy more things. ...

Robert J. Bloomfield, a behavioral economist at Cornell University, studies investor behavior in the real world and recently became interested in how investors behave similarly in Second Life. “We know the little guy makes lots of dumb mistakes,” Professor Bloomfield said. “They tend to be overly impressed by the trappings of success. We see that magnified in Second Life.” ....

By Shira Boss, 9/9/2007

Charles Dickens Quote on Income & Happiness

2007-09-04T16:43:00.001-07:00

Annual income twenty pounds, annual expenditure nineteen six, result happiness.
Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

- Charles Dickens, David Copperfield

Money, Real Estate, Happiness: "One Family's Journey Into a Subprime Trap"

2007-08-22T14:39:00.001-07:00

From the Wall Street Journal's RealEstateJournal.com:

Nearly two years ago, Mario and Leticia Montes found a home they loved, a gray stucco bungalow with a hot tub in the backyard in a middle-class neighborhood of Orange County [California - MBH].

The price was a major stretch at $567,000. But the couple, who had sold a home a few years earlier to move to a better area, was tired of renting. Mr. and Mrs. Montes convened a meeting with their two teenage daughters around the kitchen table to hash out the implications. "We agreed we wanted to be homeowners again," says Mr. Montes, "even if it meant the end of vacations and not eating out as often."

Like many people who jumped into the rising housing market in recent years, they had little money for a down payment and chose a loan that would hold their monthly payments down for the first two years, then "reset" to a much higher level. Mr. and Mrs. Montes say their mortgage broker assured them they would be able to refinance in a couple of years to keep their payments affordable.

With a December "reset" on their loan looming, however, the refinancing option now looks impossible. A friend who works as a loan officer called with some bad news this week: Similar homes in their area have been selling for $535,000 to $565,000 recently. That means the Monteses' loan balance may exceed the value of their home.

The Monteses are caught in a trap -- one that hundreds of thousands of people could face as the housing market totters and the easy credit of recent years dries up. They in effect bet that the boom in housing prices would continue. It was more important to hop onto the escalator than to wait until they could afford to make the leap according to traditional measures.

And with thousands of mortgage banks and brokers threatened with extinction, lenders that embraced all kinds of risky loans two years ago are enforcing increasingly strict standards. They are refusing even to consider extending new credit to people like the Monteses who lack any equity in their homes.

"We have a disaster on our hands," says Mr. Montes, a 48-year-old warehouse manager. He fears he won't be able to handle the payments after the December reset and wonders whether the family can avert foreclosure. "At this point," he says, "we really don't have a plan."

Until recently, the Montes family didn't seem like the type that would find itself faced with foreclosure. They live in a solid neighborhood and are both employed and in good health. "My wife and I make pretty good money," says Mr. Montes. Mrs. Montes works as a school secretary. Together, they earned nearly $90,000 last year.

But they already pay about $38,400 a year on their home loans, even before taxes and insurance. In December, when their primary loan "resets" to a higher rate, that cost will rise to about $50,000 a year, Mr. Montes says.

Tightening Standards

Lenders have been tightening their standards for the past year in the face of rising defaults and growing jitters among the investors who provide funding for loans. That tightening has accelerated in the past two weeks as many lenders -- uncertain at what price they might be able to sell loans -- have stopped making all but the safest ones.

"It's getting worse and worse," says Jeff Lazerson, chief executive of Mortgage Grader, a mortgage broker in Laguna Niguel, who tried to help the Montes family last spring but concluded even then that they couldn't qualify for a new loan. Many people who have been counting on a refinancing to ease their debt burdens will find that's now impossible, he says: "It's either work 24 hours a day to make ends meet [with the existing loan] or mail the keys back to the bank."

Being stuck with little or no home equity is no longer a rare situation. Christopher Cagan, director of research at First American CoreLogic, a housing and mortgage data supplier in Santa Ana, recently found that nearly 7% of 32 million U.S. households studied as of December owed more than their homes were worth, based on computer estimates of the property values. An additional 4% had home equity of 5% or less. Since then, house prices have edged down in much of the country, erasing more home equity.

Without a cushion of equity, homeowners are vulnerable to losing their homes to foreclosure if they suddenly are out of work, suffer a serious illness or, like the Montes family, face a jump in mortgage payments.

Partly as a result, foreclosures are surging. Moody's Economy.com, a research firm in West Chester, Pa., projects that lenders will acquire about 760,000 homes through foreclosure this year and 935,000 in 2008, up from an average of about 440,000 a year from 2000 through 2006.

When the Monteses decided to buy the bungalow in 2005, they had only a so-so credit record and little savings. So they settled for a "subprime" loan, with costlier terms than those available in the prime market.

The Monteses' primary loan is the type that became the dominant subprime mortgage during the housing boom of the first half of this decade -- and now has become a symbol of misguided lending, swept away by regulatory fiat and investors' flight from mortgages deemed too risky. These loans are known in the trade as 2/28 mortgages. The interest rate is fixed at a relatively low rate for the first two years (5.45% in the Monteses' case), then floats at a predetermined margin above an interest-rate index for the next 28 years. In many cases, that "reset" of the interest rate after two years leads to a monthly payment increase of 30% or more.

