How much is enough?

Shawn Powell

How much is enough?

One of the things you learn as an advisor when presenting numerous financial plans over the years is patterns. There are patterns everywhere in numbers and in plans. The key is trying to figure out why those patterns exist and how to help others with what you’ve uncovered.

When I was working for my previous firm and presenting plans, the amount of money people needed in retirement to live the life they wanted was really consistent. There wasn’t an outlier. I can’t think of one person who was spending $3,000 per month and all the sudden needed (or wanted) $6,000 per month in retirement.

*Obviously this includes people who are healthy and have a choice*

There also wasn’t a person who was spending $8,000 per month and all of the sudden wanted to spend $2,000 per month in retirement. Every single person wanted to at least maintain the lifestyle they had become accustomed to.

My wife and I have recently been watching a couple movies on Netflix on minimalism. It’s been fascinating. Both of us have had to become minimalists over the past decade due to circumstances and now we feel better prepared for our financial future because of it.

There is a community based on some minimalists. It’s called the FIRE (Financial Independence Retire Early) community. And while there are some really interesting and helpful things to come from this community, there are also many extremes. It’s definitely not for everyone.

The calculator the FIRE community uses in order to become financially independent and retire early is 25 times annual spending. So for example if you need to spend $3,000 per month to live the life you want, you would need $900,000 saved up in investments before you can claim your financial independence. ($3,000 x 12 x 25)

Of course there are all types of exceptions to this rule of thumb and this shouldn’t be taken as financial advice. The rule doesn’t factor in any social security, pension, or any other income that may be coming in consistently monthly.

But the rule is an interesting one to me because it puts our spending into perspective. For example, every $500 we increase our monthly spending, we would need an additional $150,000 saved up in investments to maintain that lifestyle.

So the question then really doesn’t become how much money we make but rather how much money per month do we need to live the life we want?

For a $3,000 a month lifestyle we would need $900,000. For a $10,000 month lifestyle we would need $3,000,000. For a $20,000 month lifestyle we would need $6,000,000. Again, this should not be taken as financial advice. There are too many factors to consider when building a financial plan and you should consult with a professional. (3LW)

But the question is interesting, how much is enough for us to live the life we want?

Which level are you on?

Set your intentions. Build a plan. Leave a legacy.