How Much Money is Enough?

Posted on September 13, 2023

If you ask a billionaire, he’ll likely respond that no amount is enough. Others might reflexively say, “One million dollars.” Those that are more thoughtful might have a different number. There comes a point that there might be a better way to spend your time than chasing more money. You’ll never know if you’ve reached that point if you don’t define it.

Studies have shown that happiness doesn’t increase beyond an income of $70-75k per year. That’s a comfortable living in most parts of the country, but it’s not enough to drive a new Mercedes every three years and vacation in Europe with the family every summer. It would be tough to send your child to Harvard on a $70,000 salary.

How much is enough? It depends on you and your circumstances.

Consider how much you need to live fully:

1. How old are you? How much longer do you expect to live? If you’re 90, you probably require less money for the rest of your life than someone that just turned 30. There are actuarial tables that can tell you how much longer you’re expected to live. Plan to live longer than expected!

2. How much are your monthly expenses? What would your expenses be if you were living the life of your dreams? Let your imagination run wild. What expenses would you have? A new bowling ball each year or a second house in Vail? A housekeeper? A thoroughbred? It’s your life. Determine how much it would take to finance your ideal life.

3. Who are you responsible for? Do you have three children that will attend college in the next 10 years? Do you have a spouse that doesn’t work? Do you care for an aging parent? For how long do you expect to financially provide for others?

4. What is your current debt situation? Do you have 20 years left on a mortgage hanging over your head? Significant medical bills? Credit cards?

5. When would you like to retire and how much do you need each month to live comfortably? How would you like to spend your retirement? Do you want to travel regularly? Play golf every day? How much would a typical month in retirement cost?

• Maybe you value your free time above all else and would be happy living a simple life with a Labrador retriever and a large vegetable garden, reading books all afternoon.

6. What toys do you want to own? A plane? A Porsche? A boat? A second home? Swimming pool? Motorcycle?

There’s no set answer to the question, “How much money is enough?” It’s completely dependent on your desires and circumstances. The number might be quite small or very high. It’s your number. If you’ve never considered how much money you need, take the time to think about it.

Money is great for a couple of things: primarily, solving problems and providing choices. It has limited value beyond those two purposes. It’s a mistake to use money for establishing status. To be worried about impressing your peers is best left to your teenager. Needing money for the wrong things is limiting. It requires working longer and harder than necessary.

You could be doing other things with your limited time on Earth.

Think long and hard about what is most important to you. Ensure that you develop an income, savings, and net worth to acquire the possessions and freedom that will allow you to live your life in the way you desire. Spend time addressing this important issue. You might be able to quit working sooner than you think.