You Have “Enough” Money When You Can Afford 2 Needs
You Have “Enough” Money When You Can Afford 2 Needs
By Darius Foroux
Do you have “enough” money? A study found that the ideal income for a typical American family to have “emotional well-being” is around $60,000 to $75,000 annually.1
In an interview, Warren Buffett said he would be “very happy” with $100,000 a year, despite his billionaire net worth.2 Meanwhile, John Bogle, the pioneer of modern index investing and founder of the Vanguard Index Fund, says “enough” is “one dollar more than you need.” Which I think is also a good definition. The truth is that “enough” depends on our personal circumstances.
Money is an emotional subject, not a rational one. A multi-six-figure earner can feel they’re overwhelmed with material desires. While someone earning a fraction of that can feel perfectly satisfied with their life.
It’s all about what we think we need.
Here’s a thought experiment for you: Categorize all your needs.
That will help you to improve your relationship with money. There are several ways you can do this. Here’s an example:
Security — Having an emergency fund, a nest egg, and being financially free.
Loved ones — After establishing one’s own financial freedom, some people choose to take financial obligations for their family, sometimes including those in their extended family.
Exploration — traveling to other countries, having new experiences, living a non-traditional lifestyle, and so forth.
Hobbies — Cycling, training for endurance sports, collecting sports cars/luxury watches/ “big person” toys, beauty and fashion, etc. Depending on a person’s immersion in the hobby, these things can cost thousands or millions!
Creative outlet — painting, writing a book, making music, etc. Sometimes, your creative outlet is your full-time career. Other times, it’s a purely artistic endeavor that generates little to no income. Both are fine, depending on you.
You can define these categories any way you like. Then, ask yourself: What are my Top 2 needs?
The reason for choosing only two is that it forces you to think about whether you really want something over another. For most of us, security is always among the top 2.
But that may not be the case for others. Some people come from backgrounds that are financially well-off, for example. Or even if they don’t, they’d rather spend their time exploring and being fully immersed in their creative outlets. So security may not be a priority.
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