How much money do you want
How much money do you want
Redefining Your “Rich”: The 5-Step Formula to Calculate How Much Money You Need & Want (free worksheet)
13 Aug Redefining Your “Rich”: The 5-Step Formula to Calculate How Much Money You Need & Want (free worksheet)
“Rich is a state of mind that should be nurtured before the money comes.”
Note: This article is a detailed guide on how to calculate how much money you need to do the things you care about, live your legend and be happy. I also created a free spreadsheet template to allow you to put the principles to use immediately. Download your own copy at the bottom of this article.
Now, let’s talk money.
Avoiding the Endless Empty Pursuit of More
You’ve probably heard the scene before…
The young intern asks the big time Wall Street CEO,
“So, what’s your number? The amount you’d need to leave it all?”
The CEO gives a short pause, as if to build anticipation, and then responds with a slight smirk,
This is what we want to avoid.
And it begs the question for the rest of us…
How much money do you need to be happy?
How much is enough, for you personally, to do the things you want?
Have you ever taken the time to actually back into that magic number? To sketch it out and get specific?
If you haven’t, then without realizing it, your answer is about the same as that CEO – and just as impossible to achieve.
Today we’re going to change that.
As it turns out, the magic number may be a lot less than most would think.
This number is hard for a lot of people to believe, especially those convinced they need it all (or at least “more”), and that more shillings in the pocket will solve all their problems.
And yes, money is important, especially if you’re down near the poverty level and aren’t able to make ends meet. No question about it. But it doesn’t take long before it stops driving happiness.
Perhaps we shouldn’t be so surprised. When we think back on most things that make us smile – time with people we love, experiences, that first kiss, your daughter being born, growth, progress, achievement, contribution and the pursuit of something meaningful (i.e. doing work you love and living your legend!) – none of those have to cost anything.
But the point isn’t the actual number anyway, as all studies have biases and any number will of course vary depending on all kinds of factors, like where you live, family size, etc.
The real point is that however you splice it, the magic “happiness” number tends to be a lot lower than most people think (or want to admit), and more importantly, much lower than most people are endlessly sacrificing and striving for.
So today we’re going to take a crack at killing the assumptions and defining your number.
Our goal is to replace “more” with something specific. And to hopefully liberate you a bit. Because – contrary to societal insistence – living a good life, pursuing dreams and living your legend doesn’t have to require you to sell your soul to the highest bidder.
Here are the five steps to get there, and below them you’ll find the free downloadable spreadsheet template to go with them.
Time to get clear…
How Much Is Enough?
The 5-Step Formula for Calculating How Much Money You Actually Need to Do What You Want, Live Your Legend & Be Happy
A few important things to make this useful:
Step #1: How Much Do You Currently Spend?
The Goal: This first step is awareness. We’ve heard it said plenty – what gets measured, gets managed. In order to make progress we have to know where we stand and where we’ve come from.
The Task: Go through your past year of spending and list how much you spent total in the year and also what the average was per month. Include all cash, credit and accounts – don’t leave anything out.
Suggested Tool: I love using the free service Mint.com. It puts all your accounts, credit cards and spending into one place, categorizes them and allows you to analyze and compare spending, set budgets, see trends, etc. It makes tracking finances (and saving money) easy and actually fun. I try to review this each week during my weekly planning, and at the very least do a full review each month.
Step #2: Calculate Your “Survival” Number
The Goal: Figure out the bare minimum you and your family need to be secure and survive. We’re not talking luxury and fun, we’re talking pure survival here. The amount you’d need in a worst-case scenario to make ends meet.
Step #3: Calculate Your “Life Is Good” Number
The Goal: Figure out how much you’d need to make each month and year to live happy and content for the rest of your life. The amount that would allow you to live a good life doing the things you want to do, but not crazy outlandish spending. Some nice dinners out, vacations, shopping, small luxuries, charity, maybe better housing and other nice/fun things for you and your family and friends.
Step #4: Calculate Your “Dream” Number
The Goal: Figure out how much you’d need to do pretty much all the things you’ve ever wanted to do. This is not a level you need to be happy, but more of a fun bonus level if things go incredibly well. Have fun with this, but only list the things, dreams and experiences you actually care about. Don’t just throw on “five vacation houses around the world” if that’s not something that actually matters to you.
Important Tips on the Surprising Cost of Dreams:
Step #5: Define Your Gap
The Goal: Every big change starts with awareness. Now that you know your numbers, we want to figure out the difference between where you are now and where you want to be.
The Task: Write down your current annual income and subtract the total yearly number for each of the scenarios to calculate the surplus or gap between what you’re making now and what you need and want.
Bonus Step: Pay Yourself First & Fund a Dream
The Goal: This exercise wouldn’t be complete without taking some steps to actually get you closer to experiencing a dream, so this is Dream Funding 101! We want to set up a simple system for ensuring you experience one of your Life Is Good or Dream items – likely faster than you planned.
