Author Topic: Salary Increase with Greatest Impact On Your Quality of Life?  (Read 2710 times)

wealthviahealth

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Salary Increase with Greatest Impact On Your Quality of Life?
« on: December 18, 2021, 08:56:29 AM »
Curious to know what salary increase ( Ie from making $x to $z ) had the greatest impact on your quality of life and at what number that impact began to diminish.

I am looking at starting a new job that will pay significantly more but I wonder if I am already at the upper limit of impact given my current work/life balance and effective “hourly rate” all things considered.



roomtempmayo

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #1 on: December 18, 2021, 09:58:01 AM »
A classic study by Kahneman and Deaton on the relationship between money and happiness is here: https://www.pnas.org/content/107/38/16489

Your day-to-day emotional wellbeing tops out at about $75k of income (2010 dollars).  At that point, your daily needs are met and you're likely not waking up at night worrying about paying the bills.

Beyond $75k, more money can give you more life satisfaction (winning!), but that life evaluation is untethered from meeting your real needs.


maizefolk

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #2 on: December 18, 2021, 10:19:08 AM »
In the spirit of fairness, I want to point out a more recent paper published in the same journal (PNAS) which found happiness continued to increase with log(income) at an equal rate above and below $80k/year. I don't know which finding I'd put more confidence in, but want to be clear there isn't a strong consensus in the field.

Now my own anecdotal experience: I experienced a big increase in subjective wellbeing when I took a job making ~$80k/year, having made ~$45k/year in my previous position. However, that same job move involved moving from one state to another, a much lower cost of living, and my job duties shifted giving me dramatically more autonomy than I had in my old role.

Since then, significant pay increases in the same role have increased my savings rate but really haven't changed my subjective wellbeing. If anything I've gotten significantly less happy as my job gets more stressful and requires more and more hours.
« Last Edit: December 18, 2021, 10:28:49 AM by maizefolk »

Virtus3

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #3 on: December 18, 2021, 10:26:28 AM »
I have found that any raise that was in the 15-20% range or larger makes a noticeable difference:

Going from $40-48k early in my career made me feel like I could really start saving some money.

Going from $61-72k was nice but didn't feel as substantial.

Going from $72-100k was a huge difference that all but eliminated money concerns.

$110-128k made me start contemplating "early" retirement.

yachi

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #4 on: December 18, 2021, 10:39:17 AM »
I have found that any raise that was in the 15-20% range or larger makes a noticeable difference:

Going from $40-48k early in my career made me feel like I could really start saving some money.

Going from $61-72k was nice but didn't feel as substantial.

Going from $72-100k was a huge difference that all but eliminated money concerns.

$110-128k made me start contemplating "early" retirement.
A classic study by Kahneman and Deaton on the relationship between money and happiness is here: https://www.pnas.org/content/107/38/16489

Your day-to-day emotional wellbeing tops out at about $75k of income (2010 dollars).  At that point, your daily needs are met and you're likely not waking up at night worrying about paying the bills.

Beyond $75k, more money can give you more life satisfaction (winning!), but that life evaluation is untethered from meeting your real needs.

I remember the $75k number, but I forgot how long ago it was.  Or rather, I forgot the impact of inflation since then.  This site: https://www.bls.gov/data/inflation_calculator.htm gives me $95,639.67 for today's equivalent of $75K in June 2010.

I hit 74K in 2014, but it came with a bunch of benefits that made it much more: company vehicle, support staff for administrative stuff, company cell phone with data plan, and closer to home.  It say that was probably the jump with the greatest impact on my quality of life.  But it wasn't much of a salary increase.  That remained relatively the same.

Anon-E-Mouze

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #5 on: December 18, 2021, 12:54:45 PM »
This response probably isn't what you were expecting.

As a newly minted Canadian lawyer in the early 1990s, I decided to jump on the chance to make big bucks by working for a Top 10 law firm in NYC. My salary jumped from that of an "articling student" (in Canada, this is someone who has graduated from law school but is working a qualifying year before being admitted to the practice of law) of CAD$36K to USD$90K. If I had stayed in Canada my salary would have gone from CAD$36K to CAD$60K.  So, huge increase in salary BUT MASSIVE DROP in quality of life because I was suddenly working 7 days a week most of the time (instead of the standard 5.5 days a week I'd been working as an articling student). I was also working much longer hours (Mon-Thurs at least until 10 pm every night and usually until 2 am or so at least once a week, at least one all-nighter every month, etc), and for people who mostly just seemed ground down and miserable. The tax hit was high, too, because I was paying US federal, state and NYC taxes. And I was spending a lot of money to make life easier (e.g. taxis, food delivery etc) and paying high rent to live in a shoebox.

