More Money or Enough Money?

Your perspective on money and wealth will change dramatically over time. Youth want to buy cool stuff. Young adults are tied to careers and raising families. Middle age folks begin to focus on retirement and enjoying the fruits of their labor. The elderly are concerned with security and inheritance. Finance is important, but only constitutes a single aspect of life.

The purpose of money is to spend and the goal of wealth is to sustain. I guarantee you don’t sacrifice all that time and effort with the sole intent to save or invest it. It is only a matter of why and when you spend. I would like you to take a moment and deeply consider two biblical truths: you are not taking any of it with you and your time on Earth is limited.

Wealth is a proper goal, but has a point of diminishing returns. The wise understand that beyond a certain level, it rarely improves quality of life. Furthermore, that point arrives much sooner than the non-wealthy think. How much time you dedicate to its pursuit will vary accordingly.

The world is full of people who want to be rich, but “rich” is not a specific goal. You need to set a dollar amount and most set that amount too high. The problem is that for every dollar you add, it increases the amount of time you must devote to its pursuit, protection, and the amount of risk you must accept. You only have 24 hours in a day. Every dollar added to your goal decreases the amount of time you can spend balancing the 4 pillars of life.

Many people have so little money that more makes their life better and they wrongly conclude that more is always better. You should not seek MORE money, but ENOUGH money. The point of diminishing returns is around $1 million. Hardly anyone needs more than $1 million net worth.

In his excellent book Succeeding; John T. Reed explains how much money you need is a function of family size and location. By far, the main thing you spend money on is your home. He stresses you cannot overpay for location and should always aspire to live in one of the best neighborhoods in your area as defined by: view, low crime rate, excellent schools, quality shops and restaurants, proximity to work, access to recreational activities, and good-citizen neighbors. Don’t make the mistake of buying the biggest house you can afford. Kids are temporary; their bedrooms should be as well.

The modern concept of retirement is a fairly recent development. At no other time in history could people have imagined retiring by age 50 to pursue leisure activities. When they stopped working, they ceased earning. You need to establish clear goals regarding net worth, annual income, and the deadlines for attaining them. Financial Samurai is an excellent resource to help with this. You should also have a clear goal of being debt free and a timeline for that as well.

If you are trying to make a lot of money, you are implying you have a shopping list that requires that amount. I’ll bet you don’t. I’ll wager you have a vague concept that a lot of money is good. That is the wrong way to go about it. Start with the end in mind and have a clear picture of what retirement may look like for you. Leave room for some flexibility, as it will change with age. Make the list: car, vacations, clothing, food, location and begin back planning from there.

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