Tip: We do this by putting money away on a consistent basis before we have a chance to spend it. I began doing this year’s ago when we first started talking about doing our yearlong world tour. I opened a new dedicated “World Tour” savings account and set up an auto transfer of a few hundred dollars that happened first thing each month. It adds up fast, and I never missed the money!
The Tasks:
What’s Next: Once you’ve completed each step, go back through them with your significant other and/or someone else close to you. Then make a plan to revisit the exercise every few months or year, at the least.
Remove the Pressure and Give Yourself Permission to Do What Matters
When I first did this exercise, was honest about my answers and did the specific research to understand costs of various things, I was shocked to see where it all ended up – pleasantly surprised, that is.
I had already passed my Life Is Good number. Yet if you’d have asked me before doing the exercise, I would have told you I wasn’t even close!
I realized then I needed a lot less than I thought, and that was incredibly liberating.
That’s the real point here.
If you think you need some ridiculous, undefined and perpetually growing amount of money to do what you want to do and be happy, that thinking can create some very dangerous pressure. Because that pressure can lead you to prioritize the wrong things – to base your life, business and career decisions on what will fetch the highest dollar instead of what’s most interesting, exciting and rewarding.
If you think you need to make enough to buy a small country (or whatever), you may never even attempt to pursue your passions, and actually find and do work you love, assuming your interests could never make you what you “need”. And worst of all, you might be making these decisions without even knowing it.
You’ve failed before you’ve even started.
In order to pursue what matters, we must remove the pressure.
Doing that creates the freedom that makes a lot more possible. And ironically, it’s dedication to what makes us come alive that makes us a lot more likely to hit our Dream number, or blow right through it.
But it all starts with clarity.
“I wish I would have made less money.”
The last time I did this exercise was last December during an annual mastermind retreat I do with some good friends in the mountains near San Francisco.
He was excited to see the above exercise sketched out on the whiteboard, mentioning he wished he’d done something similar when he was our age.
We opened a round of beers and spent the next few hours trading stories and ideas, although most the time was spent listening to him share the kind of war stories you’d usually only read in a book. The good, the bad, the hilarious, the massive wins and multi-million-dollar losses – he covered it all, in what seemed like pure and brutal honesty.
After one of his more vulnerable stories, one of us looked over and asked what all of us were thinking…
“So, do you wish you would have made less money?”
He looked at us for a second, and responded as if he’d thought about it many times before.
“You know what? Yeah, I wish I would have made less.”
He loved his career and was grateful for the incredible success he’d experienced, but also totally transparent about the unexpected problems, expectations and pressures it had brought to him, his life and relationships, and the stress and sacrifice required to get there.
I’d never heard someone talk about money that way, especially who’d come from near poverty and experienced the world from both extremes.
Yet he was so clear about it.
More is not an answer.
But without specific clarity on what matters, that’s what your answer will always be.
And it’s that endless, empty pursuit that creates the pressure that can ruin our chances of ever doing the things we actually care about. Talk about a total backfire.
If you’re reading this, you probably have it better than you think.
The fact that you’re even able to read this, wherever you are in the world, within seconds of me publishing it, proves we live in an entirely new world of possibility than decades past.
Rich is a state of mind that should be nurtured – before the money comes.
We have so much more than we realize, and need so much less than we think.
Knowing that is freedom.
Once you know it, life becomes a lot more fun.
And you’ll have a much better shot at doing the things you used to only dream about.
Who knows, you might be a lot closer (and richer) than you think.
There’s only one way to find out!
Here’s to clarity,
P.S. Download the Free Spreadsheet Template:
To help make sure you actually go through the process and to make it a lot easier (and more fun) to complete, I’ve created a blank Google spreadsheet template for you to download and use. I’ve added it to the LYL Passionate Work Toolkit, which is available for free to members of our LYL email community. Join us and download yours below!
Click here to download your free How Much Money Do You Need to Live Your Legend spreadsheet template. Note: It will be read only so you must click: File, Download As and save to your local computer.
Урок №14 Английский язык по методу доктора Пимслера
Начинаем четырнадцатый урок из первого курса по методу доктора Пимслера американский английский язык для русскоговорящих.
Если вы намерены продолжить обучение, то ссылки на другие занятия вы найдете в статье Учим английский по методу доктора Пимслера.
Включите аудио урок и следуйте дальше по тексту.
Listen to this English conversation.
Русский мужчина сидит в баре Нью‐Йоркского ресторана. Он говорит с официанткой.
Listen.
A ‐ What would you like to drink, sir?
B — I’d like a beer.
A — Yes, sir. Here.
B — Thank you. How much do I owe you?
A — Two dollars, please.
B ‐ One beer ‐ ten dollars?
A — No, sir, you don’t understand. It’s two dollars. You owe me two dollars.
B — I understand now. Here’s two dollars and thank you.