At one point, I was working all weekend (and late into the evening on a deal) while coping with a recurrence of duodenal ulcers. I found myself vomiting blood in Goldman Sachs' bathroom and I couldn't see a way to reduce my hours on the deal because the other junior associate on the file was a woman who was pregnant and had lost her last child to a miscarriage.

Overall, that year was an unpleasant experience but I learned an important lesson - that it's not a good idea to take a job mostly for its salary.
« Last Edit: December 19, 2021, 08:34:39 AM by Anon-E-Mouze »

Runrooster

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #6 on: December 18, 2021, 02:07:27 PM »
I took a job with a 33% pay increase 3 months ago. The pay doesn't actually make much of a difference in how I spend money, though.  The intangibles are more important - they have flex time, occasional overtime, a charging station at work, some/limited work from home, better technology, short commute.  On the other hand, I'm not getting along that well with one coworker or with my boss.  My old job just called me to see if I would like to come back - they'd match some of the raise but not all.  I said no, thanks.

I kind of feel like I'm in that low pay range where pay should be rising substantially.  So I'll see in a year what else is out there.  I think I just have to accept the problems as tradeoff.

SwordGuy

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #7 on: December 18, 2021, 05:25:30 PM »
Going from a $6k family income as an unsuccessful business owner to a $30k salary (median family income in the year it happened) was HUGE.

We went from poverty to the middle class.   If I had known about MMM way back then we could have retired ever so much earlier!

roomtempmayo

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #8 on: December 19, 2021, 08:32:07 AM »
@maizefolk Do you happen to have a cite for the article you're referencing?  I have a vague memory that the happiness research that started at Princeton in the late 90s more or less concluded in a consensus around the article I linked above.  If that's changed in a major way, it would be good to know.

@wealthviahealth To your original question about our personal experiences, like most folks our income growth has been lumpy and our needs and uses for money have been uneven over time.

30k: Mid to late 20s, both my wife and I were in grad school.  We had some years where we didn't break 30k for the household.  Money was tight, and at times it was stressful, like when I had two root canals in six months with no dental coverage and wrote checks for over a month of income for my teeth.

70k: Late 20s, my wife finished school and got her first apprenticeship-style job.  I was still in grad school.  We made about 70k.  Money was less tight, but still tight.  Part of the money being tight dynamic was caused by needing to move a couple times in short order, and my wife's student loans going into repayment. 

130k: Early 30s, I finished up grad school and got my first starter job.  Lots of financially messy moving and student loan repayment in full force made our income feel just adequate for the first time.

150k to 205k: Mid to late 30s, with the logistics of our lives much more dialed in and stable, these raises have made pretty much no difference in our day-to-day lives.  We used to have grocery money, and rent money, and car repair money.  Money was allocated to concrete expenditures.  Now we just have spreadsheet money.  It's an abstraction that lives in account balances, and while those balances give us a background feeling of security, they don't really alter our behavior or stress levels on a daily basis.

At this point, we've stopped exchanging quality of life for more dollars.  If an offer isn't going to make our lives better each and every day, we decline it.  While more income is useful to a point, we passed that point quite a few dollars ago.

maizefolk

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #9 on: December 19, 2021, 08:41:54 AM »
@maizefolk Do you happen to have a cite for the article you're referencing?  I have a vague memory that the happiness research that started at Princeton in the late 90s more or less concluded in a consensus around the article I linked above.  If that's changed in a major way, it would be good to know.

Oh yikes, I thought I'd pasted in the link. Thanks for pointing that out, caleb!

My understanding is most of the writing pointing to $75,000 as a key inflection point traces back to this study from Princeton published in 2010 (the one you linked to):

Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the National Academy of Sciences, 107(38), 16489-16493. https://doi.org/10.1073/pnas.1011492107

The more recent study I brought up that argues happiness increases consistently with log(income) was from U. Penn and published at the start of this year (2021):

Killingsworth, M. A. (2021). Experienced well-being rises with income, even above $75,000 per year. Proceedings of the National Academy of Sciences, 118(4). https://doi.org/10.1073/pnas.2016976118

roomtempmayo

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #10 on: December 19, 2021, 08:53:22 AM »
Thanks, @maizefolk !  I hadn't seen that article.  I'll give it a read.

