More money, less happiness: When money makes you miserable

More money, less happiness: When money makes you miserableMoney, the conventional wisdom says, doesn’t buy happiness. Modern psychology seems to back this up, with studies suggesting that beyond an income of $75,000, money doesn’t make you any happier.

This conclusion is simultaneously obvious and counter-intuitive.

As an abstract principle, most us acknowledge that money doesn’t buy happiness. But, at the same time, we all want more of something material — a nicer house, nicer vacations, the ability to live in a certain neighborhood or eat at fancier restaurants — that we think would make us happier. (If you’re J.D., you think maybe season tickets to your favorite team might make you happier.)

So, we’re left with a conundrum. Or, rather, a series of conundrums: Does income in excess of $75,000 make us happier? And if not, why not?

When Money Makes You Happier

In answer to the first question, I believe that all else equal — and as we’ll see below, this is a huge qualifier, as things are rarely equal — more money generally makes you happier.

To be clear, money won’t solve every problem. If you’re lonely or bitter or angry, for instance, more money won’t make you any happier. But just because money doesn’t solve every problem doesn’t mean that money won’t solve any problems.

Money can make many things easier, or better. With more money you can:

  • Build a nest-egg.
  • Pay off your house or car.
  • Go on more vacations.
  • Have more kids.
  • Be a stay at home parent.
  • Eat better food.
  • Retire early.

With more money, you can do any number of other things that people enjoy and that make them happier. And if you’re a victim of systemic poverty, more money can change your world.

As much as we pay lip-service to the idea of money not making us happy, it often does, and it’s okay to admit this. It doesn’t make us materialistic or greedy to want retirement savings, a nicer home, a paid-off car, or a trip to Europe.

When Money Makes You Miserable

Assuming that you buy the premise that (in theory) more money should (generally) make us happier, it raises the question of why (in practice) income beyond $75,000 annually doesn’t make us any happier.

I think the explanation for this seemingly irreconcilable conflict is that most people spend the extra income poorly. Most people use money ways that make them less happy.

Their Job Makes Them Miserable.

People who earn a lot of money often assume that they’re paid well because of their intelligence and skills. And that is undoubtedly often the case.

But often they’re paid well in whole (or in part) because they’ve accepted a very difficult, demanding job that pays well precisely because it makes people unhappy! A job with long hours, lots of stress, lots of travel and time away from family and friends will generally pay well, but also significantly impair happiness.

It shouldn’t then be surprising that people with high incomes are often unhappy. The high income and unhappiness have the exact same origins.

They Spend Money on Things That Bring Them No Happiness.

People are generally conformists. Drive through a rich neighborhood, and you’ll see people dressed similarly, driving similar cars, going on similar vacations.

This isn’t just a happy coincidence, that all these kindred spirits serendipitously found each other and formed a happy community. Rather, people succumb to keeping up with the Joneses and continually buy stuff — not because they enjoy it, but because they’d be embarrassed not to have it.

To a large extent, individuals let their peers dictate how they spend their time and money. Living on somebody else’s terms — living somebody else’s life — is not a recipe for happiness, and if you do it, extra money won’t make you any happier. You’ll be spending it how other people want you to, not how you want to.

They Take on More Debt.

When people begin to earn more money, they generally upgrade their lifestyle — buy a nicer home and buy a nicer car. The problem is, they don’t pay cash for these things. Rather, they use their new, higher income as a means to borrow more money. Far from providing financial security, the extra income often makes their financial position more precarious.

Instead of using the extra income to buy freedom and peace of mind — which would make them happier — they incur more debt, which makes them more anxious than ever, with the added fear that if they lose their job, they’ll be humiliated at having to ratchet back their newly lavish lifestyle.

Extra money won’t make you happy if it tethers you to a heavily indebted lifestyle.

The Bottom Line

The lesson here is simple: If you come into more money, it can make you happier — provided that you use it in a way that provides you security, freedom, and sincere pleasure, not merely conformist consumption.

Money, in short, is neutral. It’s a tool that can make you happier, or less happy, depending on how you choose to spend it.

Money will make you happier only if you choose to spend it in accordance with your values and your preferences. Nobody — not your parents, not your friends, not your neighbors, and certainly not a blogger! — knows what makes you happy better than you do. But, this doesn’t stop people from assuming that they know what is best for you: what neighborhood you should live in, what car to drive, what education you “owe” your kids. If you listen to them, more money won’t make you any happier; in fact, it may make you less happy, because you’re working hard and incurring debt to live out somebody else’s life.

Our family’s life is a microcosm of this.

In our twenties, my wife and I both had good jobs in a large city. We had it made by what society values, but we weren’t very happy; we worked long hours at demanding jobs. We did however live frugally relative to our incomes.

Burnt out on our jobs, we eventually moved to a smaller city and my wife quit her job so that we could have three kids that she stayed home with. Those were expensive decisions, both in terms of cash outlays and opportunity cost. But they were good decisions; we had less money, but far more joy.

This trade-off was only possible because we had spent many years saving our money, deferring gratification — ignoring a culture that told us to spend as a reward for our hard work — so that when we finally spent the money, we spent it on something that we valued, namely our family. It was the best decision that we’ve ever made (all the credit goes to my wife!), but it was only possible to live that way in our thirties because of how we had spent, or more accurately not spent, in our twenties.

The point isn’t that we’re so smart, and that you should have a bunch of kids too. It is in fact the opposite: I have no idea what your best life is.