A ‐ You are welcome.
Вы только что слышали, как мужчина сказал «here’s two dollars» что означает «вот два доллара».
Listen again.
A ‐ What would you like to drink, sir?
B — I’d like a beer.
A — Yes, sir. Here.
B — Thank you. How much do I owe you?
A — Two dollars, please.
B ‐ One beer ‐ ten dollars?
A — No, sir, you don’t understand. It’s two dollars. You owe me two dollars.
B — I understand now. Here’s two dollars and thank you.
A ‐ You are welcome.
Спросите у продавщицы, сколько вы ей должны.
How much do I owe you?
How much do I owe you?
Представьте, что вы расплачиваетесь за покупку. Слушайте и повторяйте слово, которое часто употребляется при передаче денег продавцу.
Here
Here
Вы уже употребляли слово «here» для того, чтобы сказать «здесь». Американцы также используют это слово в выражении «вот» давая кому‐нибудь что‐то.
Вот как сказать «вот один доллар».
Listen and repeat.
Here’s one dollar.
Here is
Here is
В английском языке дословно вы говорите «здесь есть».
Что вы скажите, передавая продавщице один доллар?
Here’s one dollar.
Американцы часто превращают слова «here is» в сокращение «here’s».
Попробуйте сказать «вот один доллар», используя это сокращение.
Here’s one dollar.
Here’s
Сейчас попробуйте сказать вот тринадцать долларов.
Here’s thirteen dollars.
Here’s
Вот четырнадцать долларов.
Here’s fourteen dollars.
Fourteen
Имея ввиду что-то что у вас есть скажите «у меня есть».
I have.
have
I have.
Скажите «у меня есть двенадцать долларов».
I have twelve dollars.
Twelve
Скажите не пятнадцать.
Not fifteen.
Not fifteen.
А как сказать «у меня нет пятнадцати долларов».
I don’t have fifteen dollars.
don’t have
Скажите «хорошо, вот шестнадцать долларов».
Ok, here’s sixteen dollars.
here’s
Как спросить «у вас есть один доллар, сэр?»
Do you have one dollar, sir?
Do you have one dollar, sir?
Спросите меня, хочу ли я получить один доллар. Дословно «вы хотите один доллар?»
Do you want one dollar?
Скажите «вот один доллар».
Here’s one dollar.
A вот как сказать это по‐другому.
Listen and repeat.
Here’s a dollar.
a
a dollar
a dollar
Here’s a dollar.
Американцы обычно используют слово «один» для того чтобы подчеркнуть точное количество. В остальных же случаях, говоря, о каком‐то предмете вообще, они употребляют «а».
Используя «а» скажите еще раз «вот доллар».
Here’s a dollar.
Here’s a dollar.
Вы помните, как спросить «сколько я вам должен».
How much do I owe you?
How much
Отвечайте «один доллар, сэр».
One dollar, sir.
It’s one dollar.
Сейчас скажите еще раз «вот доллар».
Here’s a dollar.
a dollar
Продолжайте использовать «а» для обозначения единичных предметов, если не будет других указаний.
Сейчас спросите «сколько я вам должен?»
How much do I owe you?
Вот как сказать «у меня нет денег».
I don’t have any money.
any
any
any money
I don’t have any money.
Дословно вы скажете «нет никаких денег».
Скажите еще раз «у меня нет денег».
I don’t have any money.
I don’t have any money.
«У меня много денег».
Listen and repeat.
Много
A lot
Lot
A
A lot
A lot
По-английски это выражение состоит из двух слов.
Попробуйте сказать «у меня много».
I have a lot
a lot
I have a lot
«У меня много денег».
Listen and repeat.
I have a lot of money.
of
of
of money
I have a lot of money.
Обратите внимание, при упоминании о том, что у вас много чего‐то приходится употреблять слово «of».
Скажите, что у вас много денег.
I have a lot of money.
of money
Скажите «вы не русский».
You are not Russian.
You are not Russian.
Скажите «я русский».
I’m Russian.
Помните, как сказать «я хотел бы купить немного вина».
I’d like to buy some wine.
Some
Попробуйте сказать мне, что у вас есть немного денег.
I have some money.
I have some money.
«Дайте мне немного денег».
Listen and repeat.
Give me some money.
Give
Give me
Give me some money, please.
Скажите еще раз «дайте мне».
Give me
Give
Скажите «дайте мне одиннадцать долларов».
Give me eleven dollars.
Попросите меня дать вам десять долларов.
Give me ten dollars.
Скажите, что у вас нет денег.
I don’t have any money.
Как вы скажите, что у вас много денег?
I have a lot of money.
I have a lot of money.
Попробуйте сказать, у меня есть семнадцать долларов.
I have seventeen dollars.
Seventeen
Сейчас попробуйте сказать восемнадцать.
Eighteen
Eighteen
Eighteen
Попробуйте сказать девятнадцать.