OtherJen

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #11 on: December 19, 2021, 10:18:22 AM »
A promotion last year gave me a 37% bump in income, from $42K to $58K. That felt like it had the greatest impact, even though it wasn't as large proportionally as the jump from a $25K grad student stipend to a $40K postdoc salary; that postdoc gig came with so much stress that I was nearly hospitalized with burnout and ended up leaving. Last year's increase has felt like the first opportunity to build significant wealth.

My next promotion will kick in early next year along with a ~10% salary increase. Husband hasn't had a raise in years and is hoping that he can use the current job market to get a significant boost. He's currently in the low $30K range (hourly, so it varies). If we can get our household income over the 6-figure mark, that will significantly speed up our savings.

DaTrill

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #12 on: December 19, 2021, 12:04:05 PM »
I haven't noticed increase in pay since making over $30k-$40k.  I would take a 50% pay cut in current position if the job were similar to what it was 10 years ago.  AUM grows geometric at current income rather than linear at lower income.  I do notice that emergencies don't impact me as much.  Car totaled last year and other driver's insurance took a long time to pay, but paycheck covered extra expenses.  This was not possible at lower income levels and probably would have had to sell assets to cover temporary expenses caused by another driver.   

My heuristic when deciding to accept pay is below
1.  Health = How will this decision affect my short term and long-term health?  One above poster made this observation that more pay at the expense of your health is not worth it, unless very short term, a few months at most.
   
2.   Savings ratio = If I make $40k and spend $20k to live and if accept a $60k job but will spend $30k both are 50/50 and not an increase in savings ratio.  You are saving $10k more, but I look at the ratio for some reason.   
 
3.  Real options = This is non-pay benefits of a job that are only realized if the job is pursued.  Job A may pay $50k, but you meet and interact with hundreds of the top people in your field vs. a job B that pays $60k, but you spend your time in a cubicle jungle, rarely interacting with anyone buy other cubicle dwellers.  For me, I would need to make $120k to accept job B over job A as the real options of being around powerful people is unknown.

4.  Duration = How long do you plan to keep the job?  Easy jobs are better for long term plans, but challenging jobs are good for short term positions.       

cupcakery

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #13 on: December 20, 2021, 05:55:26 AM »
Our income increased 30% a few years ago.  My stress level plummeted.  Our enjoyment of life increased.  Yes, that was partially due to some lifestyle inflation and some much needed home repairs, but less stress was huge.

Freedomin5

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #14 on: December 20, 2021, 06:36:24 AM »
That’s a hard question for us to answer. We had great QOL living on 30k a year as a couple with no kids. I also loved my life as a grad student living on 10k a year. Then I got a job making 300k a year, and QOL decreased big time because of the added hours and stress. Now I make around 100k a year, but the job provides lots of perks and benefits, and QOL has gone back up. So basically a decrease in salary had the greatest impact on our QOL.

As others have mentioned, it’s not the salary that impacts QOL. It’s the benefits. My current job is walking distance to home, provides a comfortable apartment, flights around the world, private school tuition, and healthcare. The work hours are reasonable and they have a generous vacation policy.
« Last Edit: December 20, 2021, 06:42:39 AM by Freedomin5 »

RainyDay

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #15 on: December 20, 2021, 06:51:40 AM »
Probably from grad school ($5k per year) to my first real job at $24k per year, back in the late '90s.  Then a year later, a new job at $39k.  I felt positively wealthy! 

Samuel

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #16 on: December 20, 2021, 10:46:42 AM »
Pretty sure the only salary increase that truly mattered was when I went from making slightly less than I needed to pay basic living expenses to making slightly more. That was a clouds parting/angels singing experience, while pretty much every raise since then has been a "huh, neat" kind of feeling...


Virtus3

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #17 on: December 20, 2021, 11:00:32 AM »
Going from $72-100k was a huge difference that all but eliminated money concerns.


I remember the $75k number, but I forgot how long ago it was.  Or rather, I forgot the impact of inflation since then.  This site: https://www.bls.gov/data/inflation_calculator.htm gives me $95,639.67 for today's equivalent of $75K in June 2010.

I hit 74K in 2014, but it came with a bunch of benefits that made it much more: company vehicle, support staff for administrative stuff, company cell phone with data plan, and closer to home.  It say that was probably the jump with the greatest impact on my quality of life.  But it wasn't much of a salary increase.  That remained relatively the same.