U.S. lenders originated about $600 billion of subprime home loans in 2006, or 20% of all home mortgages, according to Inside Mortgage Finance, a trade publication. About 56% of those subprime loans were 2/28 mortgages, says Keith Ernst, senior policy counsel at the Center for Responsible Lending, a nonprofit research and lobbying group in Durham, N.C.

The lending industry touted the 2/28 loans as "affordability" mortgages, because they helped people buy houses that wouldn't have been affordable with the higher immediate payments on 30-year fixed-rate mortgages. To make the loans even more affordable in the early years, they were often structured as "interest-only," meaning that principal payments were deferred until later.

Lenders sometimes described these loans as "credit-repair tools." The idea was that people with blemished credit records could take out a 2/28 subprime loan and keep up with the payments long enough to improve their credit records and qualify for a less-costly prime loan.

Earlier this year, regulators ordered subprime lenders to make such loans based on the borrower's ability to afford the loan after the reset, not just for the initial two years, as was the common practice. That change, along with tighter guidelines from rating agencies and risk-aversion among investors, has recently prompted major subprime lenders to stop making 2/28 loans. Instead, they are making more subprime loans that carry a fixed rate for at least five years, as well as ones that hold down payments by stretching the payments over 40 years instead of 30.

The Montes family got their loan through a mortgage broker in Rancho Cucamonga. Using what was then a common formula, the broker offered to arrange for two loans, one to cover about 80% of the home price and the other, a so-called piggyback loan, for the rest. For the first two years, their total monthly mortgage payments are about $3,200. The loans are initially interest-only.

Mr. Montes recalls feeling edgy about whether he would be able to afford the higher costs -- about $900 more per month -- due to take effect after two years. But he says the broker assured him he could refinance before those costs kicked in.

Mr. Montes preferred not to name the broker publicly because the broker has a business connection with a relative of the Monteses. The broker declined to comment.

Mrs. Montes says she was apprehensive about the broker's assurances. "But I blame that on that I don't understand the lingo they were talking," she says. "It's a scary experience.... All I could see was all these numbers flash before me... I said, 'Mario, I hope you don't get into something that is going to hurt us.'"

They moved into their home and hung a sign on the front door reading, "Life is a daily celebration of love." Within months, things started going wrong. The Monteses received a letter informing them their property taxes had been reassessed based on the $567,000 sale price instead of its previous $389,000 value. That raised their taxes to $6,000 from $2,900 a year and would have increased their monthly payments (including the mortgages and taxes) to $3,931. "Whoa!" Mr. Montes recalls saying. "I can't afford this. I went into emergency mode."

He was able to successfully challenge part of the tax increase, but another shock came in late February of this year when he began looking at refinancing possibilities. Mr. Montes says four brokers -- including the one who arranged the original loan -- turned him away, saying it wouldn't be possible to refinance because, with home prices flat at best, the family had little or no equity in the home. Worse for the Monteses, they learned that they faced a $12,000 prepayment penalty if they refinanced within three years of the original mortgages -- something that Mr. Montes says wasn't made clear to him when he took out those loans.

Then another broker told him in March that his home had gained enough in value for him to qualify for a more affordable loan. They paid for an appraisal and were told their home was worth $620,000, or about $53,000 more than they paid in 2005. The Monteses were jubilant, thinking their home was saved. But more than three months later, the broker outlined a package that would have involved payments far higher than indicated in earlier meetings.

Next, Mr. Montes sought the help of Laurie Arnold, a former neighbor who is a loan officer at IndyMac Bancorp, a large lender based in Pasadena. In another blow, Mr. Montes learned that the appraisal he had done in March -- at a cost of $375 -- is no longer valid. Ms. Arnold sounded out appraisers and concluded that there was no hope the house could appraise for enough to allow the family to qualify for a refinancing. Based on recent sale prices and other data, Zillow.com, an online service that provides home-value information, estimates that the price of a typical home in Fullerton is down 6.7% from a year ago.

The Monteses now hope for help from the company that services their loan, America's Servicing Co., a unit of Wells Fargo & Co. Mr. Montes telephoned America's Servicing Tuesday to ask whether it might consider a modification in the terms of the loans to help him keep the payments affordable beyond the reset date. An employee of the servicing company said that wouldn't be possible if the family has no home equity, Mr. Montes says.

A Wells spokesman declined to comment on the Monteses' loan but said the bank reviews requests for loan modifications "on a case-by-case basis and works with customers on solutions that address their individual financial needs."

Mr. Montes says the family may try to sell the house, but that would be tricky in today's weak market. Or they could try to trim other expenses and keep meeting the higher monthly home payments that are due to take effect in December.

Borrowing for College

There is very little wiggle room. Mr. and Mrs. Montes also have two car loans, with payments totaling about $700 a month, and are borrowing more money to help put their elder daughter through college. They recently had to tell their younger daughter they couldn't afford $70 a month for her to take piano lessons.

The couple now eat out once or twice a month, instead of once or twice a week before they bought the house. They have yet to visit a nearby jazz club they had hoped to frequent. The trips they used to take to Lake Tahoe now are out of the question.

To bring in a bit more income, Mr. Montes two weeks ago found a weekend job as a bartender for a catering company. He says he might be able to take on a third job.