Nineteen
Nineteen
Nineteen
Скажите «у меня есть девятнадцать долларов».
I have nineteen dollars.
Скажите у меня много денег.
I have a lot of money.
Спросите «сколько у вас денег?» Обратите внимание на порядок слов.
How much money do you have?
How much
А как спросить, сколько у нее долларов?
How many dollars do you have?
How many
Скажите «восемнадцать».
Eighteen
Скажите «нет, семнадцать».
No, seventeen.
Seventeen
Give me a dollar, please.
a dollar
Скажите «у меня нет пива».
I don’t have any beer.
any beer
I don’t have any beer.
Скажите «я хотел бы купить немного пива».
I’d like to buy some beer.
Скажите еще раз «у меня нет пива».
I don’t have any beer.
Скажите «у меня есть немного пива».
I have some beer.
Сейчас попробуйте сказать ей, что вы хотели бы купить пива. Имея ввиду одну порцию пива.
I’d like to buy a beer.
a beer
I’d like to buy a beer.
Она дает вам одну бутылку. Как она говорит «вот пиво».
Here’s a beer.
a beer
Here’s
Here’s a beer.
Скажите «сейчас дайте мне семнадцать долларов, пожалуйста».
Now give me seventeen dollars, please.
А сейчас скажите ему «нет, дайте мне семь долларов».
No, give me seven dollars.
Скажите «я хотел бы купить немного вина».
I’d like to buy some wine.
Попробуйте сказать «вот вино». Имея ввиду конкретно вино, то которое ему нужно.
Here’s the wine.
Сейчас скажите «вот пиво».
Here’s a beer.
Here’s a beer.
«Вот два пива».
Listen and repeat.
Here are two beers.
Here are
Here are two beers.
«Here’s» используется в тех случаях, когда речь идет об одном предмете или об определенной сумме денег. «Here are» используется применительно к нескольким предметам.
Слушайте и повторяйте оба эти выражения.
Listen and repeat.
Here’s.
Here are.
Скажите «вот пиво».
Here’s a beer.
Вот два пива.
Here are two beers.
Here are two beers.
Как сказать «шесть долларов».
Six dollars.
Скажите «шестнадцать».
Sixteen
Четырнадцать
Fourteen
Восемнадцать
Eighteen
Пятнадцать
Fifteen
Fifteen
Девятнадцать
Nineteen
Тринадцать
Thirteen
Семнадцать
Seventeen
Спросите мужчину, сколько у него денег.
How much money do you have?
How much
Попробуйте ответить много.
A lot.
A lot.
Помните, как спросить «сколько» о чем‐нибудь, что можно сосчитать?
Спросите «сколько у вас долларов?»
How many dollars do you have?
How many
Ответьте «двенадцать».
Twelve.
Она говорит «это не много».
Listen and repeat.
Старайтесь точно копировать произношение диктора.
That’s not a lot.
not a lot
That’s
That’s
That’s not a lot.
«That’s» означает «это» или дословно «это есть». Это еще одно сокращение, которое используется в тех же случаях, что и «it’s» но с чуть большим нажимом.
Скажите еще раз «это не много».
That’s not a lot.
Сейчас давайте вспомним, как спрашивать о месторасположении чего‐либо.
Скажите «извините, мадам».
Excuse me, ma’am.
Где Парковый Проспект?
Where’s Park Avenue?
Вы знаете, где Парковый проспект?
Do you know where Park Avenue is?
Помните, как спросить «он там?»
Is it over there?
Is it over there?
Или здесь?
Or here?
Or is it here?
Как они говорит «он там»?
It’s over there.
It’s over there.
Скажите «спасибо, мадам».
Thank you ma’am. Thanks.
Как она ответит?
You are welcome.
Сейчас представьте, что вы сидите в баре американского ресторана. Бармен хочет узнать, что вы хотите пить. Скажите ему «я хотела бы пива» имея ввиду одну порцию пива.
I’d like a beer.
a beer
I’d like a beer, please.
Он дает вам бутылку со словами «вот пиво».
Here’s a beer.
Here’s a beer, miss.
Спросите, сколько вы ему должны.
How much do I owe you?
Он отвечает «вы должны мне пять долларов».
You owe me five dollars.
You owe me
Имея ввиду цену подчеркните «это много».
That’s a lot!
That’s
That’s a lot!
Скажите ему «вот десять долларов».
Here’s ten dollars.
Here’s ten dollars.
Как он говорит «а вот два пива».
And here are two beers.
And here are two beers.
Русская женщина разговаривает со своим мужем. Они в Америке. Как она говорит «я хотела бы купить что‐нибудь».
I’d like to buy something.
Скажите «пожалуйста, дайте мне одиннадцать долларов».
Please, give me eleven dollars.
Eleven
Скажите «нет, дайте мне семнадцать или восемнадцать долларов».
No, give me seventeen or eighteen dollars.
No, give me seventeen or eighteen dollars.
