The 2.5x Salary Fallacy: Why More Money Isn't What You Need

Article #124 of Life Unlocked - A newsletter by Dr Yath Prem, MD

Dear Friends,

Have you ever thought, "If I just made X amount more money, I'd finally be happy?"

I certainly have. And apparently, almost everyone else has done so.

I recently came across a fascinating learning from Sahil Bloom. He describes it as the 2.5x Salary Fallacy, and it goes something like this:

No matter how much money we currently make, we believe that earning approximately 2.5 times our present income will bring us optimal happiness.

For example, the graduate making £40,000 dreams of making £100,000. The senior manager making £100,000 fantasises about £250,000. The partner earning £1 million? They're eyeing that £2.5 million mark as their optimal happiness threshold.

Sahil Bloom is an entrepreneur, author, and content creator known for his insights into personal development, finance, and business. He says he discovered this fallacy when interviewing hundreds of ultra-wealthy successful people. Everyone, no matter where they are in life roughly wants 2.5x more.

It's almost algorithmic how consistent this pattern is. But here's the kicker, it's a never-ending treadmill.

When I was in medical school, I remember thinking how amazing life would be once I was making a salary of any kind. Yet when I reached that milestone, the goalposts had mysteriously shifted and a junior doctor's salary was no longer “enough”. Suddenly, I needed to be a consultant, work in the private sector, or build multiple income streams to feel "secure."

The truth is, that our minds are wired to adapt quickly to new circumstances – a phenomenon psychologists call "hedonic adaptation." We experience a brief happiness spike when our income increases, then rapidly return to our baseline level of contentment.

So why do we fall for this fallacy time and again?

1. The visualisation trap: We can easily imagine how our current problems would be solved with more money, but we can't visualise the new problems that will emerge.

2. Social comparison: We're constantly bombarded with images of people who seem to have more success, more possessions, and more freedom. The 2.5x figure often represents the lifestyle of those just ahead of us.

3. Concrete vs. abstract happiness: Money represents concrete solutions (paying off debt, buying a home), while the factors that create lasting happiness (meaningful relationships, purpose, health) are more abstract and harder to quantify.

I'm not suggesting money doesn't matter. Financial stability contributes to well-being. But the 2.5x fallacy reveals something profound about human psychology: we consistently overestimate how much happiness additional income will bring.

Recently, I've been asking myself a different question: "What kind of life do I want my money to help create?" This shifts the focus from the number itself to what that number enables.

For me, it's about having the freedom to explore life with my partner and future family, to be rich in physical and mental health, and not have to worry about debt, bills, or the cost of living. I’m not entirely sure I am there yet (I have a full-time job so I’m not exactly rich in time, but that’s the working goal).

Your answer might look completely different – and that's exactly the point.

So, here's my challenge to you this week: Instead of fixating on how much more you need to earn, try asking: "How can I maximise happiness and fulfilment with what I have right now and what will money do for me?"

Have a great week,

Dr. Yath Prem, MD

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Quote of the week:

The arrival fallacy is the false assumption that reaching some achievement or goal will create durable feelings of satisfaction and contentment in our lives.

from Sahil Bloom (The 5 Types of Wealth)

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