"Bottom line, it's our little home," Mrs. Montes told a visitor one evening in April as tears welled in her eyes. "We're going to keep it. Hopefully, we won't go down and if we do, we're going to go down with a fight."

Count Your Blessings - and Your Money, says Suze Orman

2006-07-26T16:06:00.000-07:00

In her latest Yahoo column, financial expert/author Suze Orman comments on the recent money/happiness aspects of last week's New York magazine article on happiness:

I'd be the last person to tell you that money can buy happiness, but I'm fascinated by recent reports insisting that money isn't a major factor in whether or not people are happy. Please. Positive psychology (that's what academicians call the study of human happiness) is a hot field of research, and the folks at the Positive Psychology Center at the University of Pennsylvania have come up with an interesting questionnaire that's been getting a lot of press.

Yet nowhere in the 24-question Authentic Happiness Inventory does the issue of money -- or, more important, our desire for financial security -- merit a mention. Hmm.

A Conspicuous Omission
Given how expensive our lives are, how can money not be a factor? We have huge mortgages and tapped-out home equity lines of credit weighing on us. College tuition bills have never been more daunting. Our employers are less likely to give us a defined benefit pension, so the onus is on us -- and our 401(k)s -- to figure out how we'll be able to afford retirement. If we're lucky enough to get health insurance through our employer, the trend is for each of us to be responsible for a greater portion of the bill.

I would love to live in a world where authentic happiness was achievable solely from the richness of relationships, but I'm a realist. And the reality I see -- and that so many of you write to me about -- is one in which money plays into our ability to be truly happy.

Yes, I've heard about the study of lottery winners that showed they were not relatively happier than those who hadn't won the lottery, and the one reporting that folks on the Forbes 100 list (the wealthiest people alive) weren't much happier than the average American.

Those studies show that being filthy rich doesn't ensure happiness, but that's not something most of us have to contend with.

I'm talking about how your happiness is affected when you're worried about how you'll pay the bills at the end of the month, save for the future, and be able to afford to retire. In other words, how you'll make ends meet. When those worries are your reality, I think it's ridiculously hard to be authentically happy.

Happiness Is Income-Sensitive
Apparently, I'm not the only one who thinks so. A survey conducted earlier this year by the Pew Research Center reports that, overall, just 34 percent of respondents are very happy.

But when you start to slice the findings by income, it gets very interesting: 49 percent of respondents with an annual family income above $100,000 say they are very happy. When income falls between $75,000 and $100,000, the very-happy contingent falls to 38 percent. Just 24 percent of those with incomes below $30,000 said they were very happy.

I want to be quite clear: I'm in no way saying that money is all that matters. But I'm so tired of how scared everyone is to admit that money does in fact make a difference in the quality of our lives.

A Family Affair
Most of you would probably say that what makes you truly happy is your family and the love you share in your relationships, and I couldn't agree more. But money comes into play in those relationships, too.

When I talk about money this way to a group, invariably someone comes up to me afterward and give me a "tsk, tsk" look and says, "Suze, you are so wrong. Money isn't the key to life, this is!" At which point their wallet flies open and they show me a photo of their family.

That's when things get interesting, because I start asking them questions: Did you take that photo with your own camera? It looks like a beautiful beach; was the photo taken on a family vacation? Are those braces I see on the two teenagers? Do you hope to help those beautiful kids go to college?

As their heads bob in successive "yes" nods, I ask them how they provide all of that for their family. That's when they understand that I had it right.

Richer, But Not Happier
At the risk of repeating myself, I totally agree that family and friends are vital to our well being; without meaningful relationships, there's no chance of ever being truly, authentically happy. That's why, every Saturday night, I end my CNBC show with the following words: "People first. Then money. Then things."

But money does have a place at the table. If you don't have money to buy things, you're going to be very frustrated. It's just that simple.
How we handle the money we have also plays into our happiness. The Pew survey points out that over the past few decades, the percentage of Americans who say they're happy hasn't changed much (it hovers at around one-third of the population), while at the same time the average per capita income has doubled in inflation-adjusted dollars. So we have more money, but we're not much happier on average.

A paradox? Far from it. My sense is that we while we're making more money, we aren't making more of the money we make. We have a ton of debt, and we have to worry about saving for retirement in a way that our parents and grandparents never did. And as many of you know, it's really hard to boost your happiness quotient when you've got a lot of money worries.

Orman offers readers a chance to vote on whether money is a part of their happiness, with (unscientific, of course) results running about 85% affirmative.

Can Money Buy Happiness? (Money Magazine)

2006-07-18T23:21:00.000-07:00

Can Money Buy Happiness? asks a Money Magazine article reprinted on the Forbes website. Among the obvservations:

The new science of happiness starts with a simple insight: We're never satisfied. "We always think if we just had a little bit more money, we'd be happier," says Catherine Sanderson, a psychology professor at Amherst College, "but when we get there, we're not." Indeed, the more you make, the more you want. The more you have, the less effective it is at bringing you joy, and that seeming paradox has long bedeviled economists. "Once you get basic human needs met, a lot more money doesn't make a lot more happiness," notes Dan Gilbert, a psychology professor at Harvard University and the author of the new book Stumbling on Happiness. As the graphic at left shows, going from earning less than $20,000 a year to making more than $50,000 makes you twice as likely to be happy, yet the payoff for then surpassing $90,000 is slight. And while the rich are happier than the poor, the enormous rise in living standards over the past 50 years hasn't made Americans happier.