Как ей спросить, есть ли у него деньги.
Do you have any money?
Do you have any money?
Как ему ответить, что у него нет денег.
I don’t have any money.
I don’t have any money.
Спросите «у вас нет денег?»
You don’t have any money?
Попробуйте сказать «у меня немного денег».
I don’t have a lot of money.
I don’t have a lot of money.
Вы помните, как спросить, сколько денег она хочет получить.
How much money do you want?
How much money do you want?
Скажите «О‐о, восемнадцать или девятнадцать долларов».
Oh, eighteen or nineteen dollars.
eighteen or nineteen dollars
Скажите «это много».
That’s a lot.
That’s a lot.
Он говорит «я собираюсь дать вам десять долларов».
Listen.
I’m going to give you ten dollars.
Как сказать «я собираюсь дать».
I’m going to give.
give
to give
going to give
I’m going to give.
Сейчас скажите «я собираюсь дать вам».
I’m going to give you.
Я собираюсь дать вам десть долларов.
I’m going to give you ten dollars.
Скажите «у меня нет денег».
I don’t have any money.
any
I don’t have any money.
Спросите «что вы собираетесь делать?»
What are you going to do?
What are you going to do?
Скажите «пожалуйста дайте мне немного денег».
Please give me some money.
Спросите ее, сколько денег вы хотите получить?
How much money do you want?
How much
How much money do you want?
Как она спрашивает «сколько у вас долларов?»
How many dollars do you have?
Oн говорит «вот шестнадцать долларов».
Here is sixteen dollars.
Это много.
That’s a lot.
That’s a lot.
Скажите «нет, это не много».
No, that’s not a lot.
That’s not a lot.
Скачайте аудио версию урока по ссылке ниже.
How Much Money Do You Really Need?
I don’t know if it’s a kiasu thing, an Asian thing, or just a normal person thing. But instinctively, I always feel that I don’t have enough money. I always feel like I need more.
Ever felt the same?
Maybe it’s because we live in a culture where “more” is glamourised. We always want more. A nicer house, a bigger car, and a faster phone. A more spectacular vacation than last year; somewhere with a longer flight time and a higher exchange rate — so that more people will ‘like’ my pictures on Facebook and Instagram.
The difficulty is — all the above need money. But if the wants never stop growing, you need to continue to make more and more money forever.
Instead, I’d like to ask the reverse question today. How much is enough? At what point do the wants stop?
How much money do you really need?
1. How to retire early
One of my heroes is a guy nicknamed Mr. Money Mustache. He retired debt-free at 30 years old. But he’s not alone in the world of early retirement. If you’re an article addict like me, you’ve probably read about others who’ve saved enough money to fire their boss.
How do they do it? Here’s the formula:
The pattern I’ve noticed? It’s usually highly-specialised people (like lawyers and tech developers) who earn US dollars, and then choose to travel the rest of their foreseeable lives in cheap destinations. (And for those who choose not to travel, they still maintain frugal lifestyles at home.)
So the reality is that not many people will be able to do it. But if you’re wondering how much money you really need to retire young, here’s the secret:
If you have savings of 25 times your yearly expenses, you can retire today (the 4% Rule)
For example, if I need RM 5,000 per month today to live comfortably:
Why? Here are the assumptions:
What’s 4% of RM 1,500,000? Right, it’s RM 60,000. So, theoretically I can continue spending money like how I’m spending it today. And since I’m not touching the principal amount at all, I can continue like this forever.
Of course in life, shit happens. Emergencies happen. Accident babies happen. Critics of this kind of calculation will say that you can’t predict the future, so it’s not legit. Who knows if Donald Trump will take over the world and enslave anyone who didn’t vote for him?
But assuming things stay pretty stable, the 4% rule has plenty of safety margin built into it — to withstand non-Donald Trump types of catastrophes. It’s by far my favourite method for calculating how much money I would need — if I wanted to drop everything and just play guitar by the beach all day.
2. How to be financially stable
Of course, early retirement is going to be difficult for most people. And I hope I didn’t scare anyone off with talks of millions of ringgit.
So here’s a less dramatic way to look at how much money one needs. Instead of looking at that huge end-goal number, how about we look at monthly cash flow instead?
Simply, if we looked at money in and money out every month — how much money would you need to put you on the path to financial freedom?
This is what I would call financially stable:
If you were a company and had the above financials — I’d think you were fundamentally sound. If I were an investor, I’d probably invest money in you.
The only “problem” with this model though: It’s sustainable, but you’ll likely have to work until you’re old.
Unless you invest a lot more money for retirement than just 10%.
3. How to survive
Unfortunately, I think most people are actually in survival mode.
Which means making enough money to just cover expenses. Meaning no money left at the end of every month. And being one emergency away from having to borrow money, or bankruptcy if they are already in debt.
