Can you buy happiness?

Can you buy happiness?

What price is right?

September 2, 2007

We all aspire to be ‘comfortable’ in life. But exactly how much does comfort cost, and who can afford it? Peter Munro reports.

WHEN John Howard said in 1996 that he wanted Australians to feel “comfortable and relaxed”, he conjured up images of elderly, plump people watching repeats of The Sullivans. He was talking about the nation’s future, and attracted derision for wanting Australia to go gently into the 21st century.

But personal comfort is an entirely different matter. It is a state that everyone aspires to, whether it means accessing proper health care when you fall ill, enrolling your children in a good school or escaping the mortgage stress under which 140,000 Victorians labour. Such concerns have a tangible value, a figure that you can pin up on the wall. If you want to live well in Melbourne, that magic number is the mark to strive for. But how high does it go? What price comfort?

You can buy happiness. Bob Cummins, convener of the Australian Centre on Quality of Life at Deakin University, says that a high income acts as a defence against ill tidings. “If people are poor and their car breaks down, it is an absolute disaster because they haven’t got the money to mend it,” he says. “But somebody who has enough money can avoid all that – you get the garage to fix your car and you get a hire car in the meantime. And this is the power of money to help you defend yourself against all the bad stuff that is inevitably going to happen to you.”

Cummins caps the cost of comfort at about $100,000 for a family. Beyond that mark, he says, money might bring you a bigger car but no extra cheer.

Other analysts go higher. Demographer Bernard Salt says that it takes a household income of about $150,000 to live well in Melbourne – almost three times the average wage for adults. In five years, the mark will be as high as $250,000, he says.

More than a third of the online readers he polled on this question set $150,000 as the minimum household income required by two adults with two children to live comfortably in Melbourne. The next highest response, at more than 20 per cent, put the mark at $100,000. It was a small straw poll but Salt says the responses are indicative of what it now takes to live well. “That sort of lifestyle would be aspirational for middle Melbourne to achieve,” he says. “But it is not entirely out of reach.”

Salt imagines Melbourne’s most comfortable family might live in a period house in Mont Albert, or somewhere similar on the edge of the prime real estate ring. Mum and dad are in their mid-40s and probably bought their home almost two decades ago for more than $200,000. Dad is in middle-level management and brings in about $120,000, while mum works part-time to pay for their two kids to attend private school. The family holiday each year, perhaps on the Sapphire Coast, eat out at a local restaurant every fortnight and have two cars. They are house proud and have a gleaming barbecue on the back deck of their part-renovated home.

It makes for a nice family portrait. But while Salt’s Mont Albert family is straight out of suburban-dream casting, they present a pretty picture to which many increasingly aspire.

There are a million households in housing stress, where more than 30 per cent of gross income is spent on rent or mortgage repayments, according to the Australian Bureau of Statistics’ latest breakdown of the 2006 census. Almost half of those households are families spending more than $1500 a month in mortgage repayments, many of them struggling to pay off bigger homes than they need.

The number of Victorians paying for private health cover has grown to more than 42 per cent, according to the Private Health Insurance Administration Council. While over the past decade, the number of students attending private schools has grown by more than 22 per cent.

Bob Birrell, director of the Centre for Population and Urban Research at Monash University, says that Melbourne families in all income brackets are more likely to choose independent high schools than those in the rest of the country. But it typically costs too much for all but the wealthiest families to pay the school fees in comfort.

The centre’s analysis of the 2006 census revealed that almost half of all children in private schools came from homes with a minimum income of $130,000 a year. “What this is telling us unmistakably is that you need a family income of over $2500 a week to send your kid to a private school,” Birrell says.

Saul Eslake, chief economist at ANZ, sets the overall income mark slightly lower at about $110,000 per household. But he admits that this figure would not even begin to cover comfort costs such as private health insurance, running at least one car and enjoying the occasional family holiday. “With those kinds of commitments, I would say the family who have a gross income of $110,000 haven’t got a lot of spare change,” he says.

Housing affordability is the main reason the comfort level now sits above $100,000. In a recent paper, the Labor Party figured Melburnian families would need an income of more than $106,000 to buy a median-priced home, compared with $43,500 in 1996. Eslake says that housing affordability will get worse, even if not at the soaring rates we have seen over the past decade. Ten years ago, a family might have been comfortable on about $75,000 a year. By 2017, that figure could hit $175,000, he says.

Binny Roberts, 27, from Armadale, is among a generation of working students already wondering how much money they will need to live comfortably in Melbourne. She is in the first year of a postgraduate diploma in education by part-time correspondence from the Queensland University of Technology, but also earns $46,000 a year as a full-time nanny and housekeeper.

“I consider myself comfortable at the moment but I do still live pay cheque to pay cheque,” she says. “When I have finished studying and start teaching, I would hope to be on at least $60,000 a year, plus $10,000 on top of that per child if starting a family.”

She defines comfort as having the money to see a doctor if she is sick or to fly home at short notice to her parents in Adelaide. But often those desires compete with costs such as a $5000 credit card bill, $120 a month in private health insurance, $50 in capped mobile calls and $130 for a computer under a rent-to-buy scheme. Overseas trips to Italy, Japan and Bali tallied up to about $20,000 but were worth the expense, she reckons.

“My share house is kitted out like a home with all the usuals, including a lounge and a TV, but I don’t own all of it,” she says. “Growing up, I remember that mum and dad had the same lounge suite for years and years, until they had saved up to buy a new one. Now it seems we can have the best straight away. Personally, I think we’re accumulating a lot more things and needing a lot more things, before we can afford to pay for them.”

Clive Hamilton, executive director of The Australia Institute and co-author of Affluenza: When Too Much is Never Enough, once polled Australians on whether they could afford to buy everything they really needed. Sixty-two per cent of people said they came up short, including, astonishingly, 50 per cent of households on about $100,000 a year.

“On the face of it, you would think that as we become wealthier and can satisfy more of our needs, then this will liberate us to focus on non-financial, non-economic things. But, in fact, the opposite has happened – the richer we have become the more preoccupied we have become with money and material things, and rather than closing the gap is increasing, and so we feel dissatisfied,” he says.

“Quite frankly, when I hear people complaining about how hard they’re doing because they’re putting three kids through private schools, well, why should I be sympathetic about that? It’s like complaining about petrol prices because you’ve got to maintain three Jaguars.”

Studies have shown that as people become wealthier the perception of what they need to live a reasonably comfortable life goes up by even more. Ten pairs of heels at $50,000 might become 50 pairs at $100,000 and 100 at $150,000, along with the new Range Rover and the private schools and extra ensuite.

Cummins says that once household income tips above $100,000 a year, money starts to lose its shine. “People have the wrong idea of what money can do for them. If you already have enough to eat, you have reasonable clothes and so on, then upping the ante by buying luxury items is really a very inefficient way and a very short-term way of increasing happiness,” he says.

He regularly surveys Australians and plots their happiness levels on the Australian Unity Wellbeing Index. He found that families with a household income of less than $15,000 can improve their sense of wellbeing by earning only an additional $7000. For households on between $150,000 and $250,000, that extra slice of happiness requires a whopping $625,000.

Melburnians, he says, are a reasonably happy lot overall. But the best way to feel comfortable about life is not tied to earning $150,000 a year. “People need a good, intimate relationship with someone you can talk to at the end of the day, if only to whinge about how little money you have,” he says. “If you’ve got that sort of person in your life, then chances are you are doing well in the happiness stakes.”