(emphasis added)

Interestingly, the recommendations to improve your happiness involve spending money, but with preference to certain expenditures over others:

SMALL PLEASURES

LATTE

Don't discount the satisfaction you can get from something as trivial as a good cup of coffee. Furthermore, casual encounters with familiar people like the barista at your local Starbucks or the guy at the newsstand have a bigger effect on your happiness than you might realize.

UPDATE 8/9/2007: Meanwhile, many financial advisor target this "Starbucks" factor as the first area to cut spending to get one's finances in shape. See, for example:

Every Penny Counts by Christine Haughney, New York Times, 7/29/2007;

Creating an emergency fund by Cheryl Allebrand, Bankrate.com, 7/23/2007:

Q: The solution I've heard most often to cut corners and start saving is giving up coffeehouse coffee. I'm not sure how caffeinated authors think we are, but is that really the solution -- give up the demon drink and you'll be financially secure? Or do you have some advice for tea drinkers?

A: I think one of the keys to financial security is about seeing what money's coming in and going out. That's where the latte factor comes in. Do you have to focus on every latte? No. See what your committed expenses are -- including taxes and the six things you have to pay every month like utilities and car payment -- and try to limit them to 60 percent of your total gross income. Look at savings: Invest 20 percent in long-term savings (education, retirement) and then you have 20 percent left. Ten percent is for your emergency fund. You never know when the boiler's going to break. That's where emergency money comes in. The 10 percent that's left is fun money, this is what partners divvy up -- 5 percent each. If you don't have 5 percent that month, you don't have the fun.

(interview with Sharon Epperson)

Happiness: A User's Manual (New York Magazine)

2006-07-16T17:57:00.000-07:00

Courtesy of New York Magazine's Happiness: A User's Manual by Ben Mathis-Lilley (20 happiness tips):

Give up the great American novel, and start temping.
Some poor countries (China, Brazil) are happier than others, but few nations are mired in spiritually fulfilling poverty. Money, when used to feel secure about your ability to shelter and feed yourself, can, in fact, buy happiness.

But don’t work overtime...
The marginal life-enhancing value of each extra dollar quickly levels off, however; hence the existence of James Bond villains and studies showing that lottery winners and Forbes 100 members are no more likely to be satisfied than anyone else.

...As long as you’re content socializing within your tax bracket.
Nevertheless, being aware of how much less money one has acquired than one’s peers is quantifiably frustrating.

Some Dark Thoughts on Happiness (New York Magazine)

2006-07-16T16:09:00.000-07:00

Some excerpts pulled from Some Dark Thoughts on Happiness by Jennifer Senior, New York Magazine:

One of the most interesting bits of American research to surface—repeatedly—in books about happiness is a study that shows depressives are far more likely to be realists, while happy people are more likely to walk around in a mild state of delusion.

Married people are happier than those who are not, while people who believe in God are happier than those who don’t.

Smarter people aren’t any happier, but those who drink in moderation are. Attractive people are slightly happier than unattractive people. Men aren’t happier than women, though women have more highs and more lows. Surprisingly, the young are not happier than the elderly; in fact, it’s the other way round, with older people reporting slightly higher levels of life satisfaction and fewer dark days.

Money doesn’t buy happiness — or even upgrade despair, as the playwright Richard Greenberg once wrote — once our basic needs are met. In one well-known survey, Ed Diener of the University of Illinois determined that those on the Forbes 100 list in 1995 were only slightly happier than the American public as a whole; in an even more famous study, in 1978, a group of researchers determined that 22 lottery winners were no happier than a control group (leading one of the authors, Philip Brickman, to coin the scarily precise phrase “hedonic treadmill,” the unending hunger for the next acquisition).

Follow the link for more information on Chris Peterson's Authentic Happiness Inventory test that was referenced in the article.

The book repeatedly referenced in the article is Stumbling On Happiness by Daniel Gilbert.

Authentic Happiness Inventory Positive Psychology Center

2006-07-16T16:08:00.000-07:00

The Authentic Happiness Inventory is a happiness test administered by the Positive Psychology Center of the University of Pennsylvania.

Their web site has tests anyone can take, to further their research, including the Authentic Happiness Inventory Questionnaire (measures overall happiness); the CES-D Questionnaire (measures depression Symptoms); the Fordyce Emotions Questionnaire (measures current happiness); and the General Happiness Questionnaire (assesses enduring happiness).

Rich Get More Sleep Than Poor

2006-07-01T21:09:00.000-07:00

An example of the health impact of socioeconomic status, a study found that - surprisingly - the higher one's income, the more sleep one tended to get:

The amount of sleep people got increased with their income, and this effect was stronger for the black participants than the whites.

There are a number of potential explanations for the findings, Lauderdale noted. People who make less money may have more worries that prevent them from sleeping well. They could be living in noisier, less comfortable environments, and they may have more health problems.

The racial and economic sleep differences detected in this study could help explain the well-known disparities in health that exist between blacks and whites, [the reseracher] added.