The math behind survival is simple. If you just want to survive, the amount of money you need is equal to your spending. But since you don’t have savings, you’ll have to work until you die.
But who wants to work forever to just survive!? Everyone wants to be rich and retire early.
Well that’s true, which is why I ask, “Then why do most people spend money as if they want to work forever?”
I’m not trying to disrespect the lower-income group here. This one isn’t for them. I understand that it’s extremely difficult to escape poverty. This one is for the middle class who have choices. Of course, earning more money would help you be more comfortable. But a low salary isn’t the only reason you’re finding it hard to breathe.
You’re barely surviving because you spend too much.
The first step: knowing your monthly expenses
Regardless of which of the above situations you’re in or aiming for, knowing your monthly expenses is the first step to improvement.
Because if you never have good control over your spending — you will never have enough money.
Never.
Here’s how to start: use an app to track your expenses. Personally, I use an Android app called Monefy. Every time my wallet comes out, I make a few touches and record the transaction. But try a few and see what you like.
(I won’t judge you if you prefer to use buku tiga lima.)
You’ll discover spending patterns that you’ve never realised before. I’ve always prided myself on being thrifty with my money. But even then, I was really surprised once I started tracking this year. I discovered I had been spending too much on entertainment, and not enough on other important things in life.
Now that I’ve started tracking my money, my expenses are a lot more optimised.
Some capitalist entrepreneurs and motivational speakers out there probably do not agree with this article.
“Why limit yourself?” they complain. “The amount of money you can make is unlimited, so aim for the stars!” they may say.
I don’t deny that. Theoretically, it’s true that anyone can make millions, hang out with Leonardo DiCaprio, and own luxury properties in New York and Los Angeles.
Practically though — I know most people aren’t going to. Instead of trying to earn unlimited money, most people would be better off first figuring out how much money they need. And then making wiser life decisions based on that.
Because knowing exactly how much money you need leads to happier questions.
If you’ve already exceeded your financial goals, you can then relook at your priorities in life, such as cutting down work time and spend more quality time with the family.
If you already have a sustainable cash flow, maybe it’s time to venture into that hobby-business you’ve always wanted to start.
Or maybe you can do it the old-fashioned way: downgrade your lifestyle, spend less money, and retire earlier. Then spend the rest of your life doing whatever you want.
How Much Money Is Really Enough?
How much money is enough varies greatly from person to person. Specifically, how much money is enough depends on your lifestyle and what your expectations are. What’s more than enough for one person may leave another feeling impoverished.
This is true both in terms of day-to-day living and in terms of retirement savings. To get a handle on what might be enough for you, you’ll need to consider a number of variables — from your current and projected expenses to your anticipated life span.
If you want to jump ahead to a particular section of this article, use one of these links:
How Much Money Do You Need To Be Comfortable?
Of course, these are broad guidelines. Your expenses might be more or less in retirement, and if you want to be comfortable, you’d want more money than just the living wage amounts. You should also factor in that you’ll have at least a portion of those funds invested during your retirement years, however.
How To Calculate How Much Money You Really Need
The exact amount of money you really need can be a moving target. Even so, there are some calculations you can make, based on certain assumptions, that can help you arrive at a good approximation. Here’s what you need to know.
Calculating Current Needs
In terms of your current needs, the best way to start is to calculate all of your monthly expenses. Be sure to add in all of your annual expenses and average them on a monthly basis. This should give you enough to determine how much money you really need every month. If you want to live more comfortably, add another 10% or 20% to the calculation.
Calculating Lifetime Retirement Needs
While no one can predict their life expectancy with certainty, you can use online calculators to make an estimate, sometimes factoring in variables such as your lifestyle and health situation. Once you reach age 70, the IRS provides a helpful life expectancy table that’s used for minimum individual retirement account withdrawals.
More advanced calculators can factor in other variables, such as your estimated Social Security income and your investment income. Under these scenarios, you won’t need as much money over your lifetime because you’ll have supplemental income.
The Power of Investing
The important thing to understand is that if you’re able to successfully invest your money in retirement, it can last many years beyond a simple straight withdrawal strategy.
What Is Financial Independence?
Financial independence is the ability to afford your lifestyle without the need for supplemental income. Financial independence is not a magical signpost or number, however. Rather, it runs along a continuum.
For most people, there are various stages of financial independence. For example, the first stage might be when you get your first job and no longer need to rely on your parents, friends or relatives to support you financially. The next level of financial independence might be when you own your first home and no longer need to pay rent, although you’ll have mortgage payments. Eventually, you might get to the point where you pay off your home, which marks another level of financial independence. The ultimate level of financial independence is if you can comfortably retire without the need for a job to support your lifestyle.
The FIRE (Financial Independence, Retire Early) movement, which is currently a booming trend, suggests that with an extreme level of savings — think 50% of your income or more — you can retire early and be financially independent. While this is certainly possible, it requires a lot of dedication and sacrifice when you are young. The other major caveat of the FIRE strategy is that it dramatically lengthens your time in retirement as well, meaning you’ll need to save significantly more than if you retired at 65.
