How Much Money Is Enough?

I must admit, I have been thinking about this question for a few months now. But changes at work and talking with a few of my close friends has really got me thinking! How much money is enough?

I see it every day, people working countless hours with a face that looks like they should be on the walking dead show, just because they are chasing money and the happiness that money brings…does money really bring happiness?

So How Much is Enough?

I think the first question we must ask ourselves is what does money mean to you? Would you be happy with just enough to pay the bills, or would you like extra to take your wife out to a nice dinner and spoil your kids with things? Maybe you want enough to be able to pay your bills and then give the rest away and help people less fortunate than you?

Whatever your answer is if you haven’t asked yourself this question you need to!

When researching this post I asked probably a few dozen people. They mostly all centered around this idea that a little bit more would be enough.

That used to be me, and sometimes I have to catch myself to not get into that mentality. But during those early years of my working life, I was always going for the money, and how I could get my next big check. I wasted valuable relationships for time spent getting money. I became obsessed with trying to earn that next dollar. It would not be a surprise that I would work for hours on hours just to get ahead.

Let me tell you from experience it’s a futile life you’re about to live.

The truth is money cannot buy happiness. Yes, it can buy fun things that provide happiness, but at some point, you’re just trying to get to the next level. Money is just a number on a bank statement or investment account. It’s the meaning we give to money that determines what our happiness is!

Money is just a number on a bank statement or investment account. It’s the meaning we give to money that determines what our happiness is!

I realized that chasing the dollar was not a way of life. I was starting to burn out and always be depressed. The joy I got from getting the next big check only lasted for a few days and then I was back on the grind to get the next big one. My relationship with my wife and friends suffered at the expense that money could buy happiness.

So What Does Money Mean to You?

I think the answer is different for everyone but here are some of the more common answers.

1. Protection or less risk

I know in the personal finance world it’s debated whether or not $1,000 or 6 months of your income is a good idea to keep in savings. But I know some people who want a year or more of their income in savings. This is awesome but to what expense are you saving that much for?

Again this goes back to what does money mean to you. At what point is saving so much money hinder you from giving to others and enjoying some things money can buy?

2. Validation of worth

In the business world, people determine how successful you are by the amount of money you have made or have in investments. If you have a company that is making hundreds of thousands but not millions you are probably considered a failure.

While this might hold true for them. Always needing more money personally for ourselves at some points runs out of usefulness. Our validation is not from how much money we have, but instead what is the life we lead and how our actions are perceived.

3. A Good Life for Your Children

All too many times I have heard of parents that want to give their children the best of the best money can offer. I personally think when parents do this they are setting their children up for failure.

Many times when parents give their kids everything they want or try and use the money as a way to get them to live a life they want for them, it backfires. They either become little brats that grow into big brats, or they go off on a completely different career path because they see how their parents have become.

After all, we are not responsible for the actions our kids take when they are grown.

4. Money Means Freedom

Let’s be honest with ourselves. This is what we all strive for. Freedom to tell our employers that we no longer need to work and can kick back and enjoy life.

Freedom is an obtainable goal and if you want to live like no one else and give up lots of stuff you can acquire it pretty easily. But how many of us actually enjoy the freedom and do not come up with something else to do?

So How Did I Get My Number?

I do not have some big formula that a financial advisor might use. If you do not already track your expenses and net worth, then you should – be careful it can get addicting. I think everyone should know where they are at so one of my personal favorites is the free tool Personal Capital.

Just know that over time your attitude towards money and the magical number will probably change. When you have kids, want to buy a house, or now have grandkids, the number will need to reflex your new life decisions.

I have done mine twice and I’m young.

So I asked myself some simple questions to get my number. I like to take a peek back at these when I feel I am drifting away into the dark tunnel of obsession with money.

  • What do I want my Life to Look like? 
  • Who/What do I care about?
  • What is the meaning behind the money?
  • How much money does it take to live the lifestyle I want to?
  • Do I want to retire and not work but help in my community? Or do I want to continue to tinker and make some side money?
  • How much do I need to be able to give freely?
  • How much do I want to leave for my kids?

I needed to ask myself these tough questions or I would just be lying to myself.  I encourage you to do the same!

For my  “magical” number I know that to pay all my bills, including mortgage, being able to give, and go out to eat a few times with my wife,  I can easily get by under $3k a month. I do not plan to retire until my house is paid off, so at least another good 15 – 20 years. That means at $3k a month I will have a TON of extra when my house is paid off. So $3,000 x 17 = $51,000. The general rule of thumb is to multiply by 12, but I am one of those people who wants to make sure I’m prepared so I added 5.

Personal finance tools will suggest if you want to retire and live financially independent off of your investment accounts, you need your money to bring in the same or more money than your spending. That means you will need to be taking about 4% of your money out as income to live off of.

To find your number though take your cost of living, so in this scenario, it would be $51,000 and multiply it by 25. ($51,000 x 25 = $1,275,000) This would be your number to theoretically have to live financially independent.

Just remember your decisions now and later on, could make this number change.

I pulled these numbers with the idea that I would retire in Indiana where I currently live. Being pretty positive I will not retire here because I am hoping for someplace warm, my cost of living might go up.

What is that number for you?

Each person or family is different. Some might need more money to live depending on their area or lifestyle they wish to live. I know I could get by on a whole lot less than the above scenario, but I want to have a lifestyle that is free to give when I am retired without having to think about what I need to sacrifice.

Giving Tip:

We just learned how to get to that financial independent number. But did you include any giving in your numbers? Money does not buy happiness, but giving to someone in need, will bring more joy than money ever could. ~Dave Ramsey

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