American Journal of Epidemiology, July 1, 2006, as reported by Reuters, June 29, 2006.

See also: Money not imporant, but...

Billionaire Mark Cuban discusses his wealth

2006-04-17T16:58:00.000-07:00

[INTERVIEWER: C-SPAN'S BRIAN] LAMB: What does it mean, for those of us who can’t comprehend what, you know, that kind of wealth is like, what’s it mean?

[BILLIONAIRE BUSINESSMAN MARK] CUBAN: Two things probably. It means security, you know. I don’t have – I mean I’ve woken up days and not known if I could pay my light bill. I’ve come home from work or come home at times and the lights have been turned off. And, you know, it’s embarrassing and it’s, you know – it’s motivating. You know I’ve slept on the floor for six months in buddies’ apartments when I first got to Dallas.

So, you know, I’ve been on both sides and not having to worry about those things anymore that’s part.

And when I was single I would have told you there’s nothing even remotely bad. But now I have a two-and-a-half-year-old daughter and it scares me. It scares me in how she’s going to be raised because I grew up completely middle class and I think, you know, there’s a lot of accountability involved in growing up where you are responsible for yourself. And you know, she’ll figure it out at some point in time that there’s a little cushion back there and that’s what scares me. But other than that, you know, it’s a beautiful thing.

You know it really is being able to wake up with a smile on my face and say, OK, what do I want to do today.

3/26/06 C-SPAN interview transcript

Ben Stein's Cruel Truth About Retirement

2006-04-17T16:57:00.000-07:00

For most of us, by far our biggest financial liability is going to be our retirement. Living without working is not easy, and it's getting more difficult as defined-benefit corporate pension plans go the way of the do-do bird. To live comfortably off your capital requires a very large amount of capital relative to our earnings....

There are several points here. One is that the amount of saving the pre-retiree has to do even with a fairly good head start is fantastic.... So, prepare to save a lot....

Second, you must remember that inflation will still be eating away at your savings after you retire. Many people forget that, and it hurts them dearly.

http://finance.yahoo.com/columnist/article/yourlife/3679

Money Buys Lack of Unhappiness?

2006-01-26T16:56:00.000-08:00

MBH recently came across this 1999 Slate article citing research that indicates:

While it's true that, overall, these data show that money doesn't dramatically affect the distribution of happiness, let's examine some of the nuances. One is that you're nearly four times as likely to be miserable if you make less than $15,000 than you would be if you made more than $35,000. True, 79 percent of people making less than $15,000 still consider themselves "pretty happy" or "very happy." But what if you don't happen to belong to this naturally buoyant majority? Clearly, for at least 15 or 16 percent (i.e., the proportion of unhappy people exceeding the "naturally unhappy" baseline of 5 or 6 percent), the lack of money buys unhappiness.

Chatterbox is also intrigued by what happens when your income rises above $75,000. If you were unhappy before, apparently you're likely to stay unhappy. But 11 percent of the people who were "pretty happy" will become "very happy." Money may not buy happiness, but if you're already happy there's a decent chance it will make you more happy!

Most retirees work because they need the money

2005-11-17T16:51:00.000-08:00

Some work for other reasons, of course, but most simply don't have enough money for retirment: Retirees back at work (USA Today, 6/8/05)

According to a CNN Money columnist, many Americans may be happy with their paltry retirement savings because they are unrealistic about the amount of money required for their retirements:

Our low savings levels in part may be due to the fact that a lot of us are laboring under false notions about how much money we need to finance a retirement – which for many of us will not include a company-paid pension with health benefits.
According to the survey, 10 percent of workers think they will need less than 50 percent of their pre-retirement income to live comfortably in their golden years; another 28 percent think they'll need somewhere between 50 percent and 70 percent.
What's more, 6 out of 10 workers said they do not expect their standard of living to decline, while nearly 5 out of 10 workers who have not saved at all feel at least somewhat confident about their ability to have a comfortable retirement.
Now I need an Advil. Maybe my next column should be about logical reasoning.

Retirement savings falling far short

Job Satisfaction Advice

2005-05-15T16:50:00.000-07:00

In Marty Nemko's latest column, the career/job advice expert lays down his "6 most important career tips", one of which is:

Don't focus on finding a so-called dream career. Focus on getting your career non-negotiables met. It's extraordinarily competitive to land a well-paying job in most so-called dream careers -- for example, law, investment banking, acting, art, sports, nonprofit work, fashion or TV. And once in, dream careers so often turn out to be disappointing. Because so many people want to be in those careers, bosses can demand absurd work hours, be unkind, etc.

Sure, if you're brilliant, driven, winsome and/or well connected, all options may be open to you, but let's say you're a mere mortal. In a less-competitive career, you're more likely to find the things that lead to true career contentment: a kind boss, nice co-workers, opportunities to keep learning, a reasonable commute and a middle-class living.

As long as the compensation is middle-class, your contentment won't be impeded by a lack of income. Study after study shows that wealth doesn't increase contentment. Yes, the extra income may enable you to buy that new suit or new car, but the happiness derived usually fades quickly. After that, you'll seek another material fix and that too will soon wear off, whereupon you'll need yet another fix. Dan Pink, author of the new book, "A Whole New Mind," calls this, "The Hedonism Treadmill." Ultimately, contentment comes mainly from love and from good work.

