How much money is enough?
Ah, the age-old question about money. I think most of us would answer there’s never enough. I know I never seem to have enough for all the things I want to do.
When I consult clients during financial planning, many of them have no idea how much retirement or a dream vacation in the future will cost. Some of them simply over save, or worse yet, take on too much unnecessary risk to achieve the goal.
But really the question of How Much Money Is Enough? is different for each of us. The answer boils down to a couple of questions.
When are your needs met? This is a question of how much money you need to feed, clothe and shelter yourself as well as providing for yourself in retirement. How will you know this number or the required savings? Financial planning of course. Again, this will be different for each of us. Depending on how many wants we turn into needs, can greatly affect your savings. Therefore, you will have to have a larger portfolio to generate the additional income required.
When are you happy? Yep. Money cannot buy happiness. No matter how much you eventually accumulate it won’t make you any happier. However, the number that you will be happy with varies for everyone. One individual might say $50,000 would make them happy, while another person might say it would take $1 million. It all depends on your lifestyle. Many psychological studies have shown that once you’ve met your basic needs, small increases in wealth have little effect on your happiness.
Are you taking too much risk? Once you have saved enough money to meet your needs today and in retirement, you should focus on controlling risk. You don’t want to take more risk to the portfolio than is absolutely necessary. With my financial planning clients, if their success factor is way over 90% and as high as 100% in achieving their goals, then it may be time to dial down the risk. So it becomes more about staying rich versus getting rich.
How much money is enough? You may be surprised to find that it will take a lot less than you think.
To be honest, I’ve never heard of anyone at the end of their life as they take their last breath, saying they wish they had saved more money. The most important things in life don’t involve money at all, like our relationships with our family and friends, or simple pleasures like taking a walk or reading a book. However, money does give us all more choices. It allows us to make choices about where we live, how well we live and the type of life we live.
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