That's interesting and really shows how quickly inflation adds up. I'm now contemplating whether that $72-100k jump was more substantial due to size (almost 40%) or that it got me over the happiness hump of $75k (in 2010 dollars).

Duke03

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #18 on: December 20, 2021, 11:28:50 AM »
Can I play devil's advocate? I actually took a step back from my work this year due to some circumstances that were out of my control.  Long story short I took a 25k pay cut, but my work schedule is much more balanced.  For the past 8 months I haven't worked more than 15 days a month.  Going into this I tightened up our budget and now we are at the end of the year, and I literally have more money piled up than I did working myself to death.  It's the craziest thing ever.  I was looking over my spread sheets last night and our cash reserve account grew 15k from last oct.  This is strictly cash that is earned from paychecks and has nothing to do with any type of investments.

LightStache

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #19 on: December 21, 2021, 05:49:05 AM »
Probably the jump from $60K to $75K in 2011. It allowed me to buy my own 1 br. condo and stop living with roommates.


neophyte

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #20 on: December 21, 2021, 10:39:04 AM »
I went from 30k to about 65 or 70k a few years ago. It made a huge difference in my quality of life! I don't worry about money anymore.

TheAnonOne

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #21 on: December 21, 2021, 10:48:35 AM »
Early in my career I had experienced many jumps. I was making 30-50% more every 6-18 months for something like 3-4 years in a row.

I remember making $15 an hour at first after an unpaid intership

"How could anyone spend all of this?" I seriously had that thought.

Now I make 200k(ish) +- depending on overtime, incentives, etc and there are some months I spend it all! Ha.

I think the biggest change though was a jump from making 50k(ish) to nearly 100k(ish). At that point, caring about spending was mostly moot. 6 months later I was over 120k

Wild times.

mistymoney

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #22 on: December 21, 2021, 11:18:45 AM »
this is really so confounded by the job you are doing, most 80k/jobs are more work than 40k. and most 120k jobs are more work than 80k jobs. More work, harder work, more politics, more stress, more being responsible of other people's mistakes. There is a lot wrapped up into all that.

So maybe the happiness that money can buy is being dampened by the bull shit of the job? So someone aught to tease that.

Going from entry-level up a rung or two is usually some more money and also a step up from drugery and mindless work to something a bt more interesting and challenging, and that interest and challenge may peak at some point of happiness before the bullshit factors in.

ChickenStash

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #23 on: December 21, 2021, 12:06:43 PM »
I've had a few pay bumps due to changing jobs or getting promotions but there are two I credit with making the most impact. The first was a +50% raise leaving a company that was allergic to paying market wages. This got me out of the loop of prospective employers wondering why my salary history didn't match my skillset and made it easier to job hunt later.

The second was a smaller bump at +30% changing employers. This one is probably more significant with a lesser increase because it caused me to start investigating more into retirement savings and I wound up finding this place. Some was just good timing but the whole spiel wound up making my savings rate go from 15% to near 50% (still working on increasing that). Looking into the future, this one has likely set me up the most to get out of the rat race a lot earlier than I thought I could.

lutorm

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #24 on: December 21, 2021, 10:47:00 PM »
Probably the increase from first postdoc at $45k to second at $80k. Beyond that it's pretty much only bought increased security and shorter time to FI.

Healthie

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #25 on: December 22, 2021, 12:10:28 AM »
I was part-time at my present position a couple years ago and made 40k/year.
1st year at full time was 85k
this year is 90k

I barely noticed it. I typically worked regular a few times per month; lately I'm happy to not be at work. I find covid is exhausting and taking it out of me. We're moving to another city hopefully this Summer and I'd really like to take 2 months off to build my workshop.

bryan995

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #26 on: December 22, 2021, 05:46:35 AM »
It’s when you no longer have to worry about money, which largely depends on where you choose to live (COL)

We’ve moved from HHI of 60k to 100k to 200k to now >350k. All levels have felt some “budgetary constraint”. Should we buy this? Is it too expensive? Are we still saving enough? Should we really be having at $70 lunch at Cheesecake Factory, on a Tuesday?

The freedom to buy any common good/service that one needs without feeling much of an impact. To hire out work and retain your free time (cleaning, daycare, repairs, remodels, etc).