Bad news for those who want to follow their dream, believe in doing what they love for a living, or who want to live a middle-class lifestyle that includes owning an average-priced home in many parts of California, apparently:

[T]he California Association of Realtors' monthly affordability report for March saw San Diego County again sink to its lowest level ever. The association said the affordability rate for the county was 10 percent, which is the percentage of households earning enough money, $137,758, to buy the median-priced home [$484,000, up 10.3 percent from a year ago] with a 20 percent down payment on a 30-year, fixed-rate loan. Santa Barbara and the Northern California Wine Country had the lowest affordability level of 9 percent.

County housing market decelerates San Diego Union-Tribune 5/13/05

See also 18% able to afford home Los Angeles Daily News 5/6/05 (18% of Californians earn enough to afford a median-priced house: "The median-priced California home -- with half priced above and half below -- cost $495,400, and it took a minimum annual income of $115,910 to buy it.")

What Money Can Buy

2005-05-14T16:49:00.000-07:00

Living well is the best revenge. - Gerald Murphy

One man's take on what money can buy:

Socrates was right: ultimately, of course, possessions cannot bring sustained happiness. But houses, cars, artworks, elegant clothes can nonetheless be amiable distractions until such time as one figures out how to attain the real thing, genuine happiness. And for those not in contention ever to receive happiness via truth at the Socratic level, they offer some of the best entertainments the earth has to offer. For those of us not operating on the Socratic heights, possessions can rank high among life's pleasures....

I try to remember when I first recognized that that the world contained superior goods and that I didn't possess them. I half suspect this sad knowledge came with leather. As a kid on the playground, I did not have one of the best baseball gloves, all of which were then, and apparently still are, made by a firm called Rawlings. I had a decent glove, mind you, but not a Rawlings, and I also sensed that I probably could not persuade my father to spring for the extra money, perhaps ten dollars more, that a Rawlings glove cost...

When I went off to college, I didn't have wretched luggage, but I began to run into people who had much better luggage than I. They had tan suitcases, smooth or grainy, often monogrammed... with strong zippers and good locks, a pliant but solid feel. Such luggage hinted at the good things within: soft fabrics beautifully tailored, swell colors, stylish clothes. I have read Catcher in the Rye only once... but in my dim recollection of the book I remember a scene that had to do with luggage. I now discover that I misremembered it, thinking that Holden Caulfield, the book's hero, had poor luggage and that his cheesy roommate Stadlater had splendid luggage. But on rechecking I find J. D. Salinger gave Holden good luggage (Could he not bear to send the kid off to school without those excellent Gladstone bags?). At another prep school, an earlier roommate of Holden's envies it, hiding his own ragtag luggage under the bed and claiming to people visiting the room that Holden's bags are really his....

Mark Cross is now out of business, but I can recall passing its shop in Manhattan when I was young, taking in its unmistakable feel and smell of deep tanned leather; it was pure swank, and then seemed awfully expensive. I now regret that I never went into minor hock to buy something there (a wallet perhaps, or a kery case), but I never took the plunge....

Not much later, in Chicago, I became enamored of a cigarette lighter, a gold, pebbly-grained Dunhill that sold for $45, at a time when $45 represented close to half a week's salary. I was then a professional smoker, a two-pack-a-day man, punctuating everything in my life with a cigarette. I would take myself to Dunhill's, three or so blocks away from the office where I worked; inside, lifting the ligher, turning it over in my hand, I felt its texture, its heft. Flick it open and a spirited flame leapt before one's eyes. I must have thought about that lighter for the better part of two weeks -- thought more about it than I did about world events, my family, my work, even my brilliant future. Enough, I thought, buy the freakin' lighter and get on with your life, friend.

And so I did. The lighter gave me great pleasure. Every time I reached into my pocket to light a cigarette, I felt a miniscule but real jolt at the thought of my owning such a lighter, a small thing but the best and most elegant of its kind. I don't believe I looked down my nose at poor devils forced to use Zipps and other coarser instruments, not to speak of paper matches. But I felt a certain contentment knowing that in one department in life, the lighting of my cigarettes, I had achieved the untoppable sublime. Forgive me -- do not turn away from me as irretrievably lightweight 0 if I say that, in some inexplicable way, this game me a limited but quite genuine happiness.

After a year or so -- try to hold back your tears here -- I lost the lighter. But the pleasure its possession conferred determined me henceforth to be extravagant, in a selective way, in minor things. I could not and cannot now afford the grand things: the second home in Tuscany, the small but perfect Matisse over the fireplace, the $2,000 suit. But I have boughtt the $300 fountain pen, the occasional $70 bow tie, the cashmere jacket. A little voice within says "let 'er rip," and I do. Piker stuff to some, I realize, but the element of petty extravagance somehow lights my fire even now.

