How much Is Enough?: The Measure of True Riches
How Much is Enough?
“How Much is Enough?” is a question that economists, psychologists and armchair philosophers have grappled with for centuries. And how is it tied to our happiness?
It’s impossible to ponder the question “How much is enough?”, without looking to legendary John Bogel,
I have what he’ll never have – Enough”
joseph heller
John Bogle was the founder of the Vanguard Group who revolutionized the mutual fund world by creating index investing, with the intent to make investing easier and at a low cost for the average investor.
In his book “Enough: True Measures of Money, Business, and Life”, Bogel reflects on the excesses of a financial system that led to the 2008 crisis and reminds readers of the benefits of a less greedy, society-first system where success in life is defined by more than just money. He opens the book by referencing one of Kurt Vonnegut’s last poems that he wrote before he died:
At a party given by a billionaire on Shelter Island, the late Kurt Vonnegut informs his pal, the author Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch 22 over its whole history. Heller responds, “Yes, but I have something he will never have . . . the knowledge that I have Enough.”
You can read the entire speech here. I highly recommend it.
What a profound feeling that must be! But how does one know when they have enough? The greedy will never have enough, but the frugal already do!
Living a rich life is about living the life that is ideal for you. A lifestyle that allows you to spend your time how you want, with who you want, in order to feel fulfilled. One that is authentic and allows you to find true happiness.
Living Richly is NOT about money. A Rich Life cannot be measured by income or net worth.
The secret to finding happiness is having a lifestyle with FREEDOM and FLEXIBILITY. Living Richly is about achieving financial independence where you have enough money to live the life you want without income from a job that you don’t want. To be clear, you can still work once you’re financially independent, you just work doing something you’re passionate about, or that. aligns with your life values. You’re not working at a job you don’t enjoy to pay for things you don’t need.
Achieving financial independence depends on 2 main things:
Achieving Financial Independence depends on two main things: Frugality and Investing.
1. FRUGALITY
Frugality is living below your means, without depriving yourself. If you have trouble with frugality, remember that consumerism generally does not bring more happiness.
To live below your means, you need to be able to define ENOUGH
- Money: How much money is enough to live comfortably varies widely based on factors such as your cost of living, financial goals (e.g., buying a home, traveling, retiring early), and your personal values (e.g., prioritizing experiences over material possessions).
- Material Possessions: What you consider enough in terms of possessions, such as a home, car, or clothing, depends on your lifestyle and preferences. Minimalists like myself might feel content with very few possessions, and actually have well-being decrease as possessions increase due to clutter-stress.
- House: U.S. houses are among the biggest—if not the biggest—in the world. The median size of a newly built house in the U.S. has risen while the average number of people per household has declined. As a result, the average number of square feet per person in the median new home nearly doubled from the 1970s to the 2010s. “Enough” house is sometimes determined by what people consider normal, which is often driven by what people see their neighbors, friends, and co-workers doing.
- Work-Life Balance: How much work is enough can vary greatly. Some people prioritize their careers and are comfortable with long hours, while others prioritize work-life balance and are willing to earn less to have more free time.
- Social Relationships: How many friends or social connections are enough can be subjective. Some people thrive in large social circles, while others find happiness in a few close relationships.
- Experiences: What constitutes enough in terms of life experiences, travel, or personal growth is highly individual. Some may want to travel extensively, while others may find contentment in simpler, local experiences.
In their book, “Your Money or Your Life”, Vicki Robin and Joe Dominguez, founders of the Financial Independence movement, outline the notion of a Fulfillment Curve. The curve demonstrates how we are groomed from birth to acquire more and more – first for survival, then for comfort, and then merely on the belief that more stuff will make us feel more fulfilled.
Society teaches us that more = better, but the truth is that after a tipping point, more = clutter, distraction, distress.
“Some people would say that once we’re above the survival level,” the book says, “the difference between prosperity and poverty lies simply in our degree of gratitude.”
“Part of the secret to life comes from identifying for yourself that point of maximum fulfillment. There is a name for this peak of the curve, and it provides the basis for transforming your relationship with money. It’s a word we use every day, yet we are practically incapable of recognizing it . The word is enough. At the peak of the fulfillment curve we have enough necessities for our survival, comforts, pleasures and luxuries. We have everything we need, there’s nothing extra to weigh us down, distract or distress us, nothing we’ve bought on credit, have never used and are slaving to pay off. It’s appreciating and fully enjoying what money brings into your life, and yet never purchasing anything that isn’t needed or wanted. Once you have discovered what is enough for you, your fulfillment curve can reverse direction and head straight up.”
