How much money is “enough” is a critical concept when it comes to reaching financial independence. The concept of enough is that once you have reached a certain level of wealth (or truly passive income, as they’re essentially interchangeable), having more wealth doesn’t actually lead to any increased happiness. In fact, in many situations, more leads to decreased happiness.
Mo’ money, mo’ problems.
- More to worry about losing.
- More to protect from lawsuits.
- More to worry about paying taxes on.
- More estate planning tasks to do.
There is no specific dollar amount that represents enough for everyone. For some, it could be a low six-figure amount, while for many it will be a seven-figure amount. It might even be an eight-figure amount for a few. [If this is the first time you’ve heard of this concept and you have no idea how much money might be “enough” for you, multiply what you spent last year by 25 and that’ll get you into the right neighborhood.]
The Crisis of Early Financial Independence
Katie and I have been fortunate to have reached “enough” relatively early in life. This has all been very exciting, of course, to watch our income and wealth grow, but it is also at times terrifying. In some ways, it has provoked an existential crisis as we try to figure out what to do with the rest of our lives now that we are freed from the need to exchange our time and life energy for money. If, as Jonathan Clements has stated, acquiring a nest egg sufficient to support you the rest of your life is your most important financial goal, what comes next?
We fully recognize that this is a dilemma that many of our readers, as fortunate as their financial situations may be, do not currently face. Some do, of course, but only a small percentage. No matter your station, there will always be somebody with more wealth and income than you and somebody with less. However, it is a dilemma that we hope and fully expect each of our readers will face eventually, so we thought it was worth addressing.
Even if you are nowhere near financial independence, or even are still struggling with paying off the credit cards, hopefully, there is something in this post you can use. Like with everything on this blog (and every other source of financial information out there), take what you find useful and leave the rest.
Today, I’m going to discuss a few things to consider when you get beyond enough. This is relatively new territory for me, so I wouldn’t be surprised if my views on the subject change over time, but I think I’ve learned a few items worth sharing.
6 Tips For Those Who Have Enough
I've written about life Beyond Enough before on The Physician on FIRE website, but it is something I spend more and more time thinking about as the years go by.
# 1 Dealing with Guilt
Katie and I worked hard to become educated, make good financial decisions, grow a business, and help as many people as we could. But we didn’t work as hard as what we’ve been blessed with. By no objective measure can we claim to deserve this level of financial success.
I recently had the opportunity to discuss my grandfather’s life with my mother. She was one of twelve children raised on a 200-acre farm in Eastern Utah that was purchased about the time of her birth. (Prior to that point, this grandfather, like my other grandfather, was a miner.) There was a one-bedroom house on the farm. The girls got the bedroom (3-4 in the bed), my grandparents slept in the front room (there were only two rooms total in the house), and the boys slept in the barn. They primarily ate bread along with potatoes, carrots, and onions raised in the large garden. The farm grew wheat, barley, and hay and there were 15-20 cows to milk each day and about 200 sheep. Nearly the entire production of the farm was consumed by the family. The only “cash crops” were the cream from the milk and the wool from the sheep.
In addition, starting when my mother was young, my grandfather took a job pumping gas at the service station all night. He would return from work, sleep for a few hours, farm for a few hours during the heat of the day, sleep a few more hours, and go back to work. Needless to say, the children had to take care of most of the farm chores. My grandfather busted his butt for his entire life just to keep food on the table.
By contrast, I was 43 when I wrote this post (45 now), never have to work again, and can afford to buy just about anything my heart desires. Given technological change, my privilege, wealth, opportunity, and health are beyond that of the vast majority of kings that have ever lived on this planet. Do I feel a little guilty about that? You betcha. This is not uncommon for the wealthy and something you have likely had to deal with in the past or will have to in the future. Here’s my take: There is nothing wrong with having wealth and privilege, so long as you use it to better the lives of those around you. As Uncle Ben said, “With great power comes great responsibility.” In fact, I have no doubt that my grandfather INTENDED for me (and my 80+ cousins) to enjoy a more privileged life than he led. That was why he went to war in the 1940s and why he worked so hard after he came home.
# 2 Spend a Little
From time to time, Katie and I have very deliberately increased our lifestyle. We have intentionally spent more money on clothing, food, shelter, vacations, and even “stuff.” The fun thing about having “enough” is that anything above and beyond that amount can be safely squandered in any way you choose without it affecting the fact that you have enough. Yes, boosting your spending on an ongoing basis has the nasty side effect of increasing how much “enough” is, but within reason, that’s okay. And one time expenditures are exactly that. Good luck trying to tell “ongoing expenses” apart from “one time expenditures,” by the way. That’s a dilemma I never considered before but frequently think about now.
Bear in mind what the literature on happiness says — the best way to “buy” happiness is to have shared experiences with people you care about. Limit how much “stuff” you buy, make sure that which you do is of high quality, and remember that everything you own owns a little piece of you. Also, as you
recklessly consume loosen the purse strings, be sure you remember what you are consuming. While you have enough money to buy/do what you want, remember that every product or service you consume has effects on the rest of the planet and every species on it. In many ways, the resources of the planet are more limited than yours! “Fix it up, wear it out, make it do, or do without” is more than a method to build wealth, it’s a prescription for improving sustainability.
# 3 Continue to Invest
Despite having “enough” we’re still saving and investing. There are really four categories of what we’re doing with our money. Currently, the smallest category of what we do with our money is to spend it. The next smallest category is to give money away. We’re proud to give away more than we spend each year. This includes money given to charities, money given to family (primarily 529s for nieces/nephews), and The White Coat Investor Scholarship.