How Much Money Is Enough for a Lifetime?
You can’t know with certainty how much money would be enough to last a lifetime, as you can never be sure how long you will live and how much you will spend. Any estimate of how much money you really need is a projection. The more accurate you can input your financial needs, however, the better an estimate you can create.
Whether you’re trying to create a current budget or you are projecting out your needed retirement savings, “enough” money is the amount you need to cover all of your expenses.
More From GOBankingRates
How Much Money Is Enough: Create an Ideal Life (Then Save)
When defining how much money is enough for your future, you must first intentionally create the fulfilling, exciting life you want (then save for it). This is how.
When we talk about defining “how much money is enough”, we first have to understand that there are two parts to the equation.
One, our income, is how we build two, our wealth.
What we have left after spending our income is what we can save towards building our wealth.
Perhaps the most important part that this question belies is that which is unasked: “how do I build enough wealth for the life I want?”
It’s a symbiotic triangle you have to consciously build: income yields wealth to enable your desired life.
I’ve had my personal struggles with limiting myself and knowing when “enough is enough”. We’ll get to that. But first, let’s review the quantitive process of defining “enough” for you.
How Much Money Is Enough?
Deciding your savings rate goals likely depends on your view of the value of time. Are luxuries and spending worth more to you than free time and flexibility? Be honest with yourself.
How much money is enough to retire?
Your savings rate defines how quickly you can build your wealth in relative terms. The amount of wealth you need to live comfortably off of and retire is relative to your spending, not your income.
A typical financial advisor (often not a fiduciary) may look at your income and use it as the basis for defining your retirement needs. This is often because income is easy to define for most people: they know their salary and can check a tax return for things like investment income.
However, spending is much harder to define as it requires consistent, routine tracking of your expenses. We’re big advocates for tracking spending as the most basic, most important element to building wealth for the average person.
Just like with health and diet, simply knowing what you’re consuming is the most basic step to making corrections that produce long term gains (or, losses in the case of weight!).
Income-based retirement calculation problems
Here’s the problem with solely looking at the “how much money is enough” problem from an income basis:
That’s a half million dollar difference!
In general, the personal savings rate is quite low, at least in the US. That makes income an easy correlation to spending to make since usually, the two are near equal. Over 2019, the average personal savings rate was 7.7%.
So why do so many financial advisors make retirement calculations based on income?
Focus on your spending when it comes to planning for retirement rather than income.
How much money is enough to never work again?
Neither of these income numbers helps us figure out how much money is enough.
Most people tend to spend pretty consistently, whether that’s with a healthy savings rate or beyond their income and into debt. Understanding your spending, and what your retirement expectations are, will be the most important component in defining just how much money is enough for you.
How much money is enough to be happy?
Figuring out how much INCOME or WEALTH is enough to be happy is a much more difficult and personal question. Happiness is relative: what being happy is to you can be very different from what it is to me.
For us, having enough money—whether wealth or income—depends on how you value time. It’s about the freedom to make decisions that are most beneficial to our personal health, goals, and priorities. We don’t want to feel pressure to work simply to pay bills or stay afloat.
Sometimes, those decisions can be financially detrimental like changing from full-time to part-time work.
Perhaps your employer has demanded you to start working longer shifts, overtime. Will you be able to say no?
Maybe a project has a deadline but the underlying requirements keep changing. Can you insist that either the deadline must shift or the requirements can’t change?
Has your place of work required you to take personal health risks that seem unnecessary, simply in order to keep their costs low—maybe during a pandemic?
What if you get fired for your responses, or your hours reduced?
We want to be able to make those financially detrimental decisions, despite their monetary cost.
Statistical income and happiness
Emotional well-being also rises with log income, but there is no further progress beyond an annual income of
Daniel Kahneman and Angus Deaton
Of course, you need to remember that is an average across a wide, geographically diverse sample (450K people). What income level works for you could be a good bit less or more. And, as we’ve already discussed, income doesn’t necessarily dictate how much you spend—the most important element.
These inputs aren’t fixed, though. You’ll need to reevaluate in the future. Will your family grow? Will you move from country life to city life or the reverse, affecting your cost of living? How will your expectations of life in retirement differ from current times?
An addiction to income and saving money
Jenni and I are in the process of transitioning to early retirement. We reached financial independence in 2018.
Sometimes I feel like I still have to make money. It’s reassuring, even comforting to do so. I still operate a business where it’s possible to sort of “turn on the tap” at any given moment to make more money. It just takes spending some money as an input to get the output of even more money.
So, sometimes I do this.
I think one of the best ways to feel more comfortable and let this go, is to simply lay it all out. You’re witnessing that process unfold through this retire early blog. Jenni and I have been working out all the details—developing plans and timelines—for years.