But then again, neither does anybody else besides you. If you find the courage to decide for yourself what you value, and you use money wisely to pursue your goals and your dreams, you will find that, contrary to popular opinion, money will buy you happiness.

Source: getrichslowly.org

What Long-Term Care Insurance Covers

what does long term care insurance cover
While Medicare and Medicaid both help aging adults afford some of their medical expenses, they may not cover the cost of an extended illness or disability. That’s where long-term care insurance comes into play. Long-term care insurance helps policyholders pay for their long-term care needs such as nursing home care. We’ll explain what long-term care insurance covers and whether or not such coverage is something you or your loved ones should consider.

Long-Term Care Insurance Explained

Long-term care insurance helps individuals pay for a variety of services. Most of these services do not include medical care. Coverage may include the cost of staying in a nursing home or assisted living facility, adult day care or in-home care. This includes nursing care, physical, occupational or speech therapy and help with day to day activities.

A long-term care insurance policy pays for the cost of care due to a chronic illness, a disability, or injury. It also provides an individual with the assistance they may require as a result of the general effects of aging. Primarily, though, long-term care insurance is designed to help pay for the costs of custodial and personal care, versus strictly medical care.

When You Should Consider Long-Term Care Insurance

During the financial planning process, it’s important to consider long-term care costs. This is important if you are close to retirement age. Unfortunately, if you wait too long to purchase coverage, it may be too late. Many applicants may not qualify if they already have a chronic illness or disability.

According to the U.S. Department of Health and Human Services, an adult turning 65 has a 70% chance of needing some form of long-term care. While only one-third of retirees may never need long-term care coverage, 20% may need it for five years or longer. With a private nursing home room averaging about $7,698 per month, long-term care could end up being a huge financial burden for you and your family.

Most health insurance policies won’t cover long-term care costs. Additionally, if you’re counting on Medicare to assist you with these extra expenses, you may be out of luck. Medicare doesn’t cover long-term care or custodial care. Most nursing homes classify under the custodial care category. This classification of care includes the supervision of your daily tasks.

So, if you don’t have long-term care insurance, you’re on the hook for these expenses. However, it’s possible to get help through Medicaid for low income families. But keep in mind, you may only receive coverage after you deplete your life savings. Just know that Medicare may cover short-term nursing care or hospice care, but little of the long-term care in between.

What Does Long Term Care Insurance Cover

what does long term care insurance coverSo what does long term care insurance cover, Well, since the majority of long-term care policies are comprehensive policies, they may cover at-home care, adult day care, assisted living facilities (resident care or alternative care), and nursing home care. At home, long-term care may cover the cost of professional nursing care, occupational therapy, or rehabilitation. This may also include assistance with daily tasks, including bathing or brushing teeth.

Additionally, long-term care coverage can cover short-term hospice care for individuals who are terminally ill. The objective of hospice care is to help with pain management and provide emotional and physical support for all parties involved. Most policies allow beneficiaries to obtain care at a hospice facility, nursing home, or in the comfort of their own home. However, most hospice care is not considered long-term care and may receive coverage through Medicare.

Also, long-term care insurance can help cover the costs of respite care or temporary care. These policy extensions provide time off to those who care for an individual on a regular basis. Usually, respite care provides compensation to caregivers for 14 to 21 days a year. This care can take place at a nursing home, adult daytime care facility, or at home

What Long-Term Care Doesn’t Cover

If you have a pre-existing medical condition, you may not be eligible for long-term care during the exclusion period. The exclusion period can last for several months after your initial purchase of the policy. Also, if a family member provides in-home care, your policy may not pay them for their services.

Keep in mind, long-term care coverage won’t cover medical care costs. Many of your medical costs will fall under your coverage plan if you’re eligible for Medicare.

Long-Term Care Insurance Costs

Some of the following factors may affect the cost of your long-term care policy:

  • The age of the policyholder.
  • The maximum amount the policy will pay per year.
  • The maximum number of days the policy will pay.
  • The lifetime maximum amount that the policy will pay
  • Any additional options or benefits you choose.

If you’re in poor health or you’re currently receiving long-term care, you may not qualify for a plan. However, it’s possible to qualify for a limited amount of coverage with a higher premium rate. Some group policies don’t even require underwriting.

According to the American Association for Long-Term Care Insurance (AALTCI), a couple in their mid-50s can purchase a new long-term care policy for around $3,000 a year. The combined benefit of this plan would be roughly $770,000. Keep in mind, some policies limit your payout period. These payout limitations may be two to five years, while other policies may offer a lifetime benefit. This is an important consideration when finding the right policy.

Bottom Line

what does long term care insurance coverWhile it’s highly likely that you may need some form of long-term care, it’s wise to consider how you will pay for this additional cost as you age. While a long-term care policy is a viable option, there are alternatives you can consider.

One viable choice would be to boost your retirement savings to help compensate for long-term care costs. Ultimately, it comes down to what level of risk you’re comfortable with and how well a long-term care policy fits into your bigger financial picture.

Retirement Tips

  • If you’re unsure what long-term care might mean to your retirement plans, consider consulting a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • The looming costs of long-term care may have you thinking about how much money you’ll need for retirement. If you aren’t sure how much your 401(k) or Social Security will factor into the equation, SmartAsset’s retirement guide can help you sort out the details.

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Source: smartasset.com