The third category? Taxes. While the 2018 tax code changes helped a little, over 30% of our income still goes to support our national, state, and local governments and is spent as directed by our elected officials.
But the largest category? It’s still our savings. Why are we still saving so much? I guess part of it is habit. But there’s more to it. I think some of it is just boosting things up a bit. Having a little more than enough provides us a little extra financial security. Some of it is “rounding out” our investments. For example, we’ve met the original goals we had for money to give to our children for college and their 20s. But we bumped those goals up a bit because we could, so we’re still putting some money there. Some of that savings also provide us a tax break and a little extra asset protection, and that’s nice too.
If our spending continues to rise, as it has throughout our adult lives, we may also need a little more than what we now think is enough. So saving more allows us to increase spending. I’ve been impressed by our ability to spend more and more over the years without feeling like we’re wasting it, so additional savings adds a bit of a fudge factor in there. For sure a big chunk of this additional savings is going to end up being given away eventually, whether to heirs or charity. But would those heirs and charities be better off being given this money now or being given more money after we’ve invested it for a few more decades? I don’t claim to be Warren Buffett, but I’ve discovered that I’m a whole lot better at investing money than the vast majority of those on the planet, and that certainly includes my kids! But we still expect to give away more and more each year if our income stays anywhere near where it is now. Maybe at some point, it will eclipse our savings and our tax bill.
# 4 Give Money Away
Beyond enough, your focus should turn more and more to the needs of others. This includes your financial focus. Another cruise probably isn’t going to make you any happier. But the $10K you could spend on it can buy an awful lot of Meals on Wheels. It could pay the nurse practitioner’s salary in the homeless clinic for a month. At 20 patients a day, that could be 400 medical encounters you paid for. You could vaccinate or feed hundreds in the developing world. Prefer to teach a man to fish rather than give him a fish? You could pay for a year’s worth of college tuition with that $10K, and that’s in the crazy-expensive US education system.
I’ve written about charity many times before, but beyond enough, more and more of your income should be going toward it. Given the thousands of charities in this world, there must be at least one whose mission you agree with. You can't take it with you. Hearses don't have trailer hitches. You're giving it away eventually, you might as well give it while you can enjoy seeing the benefits of the gift.
# 5 Use Your Time Wisely
You now have minimal limitations on your financial resources. But you only have a limited amount of time, and perhaps a lot less than you think. This has all kinds of implications on your day to day decisions. When possible, exchange time for money. Maybe that means hiring a lawn care service or a housekeeper. Maybe it means Ubering instead of taking the subway. Maybe you hire an investment manager, even after a lifetime of do-it-yourself investing. Some expenditures may even extend your life – preventive, diagnostic, and therapeutic health care, medications, good food, a gym membership, a safer car, a less polluted city.
Just as you should use your money to better humanity and the planet, so you should use your time. We’re not just talking about volunteer work here. When you are no longer working for money, I would recommend you make sure your work meets these three criteria, no matter what it pays:
- Give you something to do. Boredom and lack of structure have killed more retirees than cancer. Want to be happy? Retire TO something, not FROM something.
- Allow you to make a difference in the world. Define this however you like, but purposeful work is critical when its main purpose is no longer to trade your time for money.
- Provide a challenge. Routine, easy, mindless work might seem attractive as a teenager, but most of those reading these words have since learned that a job without challenge rapidly loses its joy. That challenge might be making more money or creating jobs for other people, which is fine. But make sure there is something there that will keep you learning and growing.
It is said that if you want to motivate white-collar employees, you need to make sure they can have mastery, autonomy, and purpose. That goes for you too.
# 6 Take Care of Your Health
Since you are no longer working for money, there is no reason to be a slave to your job. Turn down the stuff you don’t want to do. If the bad stuff outweighs the good and it can’t be adjusted, quit. No reason to be working 80 hours a week. You now have time to find the perfect balance of productivity, recreation, and rest. Consider the recommendation of Brigham Young for the balanced day: 8 hours work, 8 hours play, 8 hours sleep.
“Life is best enjoyed when time periods are evenly divided between labour, sleep and recreation. All men, women, and children should labour; all must sleep; and if mental and physical balance is to be maintained, all people should spend one-third of their time in recreation which is rebuilding, voluntary activity—never idleness. Eight hours work, eight hours sleep, and eight hours recreation.”
That would seem to indicate no more than a 56 hour work week, but most will find that they have enough non-paid productive work to do that they don’t need to spend more than 20-30 hours a week to get what they’re looking for out of a job they don’t need the money from. Exercise more. Who says you can’t be in the best shape of your life in your 40s or 50s? Eat better. Lose weight. Sleep more. Destress. See a therapist. Travel. Increase your spirituality. Rekindle relationships with family and friends. Build new ones. Find that balance that eluded you when you had to work for money. One wonderful thing that financial independence did for me was to give me dramatically fewer URIs (colds). Not sure how much is due to working less (and less exposure to sick people) vs a stronger immune system from not staying up all night and constantly rotating shifts (what I attribute most of it to.)
Wrapping it Up
I hope these tips are helpful. I wrote them as much for me as for you. As I noted above, this is new territory for us, and we’re figuring it out as we go along. My hope is for each of you to have the opportunity to wrestle with these issues and find your own path.
What do you think? What will you do when you have enough? How much is enough for you? If you’ve been beyond enough for a long time, what tips do you have for those of us who have found ourselves in this position more recently? Comment below!