Joseph Epstein, Snobbery: The American Version (2002)

Epstein also notes in his excellent book that, for those into such things, it is quite difficult to be with-it, trendy, hip, up-to-date, fashionable, or whatever one calls it, without a certain accompanying inve$tment:

Exhibit A: My old Burberry. I owned a tan, single-breasted Burberry raincoat, in good condition. One day I put it on and discovered that it was no longer, well, quite right. I hadn't outgrown it, but suddenly this excellent coat -- not inexpensive when I bought it four or five years before -- seemed a bit tight, skimpy, slightly yet definitely inadequate. I hadn't changed -- grown no heavier, surely no taller -- but fashion had, and raincoats, including newer Burberry raincoats, had grown longer and fuller, giving the look and feel of greater amplitude. My old raincoat felt somehow off, wrong, and because of this -- you'll have to take my word on it -- uncomfortable. Not long afterward I bought another raincoat, not a Burberry this time around but an Aquascutum. Does this make me a slave to fashion? Probably. ....

The expenses -- the outlay of cash -- of being with-it are never low. Once cannot hope to achieve with-it-ry in comtemporary America on an income of less than six figures, probably the middle to high six figures. Consider real estate. Can one claim to be anywhere near with-it and live in, say Minneapolis, Salt Lake City, or Tulsa? With-it American cities today include Chicago, Los Angeles, San Francisco, Portland (Oregon), Seattle, New Orleans, Key West, Santa Fe, Princeton, Jackson Hole, maybe Austin, and above all and primarily New York....

Within the with-it cities one then has to find the right neighborhoods in which to live, those SoHos, NoHos, Tri-BeCas, none of which comes cheap. Moving on to wardrobe, one has to hit this just right, too: wear that $200 Prada T-shirt, the right jeans, jacket, shoes, eyeglass frames. Probably best also not to walk around with too droopy -- that is to say, too old -- a face, for which, in cosmetic surgery, remedies, also not cheap, are at hand.

Money Not Important, but...

2005-05-13T16:48:00.000-07:00

On today's Laura Ingraham show, the popular conservative talk radio host(-ess?) remarked that her recent breast cancer surgery served to put money in perspective for her -- it's not really that important, she said.

Ingraham, whose show regularly features "but monkey" soundbites (replete with cartoon monkey sound effects) from journalists and politicians who start to say one thing, then insert a BUT big enough to change the meaning of their thought entirely, then added:

'But you do have to have health insurance, that's for sure.'

See also:: New hope against breast cancer Kansas City Star 4/28/05 (Anti-cancer drug Herceptin effective, but typical treatment $120,000, in addition to surgery, chemotherapy and radiation)

New Cancer Drugs Are Driving Up Cost of Care Los Angeles Times 5/14/05 ("[The two drugs that Mary Vaughan takes to specifically target her breast cancer cells (unlike chemotherapy, which also targets healthy cells),] Avastin and Herceptin, would cost her nearly $8,000 a month — more than Vaughan says she can afford, even with her insurance.... The average life expectancy of [colon cancer] patients has doubled to 22 months ... but the cost of treatment has swollen 500 times to $250,000.")

Cost of Cancer On the Rise American Cancer Society 4/19/02 ("'Everybody's talking about cost controls... But the consumer needs to be sensitive to the idea that certain types of cost controls may impact the ability to keep your cancer from growing.'")

Update January 2007: Rich, young, educated women get better breast cancer care than poor, older women, BMJ, 1/27/2007: "Three US studies show that the treatment of breast cancer is influenced by a woman's education, income, and age."

Cartoon: Women

2005-05-13T16:45:00.000-07:00

Just for fun on this Friday the 13th...

http://www.wimp.com/smooth/

(includes cartoon violence and other non-PC stuff)

Africa the Worst Contient for Mothers, Children

2005-05-04T16:47:00.000-07:00

According to a recent Save the Children study, Africa is the worst place on Earth for mother and children. As reported by ABC News:

Scandinavian countries sweep the top rankings for the best places to be a mother, while countries in sub-Saharan Africa dominate the bottom tier, the report said. Out of the 10 worst countries to be a mother or child, seven are in Africa.

In Sweden, which tops the list, nearly all women are literate. In Ethiopia, only 34 percent of women are literate. A mother in Ethiopia is 37 times more likely to see her child die in the first year of life than a mother in Sweden.

The United States ranked 11th. ...

"The Mothers' Index clearly shows that the quality of children's lives is inextricably linked to the health and education of their mothers," MacCormack added. "In countries where mothers fare well, children fare well; in countries where mothers do poorly, children do poorly."

The low-ranking African countries identified by the study are of course poor and the Scandinavian countries that outrank them are comparatively wealthy.

Laura Rowley: Money DOES Buy Happiness, But...

2005-04-26T16:45:00.000-07:00

Financial author Laura Rowley was interviewed recently on NPR/Motley Fool radio while promoting her book, Money & Happiness: A Woman's Guide to True Wealth, and asked if money buys happiness.

Her reply - on the air, at least; we haven't read the book - was that "a certain amount of money does buy happiness." That is, the difference between having no money and having enough money to meet one's basic human needs of food, clothing, shelter, was enormous. Beyond that, she felt based on the studies she had reviewed, such as those showing enormous increases in wealth in countries like the United States but only marginal increases in the happiness reported over the same time frame, that additional wealth buys little, if any, additional happiness.

Vaguely referencing various studies, some of which are mentioned in other posts and links here (this being radio, there were no "cites"), she adds that lottery winners and even Forbes list-ers are only somewhat happier than the average person.

