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How much money do you need to be happy? Here’s what the research says

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Brad Elphinstone, Swinburne University of Technology

Over the next decade, Elon Musk could become the world’s first trillionaire. The Tesla board recently proposed a US$1 trillion (A$1.5 trillion) compensation plan, if Musk can meet a series of ambitious growth targets.

Australia’s corporate pay packets aren’t quite on that scale. Yet even here, on Friday it was reported departing Virgin chief executive Jayne Hrdlicka will collect nearly $50 million in shares and other cash benefits on her way out the door.

Research from the United States suggests people think the average CEO earns ten times more than the average worker – and would prefer it was closer to only five times more.

In fact, the real gap in the US over the past decade has been estimated to mean CEOs earn a staggering 265 to 300 times more than average US workers.

Australians think CEOs earn seven times more than the average worker and would prefer if it was only three times more.

But the real gap here is also much higher. A long-running study found CEOs of the top 100 Australian companies earned 55 times more last financial year than average workers.

So, how much money is enough?

People have asked this question for thousands of years. The ancient Greek philosopher Aristotle explained the idea of eudaimonia, or a roadmap of “living well”, saying it:

belongs more to those who have cultivated their character and mind to the uttermost, and kept acquisition of external goods within moderate limits, than it does to those who have managed to acquire more external goods than they can possibly use, and are lacking goods of the soul.

Aristotle’s philosophy doesn’t call on us to shun money or wealth entirely, but argues it shouldn’t become life’s sole focus.

Research over recent decades has come to different conclusions on how much money is needed to achieve peak wellbeing.

A US study in 2010 suggested wellbeing maxes out around US$75,000. This figure naturally needs to be increased today to account for inflation – which, if those research findings are still true today, would be closer to US$111,000 in today’s dollars. You’d also need to take into account the cost of living in your area.

Other findings suggest wellbeing may continually increase with growing wealth, but the increase in wellbeing from $1 million to $10 million is likely less than when someone moves from poverty to middle class.

A 2022 experiment studied 200 people from Brazil, Indonesia, Kenya, Australia, Canada, the United States and the United Kingdom who were randomly given US$10,000 (A$15,000 at today’s exchange rate).

It found people in lower income countries “exhibited happiness gains three times larger than those in higher-income countries”, including Australia. But that cash still provided detectable benefits for people with household incomes up to US$123,000 (roughly A$184,000 today).

Remarkably, the people in that experiment (explained from 4:42 minutes into the video below) gave away more than two-thirds of that money to family, friends, strangers and charities.

Valuing time and relationships

Decades of international research have consistently shown materialistic goals – acquiring wealth and possessions for reasons associated with image and status – undermine wellbeing.

This is because materialistic striving is often borne out of low self-esteem or tending to compare oneself negatively to others, and there is always someone else to compare yourself against.

People can get stuck on the “hedonic treadmill”, where they get used to their new level of wealth and the luxuries it provides and then need more to feel happy.

It’s also because the work needed to acquire that wealth can mean less time focusing on hobbies and with loved ones.

Harvard research tracking two generations of men and their children over their lives, going back to 1938, shows deep, meaningful relationships with others are key to mental and physical wellbeing.

American psychologist Abraham Maslow developed a “hierarchy” of people’s “needs” in 1943. This suggested “self-actualisation” – reaching your pinnacle of personal growth – starts by having enough money to cover the basics of food, shelter, and access to the opportunities needed to grow as a person.

In line with this, research has shown “time affluence” (maximising free time by paying people to do things you don’t want to) and “experiential buying” (for example, meals out with loved ones, going on holidays) can support wellbeing by helping people develop new skills, build relationships, and create lifelong memories.

It’s in most of our interests to close the wealth gap

Recent data shows economic inequality in Australia is increasing. This is particularly affecting young Australians, as housing becomes less affordable.

At a broader social level, research from the UK indicates that as inequality increases, social outcomes get worse. These include increased crime, drug and alcohol abuse, obesity as people struggle to afford nutritious food, and reductions in social trust.

What percentage of wealth do you think is owned by the richest 20% of Australians? And in your ideal Australia, how much wealth should the richest 20% own?

The most recent Bureau of Statistics data we have, from 2019-20, showed the richest 20% of Australians owned around 62% of our wealth.

As inequality gets worse, evidence suggests it will lead to social problems that threaten to undermine the wellbeing of the whole community.

The irony is those who pursue extreme wealth and benefit most from this inequality will not necessarily be happier or more fulfilled because of it.The Conversation

Brad Elphinstone, Lecturer in psychology, Swinburne University of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Inflation rise reduces chances of Reserve Bank rate cut

Inflation spikes, drastically reducing chances of a Reserve Bank rate cut amid economic pressures and rising costs

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Inflation spikes, drastically reducing chances of a Reserve Bank rate cut amid economic pressures and rising costs

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In Short:
– Rate cut likelihood by the Reserve Bank has decreased due to a rise in annual inflation to 3.2 per cent.
– Significant price increases in housing, recreation, and transport are raising concerns for the Reserve Bank.

