My experience of being an engineer in the Bay Area, with three kids and a wife, has been that much of my annual salary has been consumed in costs which I felt I "had" to pay (mortgage, power, food, pre-school or school, clothes, saving for the future (401k)). And while I recognize that from an annual salary, property ownership, and actually having savings for retirement that made me "rich", a bit of extra money from bonuses would enable things like replacing an older car, or a family trip to Hawaii. Often times the bulk of any "extra" money would go into things like the savings fund for my kids college tuition.

For me, and my living situation, when I had the option of earning a bonus it would enable something in my life (saving for kids educations, a vacation trip) that would normally be outside of my financial profile. As a result I was motivated to compete for those bonuses. But had all those other things been covered vacationing every year in the Alps in my chalet, private jet service where ever I wanted to go etc. Extra money would have very little motivation for me. That is why I was really curious about how it motivated someone who had a multi-million dollar bonus program.

  1. Wealth is exponentially distributed.
  2. People tend to socialize with people in their rough income range.
  3. Expenses tend to grow to fill any budget.
  4. US society isn't very good at saving money, so most 
     people's budget for spending is their entire income.

  1. People tend to know a few people who make >10x what they do, 
     a few people who make <1/10x what they do, 
     and a lot of people that make about what they do. 
  2. Normal expenses in a milieu are enough to use up a person's entire income.
  3. A person's idea of a luxury will tend towards something
     that would require >10x their income to be affordable.

When I moved to the Bay Area from LA it was with the plan to get a house as quickly as I could, build up some equity in the house while working for a company with offices outside of the Bay Area and then transfer to one of those offices when we had kids so that using the equity in our California house we could greatly reduce our burn rate and in a lower cost of living location and support a one earner payroll. So paying attention to our burn rate as a family was critical to understanding what the payroll requirements would be on a single earner to maintain a lifestyle that didn't add stress to our lives.

And there are lots of things that incrementally add burn rate, communication charges, cable service, eating out, expensive to maintain cars, debt (especially credit card debt) etc. I also had aspirations for paying my kids college tuition (even though tuition was rising much faster than incomes or inflation) and being able to reach a point where I could develop enough passive income from investments/dividends/royalties/what have you that I would not be required charge an employer for my services in order to survive. Doing that math kind of make #4 a necessity, had to send money into the future (save) so that it could cover those costs which I wouldn't be able to cover out of a paycheck.

On your corollaries I find #1 is blown away by attending a church. It is especially true if you're volunteering for some of the community service activities at said church.

I certainly see #2 as a valid up to a point, per the $75K mention earlier. I remember working as a summer Intern and getting paid $200 a week and thinking "Wow, I can't even spend all the money I'm making!" but yes, you can always spend more without too much effort. During (and after) the 2009 banking crisis when people I knew were out of work and looking at being so for a "long" time a few of them were astonished at how much their monthly expenses has creeped up on them without thinking about it. One guy who was out of work for 18 months, once he got back to work he and his family made an explicit agreement to talk about 'incremental' costs before they took them on.

I also don't know about Corollary #3. Perhaps its a magnitude thing.

Corollary #3 is the one I feel the shakiest about. Interesting point about church. Childhood friends who went into careers with diverse income ranges, combined with a social scene outside my career does some of the same things for me, but I suspect church would do a yet better job in keeping me grounded.

another thought: you could donate all of it. the perfect money sink. it actually helps, and more of it helps better. so with an altruistic mind you can get motivated with that no matter on which salary level :)

But how about you? Do you feel better about yourself if you have more art? or more cars? a bigger house? a staff? And if so, why does that make you feel better about yourself?

Whoever said that money was an obedient servant but a cruel master pretty much nailed it.

There are, of course, plenty of things to worry about that money cannot solve. But having known the kind of worries brought on by too little money, I very much appreciate that none of my current worries are about money. Anything beyond that is nice to have, but I doubt anything could beat that feeling of not having to worry about money any longer.

Sure my family with an extra 100k could do a handful of extra things in life but quality of life isn't going to change because of it.

Happiness does not grow linearly with salary and happiness is what you ultimately want to maximize. Income is only one input, and as it grows, it can actually complicate your life decreasing your happiness.

A person making 60k a year losing 15% of their income? There's likely to be significant lifestyle changes.

Furthermore, I think any financial advisor would advise that your 'lifestyle' not depend on one year's bonus!

but of course it's true that the further you go up the scale, the more absurd it becomes to talk about serious comfort losses, and there's a point on the lower end where we're talking about actual poverty.

[1] http://home.bt.com/lifestyle/money/mortgages-bills/how-much-...

[2] (warning self starting video) http://www.investopedia.com/articles/financialcareers/10/buf...