Vicki Robin & joe dominguez – “your money or your life”
Evidence from past research suggests that money does bring happiness, up to a certain point. After that, it reports a flattening pattern: happiness increased steadily with income up to a threshold and then plateaued. Various numbers have been cited as the peak number, with some saying as little as $75,000. But it’s not as simple as that. Happiness and well-being is very individualized and won’t be the same for everyone. So we each need to find out what that number is for us.
At what point do we continue to obtain more, while not feeling any more happy or fulfilled?
Ok, so how much is enough (for you)? Take a look at the categories above and determine an internal yardstick of fulfillment that reflects your values, not social pressures and expectations of others. Align your values around contribution to others – your family, school, community, etc, not acquisition of things.
Ultimately, the concept of “enough” is deeply personal and can change over time. It’s important to engage in self-reflection to determine your own values, priorities, and goals. Define what enough means to you today. And understand that what may be enough for you at one stage of life may not be the same at another.
2. INVESTING
Once you have reflected on how much money is enough for you, you’re ready to spend simply and consciously, save regularly and invest wisely.
Only spend money on what matters most to you. If you can become clear about what matters most to you, it makes it easier to cut down your spending on things that really don’t matter to you but have become a habit.
Regardless of how much money you make, spending money makes you poorer, while investing it makes you wealthier. Wealth brings a sense of financial security and peace of mind.
A recent Bankrate Survey of 2,500 Americans indicated that the 72% of respondents did not currently feel financially secure. The biggest reason cited for not feeling secure today was insufficient savings.
- insufficient emergency and/or retirement savings (83%);
- high inflation (63%); the economic environment (48%);
- rising interest rates (36%);
- low pay or low career mobility (33%);
- high debt (26%);
- and housing affordability (25%).
Spending less and saving more allows you to building up your emergency savings. Once that’s complete, you’re ready to focus on the 2nd component of financial independence – Investing.
here’s how Investing can play a crucial role in helping you achieve financial security and independence.
- Wealth Accumulation: By investing your money, you have the potential to grow your wealth over time. Investments such as stocks, bonds, and real estate historically have provided returns that outpace inflation. This means your money can grow faster than the cost of living, increasing your overall net worth.
- Income Generation: Some investments, like dividend-paying stocks or rental properties, can provide regular income streams. This passive income can supplement your primary income sources, reducing financial stress and increasing your financial security.
- Diversification: Properly diversified investments spread risk across various asset classes. Diversification can help protect your wealth during economic downturns. When one asset class performs poorly, others may perform well, reducing the overall impact on your portfolio.
- Compounding Returns: Compound interest is one of the most powerful concepts in investing. It allows your investments to earn returns on both the original principal and any previously earned returns. Over time, compounding can significantly increase your investment gains.
- Long-Term Growth: Investing is often a long-term strategy. The longer you leave your investments untouched, the more time they have to grow. This is particularly important for achieving financial independence and a comfortable retirement.
- Tax Advantages: Certain investment accounts, like IRAs and 401(k)s in the United States, offer tax benefits that can help you keep more of your investment gains. These tax advantages can accelerate wealth accumulation.
- Inflation Hedge: Investing in assets that historically outpace inflation helps you preserve your purchasing power over time. This is crucial for maintaining your standard of living, especially in retirement.
- Asset Ownership: Owning assets such as real estate or stocks gives you a stake in the economy. As the economy grows, the value of these assets tends to increase, benefiting you as an owner.
- Financial Independence: Over time, well-managed investments can generate sufficient passive income to cover your living expenses. Achieving this point is often referred to as “financial independence” or “financial freedom.” It means you are no longer dependent on active work for income, providing more flexibility in your life choices.
To harness the benefits of investing for financial security and independence:
- Start Early: The power of compounding is most effective when you begin investing as soon as possible.
- Minimize Expenses: Funds which entail lower expense ratios display an increased probability of performing better than the funds within the same group.
- Diversify Wisely: Spread your investments across different asset classes to manage risk.
- Invest for the Long Term: Avoid trying to time the market and focus instead on long-term compounding.
Keep These Things in Mind:
When determining when you have “ENOUGH”, it’s important to strive for a balance that aligns with your authentic self and promotes your well-being and happiness, rather than conforming to external expectations or comparisons with others.
And when you invest, note that it carries risks, and there are no guarantees of returns. However, when done prudently and with a long-term perspective, investing can be a powerful tool for achieving financial security and independence.
LIVE RICHLY. FIND HAPPY.
I Can Recognize when I have Enough – now what?
Congrats on achieving Milestone 4 – You know how to recognize “Enough”
Now, learn more about the other 5 milestones on your journey to living richly!
Milestone 1 – Envision the life you want to live. Define what living richly means to you.
Milestone 4: Enough. Determine how much is enough. Enough time to spend working, enough money to provide happiness. What is the true value of money to you and how much of your life are you willing to trade for it?
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