That level of freedom defines the sweet spot to me. Anything above and you would only save more (not a bad thing!) and not impact your day to day lives.
« Last Edit: December 22, 2021, 06:11:40 AM by bryan995 »

zolotiyeruki

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #27 on: December 22, 2021, 10:08:05 AM »
It’s when you no longer have to worry about money
I like this, but here's how I'd put it:

"When you start worrying more about how you're spending your time than how you're spending your money."  I've hit the point now where I would gladly trade 20% of my income in exchange for getting every Friday off work.  Since I enjoy my job, I'll have to settle for working the full week and accelerating my FI date :)  We've hit the point where our material wants are basically satisfied.  Of my last raise, almost all of it went towards higher 401k contributions.

The actual dollar figure is going to vary, depending on lifestyle location, size of family, etc.  When we were a family of 5 and lived in a $105k house in Texas (no income taxes!), we hit that point at a much lower salary than when we lived in Illinois (same high property and sales taxes as TX, but with an added 5% income tax!) as a family of 8.

moonpalace

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #28 on: December 22, 2021, 10:24:46 AM »
For me, the salary increase that had the most impact was the first one I got *after* discovering MMM. All the ones before that I basically squandered.

Relatedly, discovering MMM was far more impactful than any salary increase I've ever gotten (and I say that as someone whose salary has basically doubled in the last six years).

use2betrix

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #29 on: December 24, 2021, 01:57:50 PM »
I would say that my pay “bumps” have never really had any sort of significant, immediate impact in my lifestyle change. I went from about $150k-$240k around 6-8 years ago and it was nice, but my lifestyle or habits remained relatively unchanged.

This will be my 3rd or 4th year making a good chunk over $300k and while the income is great, the general net worth growth has been very comfortable.

In general, the overall comfort is what is most reassuring. Not being concerned about losing a job and getting to take a long sabbatical.. I outsource a lot of stuff I would do otherwise (lawn care, auto care, etc.). I do a lot of fun activities with friends, eat nicer steaks, take worry-free vacations (financially), amongst other things.

If I was FIRED, I’d have no problem doing a lot more myself just because I’d have the time, but right now I can make a lot more easy money at work than I can pay to outsource these things..

MayDay

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #30 on: December 25, 2021, 06:51:16 AM »
When our HHI (2 adults, 2 kids) went to about 100k it was noticable. I don't remember what the previous salary was, maybe 10k less. The biggest reason though, is that it was a stable job with good benefits. Previously (during the great recession and in the years following) it was a constant churn of getting laid off when a company collapsed and having 1 year contracts.

When our income jumped from that ~100k to 250k we really started feeling like money didn't stress us out. Car broke? Meh. House problem? Throw 20k at it. No time to clean? Hire cleaners. We have enough saved that we don't really worry about our spending anymore.

The flip side to this is a lot more stress in our lives. At this time though we both like our jobs and don't want to quit.  But certainly we can't keep going like this for decades. Something will eventually give (kids launching, moving from house to condo, hiring more help, etc).

Retire-Canada

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #31 on: December 25, 2021, 08:19:10 AM »
Ever since leaving university I've made enough money to cover all my reasonable needs and enough luxuries to have a great life. So all my raises beyond that just served to address inflation and build wealth. I wouldn't say any of them made me happier.

2sk22

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #32 on: December 25, 2021, 12:33:48 PM »
Two big jumps in my career.

- When I started working in the early 1990s, the salary ($65k/year) was absolutely enormous compared to my grad student stipend ($9k per year). That original $65k is worth about $120k in 2021 dollars

- My salary doubled in 2011 as my skills in machine learning suddenly became valuable. This coincided with my wife becoming a manager and getting a big bump in her salary as well. Consequently, we had a great decade financially.

Loren Ver

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #33 on: December 25, 2021, 01:16:23 PM »
Going from 40k to 60k when I went from contracting to full time was my most impactful.

It let me start really overpaying my higher interest student loans (started with ~86k, finished in 7 years).  This increase also brought our family income up from 60k to 77k.  We were still tight, but had more breathing room.  Buying a house also brought costs down (bought before the job change).  This was between 2008 and 2009, so it was a great time to get a house if you could get financing. 

It also brought with it a 401k, company insurance (many types), and all the trappings of working for a big name company. 

All other increases were smaller in amount, percent, and impact. 

Though I will note, having DHs income stabilize was a nice addition, though he never earned as much.  Being able to count on it later one was helpful.

Loren

ender

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Re: Salary Increase with Greatest Impact On Your Quality of Life?
« Reply #34 on: December 25, 2021, 01:19:35 PM »
My largest salary increase has had the greatest impact on my quality of life.

Because it was corresponding with a job I love.

Being able to save an extra ~80k or whatever it is also is nice though.