How much money is enough? This is an idea that has long since fascinated me. There are plenty of people making less than $40,000 per year who feel like it’s plenty. There’s also millionaires and billionaires who feel like it’s not enough.
So what’s the right answer, and is there even a right answer? That’s what this post is going to be about.
Money Defined
For the purposes of this post, I’m going to use the American dollar since it’s the currency I use and am most familiar with. If you’re an international reader or more familiar with another currency, just convert the numbers into the currency you use.
Net Worth and Monthly Cashflow
Two very common measures of wealth are net worth and monthly cash flow. Net worth is simply the amount of money you have to your name after adding up all your assets and subtracting your liabilities.
For example, someone with $900,000 in real estate investments, $400,000 in stocks, and $80,000 in cash with $500,000 in mortgage debt has a net worth of $880,000.
Monthly cash flow is how much money you are bringing in every month minus bills. A family making $10,000 per month with $6,700 in bills (housing, transportation, food, etc.) has a monthly cashflow of $3,300.
Net worth can help increase monthly cash flow if the investor is paying herself every month. For example, if the real estate investor we wrote about earlier makes $700 in cashflow from her properties, she can add $700 to her monthly cash flow by using the money to fund her life.
Who Determines “Enough?”
There is only one person who determines “enough”, and that’s you. If you’re married, you and your spouse will determine together. You might be influenced by friends and family, social media, and ads but you are ultimately the boss here.
Are There Any Rules About “Enough”?
The only rule I can think of about enough is that it fits your criteria. Sounds simple, but getting there is where the complexity is.
How Much Money is “Enough”? What to Ask Yourself
This brings us to the heart of the post, and how to answer the complex question of how much money is enough. These questions will help get you to the answer.
Number 1: What Do I Want My Life to Look Like?
If you want to know how much money is enough, you first have to know the end goal. This question addresses the end goal. What do you want your life to look like?
- Do you want to travel and stay at the best hotels all over the world or is camping more of your style?
- What kind of neighborhood and house do you want to live in?
- What are the needs and wants of your family?
Getting clear on these types of questions will help you figure out what your enough is.
Recommended Books:
Number 2: How Much is This Life Going to Cost?
The first question of what you want your life to look like was the fun question. Now it’s time to get into the nuts and bolts of what you want your life by design to look like. What are the monthly costs? How much will you need yearly?
Someone who wants to travel internationally, stay at the best hotels, and eat at the best restaurants is going to need to accumulate significantly more than the person who wants to travel around the US in their RV.
Both of those choices can be a great life, they are just going to have very different costs. So figure out how much you’re going to need and use that as your starting point for how much money is your enough.
Related: What is the FIRE Movement?
Number 3: Am I on the Right Ladder?
There’s a quote from Thomas Merton that reads: “People may spend their whole lives climbing the ladder of success only to find, once they reach the top, that the ladder is leaning against the wrong wall.”
In other words, make sure you know what you’re working towards. Someone grinding day in and day out to reach early retirement at the expense of time with their family and their health is climbing the wrong ladder.
So is the person who has long since reached financial independence slogging away at the business they hate because they want to work just “one more year.”
That’s why it’s important to take a step back and remember why you’re doing what you are doing. You might actually already have everything you already want now.
Number 4: Will I Be Able to Recognize “Enough?”
If you haven’t defined “enough”, how will you be able to recognize it when you reach it? And if you have it defined, will you have the wisdom to recognize it when it arrives?
On the surface, it might seem easy to define “enough” and recognize it. But when you’re in the middle of a busy life with work, kids, and household responsibilities, it’s not always so obvious.
Think about your end goals and where you are in your current stage of life. Honest self-reflection is key here.
Number 5: If I Do Recognize “Enough”, Will I Be Able to Stop?
Ok, let’s say you have “enough” clearly defined and the wisdom to recognize it. Will you be able to stop what you’re doing and be content by pivoting into a new life? Or will you continue doing what you’ve been doing?
Life isn’t always so simple. Even when “enough” is reached, there are other factors that motivate someone to keep doing what they’ve been doing. For example, a business owner who has been working at her company for the last 25 years.
She’s worked with the same people and a big part of her identity is being a business owner. Selling the company or giving up the reins isn’t as easy as it seems, even if money is no longer a factor.
Moving on from the company means a change in daily routines, a different social network, new way of life, etc. Not so easy to do.
Number 6: Are There Reasons to Go Past “Enough”?
Let’s keep with the example of the owner of the company who has already reached “enough.” She may want to keep going because there are so many other life factors at play.
Even though she started and maintained a successful business that’s allowed her financial freedom, she might just keep working for the pure enjoyment of it. Or she might cut back hours and keep working a few days a week to keep her mind sharp and give herself a clearly defined purpose.
Conclusion: “Enough”
“Enough” isn’t as easy as it appears on the surface. After thinking about this topic on and off for the past few years, my conclusion is that you have to work on it. Just like you have to work on maintaining your health, you have to work on your definition of “enough.”
With the work comes clarity and then appropriate action. What can’t happen is you work for X amount of years with no clear direction of “enough.” That’s confusing and comes with the risk of leaving you empty and filled with regret.
Book Recommendation: The Power of Regret
So sit down and think about what “enough” means for you. Write it down and come back to it a few times a year. Even though the definition will probably change during the process, you’ll have a working vision.
How much money is enough for you?