The likelihood of a rate cut by the Reserve Bank has decreased significantly after a surge in annual inflation.

The Australian Bureau of Statistics reported that inflation for the year ending September rose to 3.2 per cent, reflecting a 1.1 per cent increase.

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Trimmed mean inflation, a crucial measure for the Reserve Bank, was recorded at 1 per cent for the quarter and 3 per cent for the year. The bank anticipates inflation to reach 3 per cent by year-end, while trimmed mean inflation is expected to slightly decrease.

The quarterly rise of 1.3 per cent in September exceeded expectations. Governor Bullock noted that a deviation from the Reserve Bank’s projections could have material implications.

Financial markets reacted promptly, with the Australian dollar rising against the US dollar, while the ASX200 index fell.

The most significant price increases were observed in housing, recreation, and transport, indicating widespread price pressures that concern the Reserve Bank.

Despite the unexpected inflation rise, some economists believe the Reserve Bank may still consider rate cuts in December, viewing current price spikes as temporary due to the winding back of subsidies.

Economic Pressures

Broad-based economic pressures suggest that the Reserve Bank may not reduce interest rates at its upcoming meeting. Analysts highlight the need for ongoing support for households facing cost-of-living challenges.


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Wall Street hits record highs on low inflation

Wall Street hits record highs on cool inflation and strong earnings ahead of key Federal Reserve interest rate decision

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Wall Street hits record highs on cool inflation and strong earnings ahead of key Federal Reserve interest rate decision

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In Short:
– U.S. stocks rose to record highs on Friday due to lower inflation and strong corporate earnings.
– Key earnings reports from major companies are expected next week, influencing market trends.
U.S. stocks rose to record highs on Friday due to lower-than-expected inflation data and positive corporate earnings.The S&P 500 and Nasdaq achieved their largest weekly gains since August. The Dow saw its biggest jump from Friday to Friday since June.

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The Labor Department reported that the Consumer Price Index was slightly cooler than analysts’ predictions, easing concerns about inflation impacts from tariffs. This development suggests a likely interest rate cut by the Federal Reserve at its upcoming meeting.

Ryan Detrick from Carson Group noted the positive inflation news may facilitate forthcoming Fed rate cuts. Despite the ongoing government shutdown affecting data releases, this CPI report provided much-needed clarity.

Earnings reports are continuing, with 143 S&P 500 companies having reported results. Growth expectations for third-quarter earnings have risen to 10.4%. Detrick indicated a strong opening to the earnings season with a significant percentage of companies exceeding expectations.

This coming week, key earnings will be reported from Meta Platforms, Microsoft, Alphabet, Amazon, and Apple, alongside industrial companies like Caterpillar and Boeing.

The Dow rose 472.51 points to 47,207.12. The S&P 500 increased by 53.25 points to 6,791.69, while the Nasdaq gained 263.07 points, reaching 23,204.87.

Alphabet gained 2.7% following a deal expansion with Anthropic. Coinbase saw a 9.8% increase from a JPMorgan upgrade. In contrast, Deckers Outdoor’s shares fell 15.2% after lowering sales forecasts.

Market Trends

Advancing stocks on the NYSE outnumbered decliners by 2.18 to 1. The S&P 500 had 34 new highs, with the Nasdaq recording 124.

Trading volume was 19.04 billion shares, lower than the average of the past 20 days.


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US stocks face tests from Tesla, Netflix earnings

US markets brace for Tesla and Netflix earnings amid rising volatility and delayed inflation data

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US markets brace for Tesla and Netflix earnings amid rising volatility and delayed inflation data

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In Short:
– Earnings reports from Tesla and Netflix might affect U.S. stock performance next week amid high inflation concerns.
– Increased market volatility arises from U.S.-China trade tensions and fewer S&P 500 stocks in an uptrend.
This coming week, earnings reports from companies including Tesla and Netflix are anticipated to impact U.S. stock performance.
Investors are also awaiting delayed U.S. inflation data, which could test market stability as it remains near record highs.Recent trading activity has shown increased volatility, influenced by ongoing U.S.-China trade tensions and concerns regarding regional bank credit risks. The CBOE volatility index has seen a rise, indicating increased market uncertainty.

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The S&P 500 entered its fourth year of growth amidst these fluctuations, having previously experienced a period of calm. Experts suggest market risks are intensifying as valuations reach peak levels.

Market Volatility

Concerns regarding U.S.-China trade relations escalated last week when the U.S. threatened to raise tariffs by November 1 over China’s rare-earth export policies. President Donald Trump is scheduled to meet with President Xi Jinping in two weeks to discuss these issues.

Despite these challenges, major stock indexes gained ground over the week, with the S&P 500 up 13.3% year-to-date. However, a noticeable decline in the number of S&P 500 stocks in an uptrend raises caution among investors about underlying market weaknesses.

The upcoming third-quarter earnings will be closely monitored, especially as the government shutdown halts economic data releases. Companies like Procter & Gamble, Coca-Cola, RTX, and IBM are due to report. The delayed U.S. consumer price index is also expected to provide crucial insights ahead of the Federal Reserve’s monetary policy meeting on October 28-29.


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