Watching the market collapse a few months back and seeing our net worth plummet by hundreds of thousands of dollars, in a strange way, helped. We expected a correction at some point, after over a decade of economic expansion. We still had plenty of money, and a chunk in more defensive assets if things really went sideways. Most of our investments are in index funds like VTSAX or VTI which probably won’t go belly up.
While I’m still working on it, I think I’ve mostly reassured myself that “enough is enough”. We’ve become more disciplined investors.
Build the Life You Want, Then Save for It
We recently wrote our how we became millionaires in 10 years and it helped me remember several forks in the road. We made many choices to find a balance between building wealth and being content, well-adjusted members of society.
I can remember times in the past thinking that I could sacrifice a bit more time to make more money. I could build a bigger business if a poured a little more heart and soul into it. A little more work and I could be rich.
The problem with that mentality is that there’s always more money and more notoriety.
But there’s not more time.
Or would I look back and wonder: “What happened to my family, my hobbies, …my life?”
The accumulation of money phase
If you’re simply daydreaming about your future retired life and not living life now, you might be taking the wrong approach. This is not a suggestion to go out and blow a bunch of money at the bar.
At the same time, staying at home because it’s almost always the cheapest choice probably isn’t healthy either.
When you, your partner, your family want to do something to take a break from the daily stresses of life, you need to have hobbies and activities you can rely on.
The solution to skipping the bar when you want to have a fun night on the town isn’t to do nothing. It’s to do something else that might be just as fun but also a little less costly.
FIRE is a novel path to life replete with varying stages, you’re used to taking the road less traveled. Work through what the purpose of your “trip to the bar” is, find a solution to that purpose that is healthier for your wallet and your life.
Instead of the bar, maybe you and your friends get together and DIY brew your own cider or beer. That’s a hobby that’s going to take a few gatherings to get together and produce, then hopefully several more gatherings to consume and enjoy.
It could be the start of a hobby you develop a serious interest in for years. Just be careful if you’re thinking about turning that hobby into a business down the line.
One of our many DIY hard cider experiments. Jenni is celiac so no beer brewing, but cider hit’s the spot! It’s surprisingly easy and variable with regards to flavor.
It’s not just bars and alcohol, though.
If you’re longing for a trip to Japan you envision with your partner a decade from now when you’re retired, find a way to take a bite of that now. Getting a taste might help motivate you to stay on track while satisfying you enough to be contented.
Sit down together and watch a few travel shows to Japan. Research where exactly you want to go and what you want to do, start making the plan now while you have time.
Might a staycation satiate your desire to escape routine for a little while?
Could you take a shorter trip to Japan next year?
Perhaps you could leverage credit card rewards to fly for cheap or free? Maybe you could stay at low-cost AirBNBs while you’re there. It’d be an opportunity to do a little “field research” ahead of your much longer, more cushy retirement trip you’ve been dreaming of.
A balanced life
We planned ahead, buying two flight tickets during a price mistake and staying at incredibly humble hotels. Our biggest expenditure was Eurail Passes, which we managed to nab at the student rate. We figured it’d be cheaper than renting a car and give us the flexibility to do what we really wanted: see the heart of western Europe together.
That first trip through Europe was so long ago the TVs were still CRT! Aside: I can’t believe no one has commented on my ridiculous hand drawn stick figures, yet!
Our goal wasn’t to go shopping in Milan or eat at the fanciest of French restaurants. It was simply to be out exploring that slice of the world together. We skipped everything else and it didn’t end up being all that costly of a trip. That seed of exploration has become a root of our relationship and it’s something we entertain ourselves with and think about to this day.
Did it slow down our reach for financial independence? Yes.
Was it worth it? Easily.
Finding that balance is what will let you build the life you want, that’ll serve as your motivation to keep saving.
I think for some people, at least for me, it might take hitting the extreme ends of the spectrum, hitting the guard rails on the sides—your family and your life slipping by—to shock you back to a balanced middle.
Financial independence isn’t just about building wealth, it’s about building a life. Don’t look back a decade after chasing FIRE and be the one thinking:
I built my savings, but I never built my life.
How Much Money FAQ
Let’s run through some common questions we see about having enough money and what that really means.
US life expectancy is currently 78.6 years per the CDC.
If a person matches the average in the US, they’d need $1,981,851.84 to last a lifetime (in 2019 dollars).
Purdue University recently did a study to identify the point of change in emotional well-being and life satisfaction at various income levels. The study answered the question of how much money is enough to be happy by saying:
That aligns pretty well with Joe’s finding when he did a deeper dive into defining how much money is needed to feel wealthy.
When John D. Rockefeller was asked this, he famously quipped: “just a little bit more”.
Don’t get sucked into never having enough.
Did those questions and answers get you thinking about how much money is enough in your own situation? Let’s get back to our experience defining the answer.
How have you managed to build a life while building wealth?
How do you define how much money is enough?
Let us know in the comments!