So how much is enough, according to Rowley? Depends in part on your expenses, she says. With the median U.S. income being $43,000 per year, she says, those earning $50,000 and more annually report fewer "blue days", according to another unnamed study.

She says scientists/economists have found the pursuit of money as a primary or number two goal in life has negative consequences such as relationship trouble, depression, and low self-esteem. And that any increase in standard of living is quickly adjusted to, with only more and bigger looking appealing thereafter (e.g., after moving from an apartment to a house, one then wants a bigger house, one with a pool, in a better neighborhood, etc.). Thus, more and more money is required, with presumably more work and less job options available to finance this newfound lifestyle.

If you can't buy happiness, can you win it?

2005-04-23T16:43:00.000-07:00

Money, if won, can cause and increase in one's happiness. Or so says a study by Professor Andrew Oswald:

Winning just £1,000 [about $1,900] can be enough to change a person's outlook on life.

However, less than £1m is unlikely to have a lasting effect on personal happiness and experts found a strong marriage and good health were more likely to make people feel content than money.

The researchers looked at 9,000 families in Britain throughout the 1990s.

They observed the impact of windfalls on individuals using standard strain indicators to gauge their levels of happiness.

The BBC report on the 2002 study went on to note that

Professor Oswald advised that money was not the only factor affecting good mental health and happiness.

He said: "There are lots of other factors in life, especially personal things like getting married and so on."

The research found that women tended to be happier than men, and people in their 30s were least likely to be content.

Professor Oswald said happiness followed a U-shaped pattern, with people beginning life happy but becoming discontented in their early 30s, before their happiness recovered and continued, increasing into their 60s.

Money = Happiness? One study says no

2005-04-23T16:17:00.000-07:00

I've been rich and I've been poor. Rich is better. - Sophie Tucker

Does more money buy more personal happiness?

According to surveys conducted by University of Southern California economist Richard A. Easterlin, no.

Instead, his research indicates -- as explained in layman's terms by Fool.com columnist Dayana Yochim -- that being married rather than single or divorced, and having friends and good health are more important to happiness than money (though money does indeed have some effect, both authors acknowledge: She notes that "[T]he most prosperous among us -- the Forbes' 100 wealthiest Americans surveyed by University of Illinois psychologist Ed Diener -- are ... slightly happier than average.").

Easterlin concludes that

people allocate a disproportionate amount of time to the pursuit of pecuniary rather than nonpecuniary objectives, as well as to "comfort" and positional goods, and shortchange goals that will have a more lasting effect on well-being....

[M]ost individuals spend a disproportionate amount of their lives working to make money, and sacrifice family life and health, domains in which aspirations remain fairly constant as actual circumstances change, and where the attainment of one's goals has a more lasting impact on happiness. Hence, a reallocation of time in favor of family life and health would, on average, increase individual happiness.

In one of Yochim's other columns, however, she quotes research summarizing what retirees who are looking back on their lives wish they had done more of, were they able to have a "do over" on their retirement planning:

Nearly 60% said they would start saving earlier.
One-third would reduce expenses to save more for retirement.
A third would be more disciplined about retirement income.
25% would work longer.

Not exactly compatible with not focusing on earning money during one's lifetime. And perhaps indicative of the fact that many underestimated the importance of money until retirement (but prior to retirement mau have answered university professors' subjective happiness surveys by indicating that they had enough money and were overall quite happy with their financial situations).

Overall, the conclusion here seems to agree with Sophie Tucker's quote: Rich is indeed better and does indeed make one somewhat happier, but given limited time to devote to relationships/family/health versus finances, the typical person will experience higher marginal utility in pursuing the former over the latter.

Study: Wealthier Nations Generally Happier

2005-04-23T16:15:00.000-07:00

Wealthier nations are generally happier ones; and, although the correlation is far from one-to-one, it is quite striking overall.

The study by Ronald Inglehart and H-D. Klingemann, "Genes, Culture and Happiness," MIT Press, 2000, compared GDP versus the mean percentage of the population subjectively happy with life as a whole, as determined by surveys.

The richest nations, the United States and Switzerland, in that order, had average happiness levels of 85% and above. The poorest nations, Nigeria and Bangladesh, respectively, had happiness ratings of around 75%, though these nations were actually anomolies -- most nations with comparable wealth levels ranked lower on the happiness scale, as examination of the chart shows.

It is perhaps not surprising that the happy and prosperous countries also tend to be democratic with free markets.

See also Wealth and Happiness Don't Necessarily Go Hand in Hand, Wall Street Journal 8/13/04 via Van Sloan (sq.4mg.com).

Money Buys Happiness ?

2004-08-24T16:12:00.000-07:00

Does money buy happiness? Come along with us, take a look at the evidence, and decide for yourself. We'll be reviewing and summarizing past studies and stories, in addition to whatever new information comes up.

Money Buys Happiness: http://www.moneybuyshappiness.com

At some point MBH may move to a website format, but for now it's a (very small) part of the blogosphere. If your comments, dear readers, prove useful, who knows, we may stay here...

Money can't buy happiness, but it sure makes misery easier to live with. - Unknown*

* Hat tip: Main Street Mom's Money Quotes