How Much is Enough?
What is “enough” in financial terms? In other words, how much money does one person truly need to live comfortably?
Is it a million dollars? $3 million? More?
Clients frequently ask me how much money they need to retire. Even as a Certified Financial PlannerTM with over fifteen years of experience, I can never give them a blanket response. There are a variety of quantitative and qualitative factors to consider:
When do you want to retire?
If married, when does your spouse plan to retire?
Where do you envision retiring?
How many children do you have, and what are their ages?
How much do you want to give to charity?
What’s your current level of debt and savings?
How much do you currently spend, and do you expect it to be similar during retirement?
Do you have a long-term care insurance policy?
For younger parents especially, retirement seems so far off. We work now with the idea that someday we’ll get to enjoy the fruits of our labor.
And yet, our savings never feels like “enough.” I know of multi-millionaires who still worry about running out of money. The economic and political uncertainty understandably scares them.
My husband Bryan and I recently reached a major financial milestone at age 38, but I don’t say it to gloat. Rather, there are several factors that contributed to our financial success at a young age, and I’d like to share them with you.
1. Frugality
Bryan and I both grew up in households where you work hard, pay bills on time, and never spend more than you earn. We were also instructed to never carry a credit card balance. Bryan bought his first car with earnings from caddying. The car wouldn’t shift into “reverse”, so he had to strategically park it to prevent accidents. My parents loaned me a Nissan Altima for several years during college until I could buy a car on my own.
Our sense of frugality is ever-present in adulthood. We are one of the few households in our new Florida neighborhood who does not have a private pool or golf cart, and we are unapologetic for it. We figure we can use the community pool a mile away and bike to town square if we don’t feel like driving the Mazda or Hyundai. We’d rather save for vacations when it is safe to travel again.
Frugality is simply spending within your means. If your after-tax income is $5,000 this month, you don’t spend more than $5,000. Budgets are great to track your spending. And contrary to popular belief, budget isn’t a dirty word.
If you historically classified yourself as a spender more than a saver, not all hope is lost. The first step in making any change is self-awareness. You must recognize behaviors that have held you back in the past. Also, study how your values fit into financial decision-making. If you value simplicity but are literally accumulating more tangible items daily, are you really living out your values?
2. Independence
I’ve seen too many instances where affluent parents think they are helping their adult children by providing financial handouts. But it’s not helping them at all. It is fostering a sense of dependence on the parents for financial livelihood.
Neither Bryan nor I received financial handouts from our parents. Bryan secured a full-ride scholarship to University of Missouri-Columbia. He knew his scholarship ended in four years, so he worked hard during college to graduate with both a Bachelors’ and Masters’ in Accounting within the four-year time frame.
My parents contributed about $10,000 annually to my college education at Saint Louis University. That financial support, coupled with a half-tuition scholarship and part-time job earnings, enabled me to graduate without any student loan debt.
Two new college grads without student loan debt? That’s unheard of! Yes, it is. But it’s also possible if you plan well. Neither one of us has received any financial support from parents since college graduation at age 22.
Maybe your financial upbringing wasn’t quite so rosy. Perhaps you or your adult child graduated with five or six-figure student loan debt and still feel crippled by it. Student Loan Planner is a great resource to get out of debt faster.
3. Generosity
I alluded to this earlier but cannot emphasize it enough. Values drive everything. One of my core values is generosity. I know that God has called me and Bryan to be great stewards of the resources entrusted to us. It’s not our money, it’s His.
We tithe. We give back to causes that run deep in our hearts. Bryan donates to Evans Scholars Foundation each year since it’s the same scholarship program that funded his college education. I give to my alma mater, Saint Louis University, because students and faculty helped me become a better version of myself.
Generosity doesn’t hinder wealth-building; it’s an aid. When you freely give time, talent and treasure to worthy causes, you open yourself to God’s amazing possibilities. There is a deep level of satisfaction and purpose that comes from helping others.
You become less attached to money. And since God wants all of us to live abundantly, giving is a surefire way to bless others.
4. Marriage
Bryan and I have had our share of ups and downs in our thirteen-year marriage, and I’m sure we will continue to have them. Working through those challenges has not only strengthened our marriage emotionally but also financially. Married dual income-earners have flexibility in embarking on an entrepreneurial journey or career change because they can temporarily rely on the other spouse’s income. Single parents do not have that luxury.
Additionally, parents aren’t the only ones benefitting from marriage. Children living in two-parent households fare better socioeconomically than those born to single parents.
If you are married and finances are a major source of tension, consider working with an Accredited Financial Counselor (AFC®) through AFCPE. Certified counselors and coaches are offering free virtual sessions to those families impacted by COVID-19. For all other married couples, take comfort in knowing that staying together makes wealth-building far easier.
5. Privilege
The word “privilege” likely isn’t something you see on a “reach your financial milestone” list. However, we cannot ignore it.
I am a person of privilege. As a white woman in the U.S., I have been afforded certain opportunities that may not be as easy for women of color to obtain. My husband Bryan, as a white man, has never been turned down for a job because of his skin color. Nor has he been pulled over by a cop in a predominantly white neighborhood strictly because of his skin color.
It pains me to see that racial injustice not only exists but leads to more division in our nation. If you are white, recognize that you are privileged and try to be part of the solution to heal racial inequality. Support black entrepreneurs through your purchases or investments. Read books and articles by people who look different from you.
In closing, everyone’s idea of “enough” is unique to the individual or family. Let’s explore yours through a complimentary initial consult.