How Much Is Enough?

It's a question we should ask ourselves. And to which we should give careful attention. It's a question we now ask our clients as a part of the planning process. Like us, many of our clients, and potential clients, have made mistakes.

They often find themselves on the path of revisiting, re-evaluating, reinterpreting, re-starting, or re-engaging some aspect in life. Which makes it a critical time to ask this question.

In this latest article & podcast in the series informed and inspired by Morgan Housel's bestseller, "The Psychology Of Money", we take a look at Chapter 3: Never Enough. When Rich People Do Crazy Things.

While there is a podcast dedicated to each chapter, there will not be an article for each. In this case, for this chapter of the book, I have given extra consideration.

"There is no reason to risk what you have and need for what you don't have and don't need". - Warren Buffett

Before jumping in, let’s preface with something important. I like to say that there are two hard truths about money at the transition of life.

The first truth is that you leave with nothing.

This leaves legacy as the only option for money & assets.

Which then naturally asks the question: Do you wish to leave anything behind?

If so, what? And how?

The second truth is that most inheritances such as wealth transfers, business handoffs are misspent, mismanaged, pilfered, and extinguished by the 3rd generation.

The exception is having rules in place via trusts.

What kind of life path do you choose, given this?

Said differently, what kind of lifestyle do you want?

This insight is what will lead you toward the question: How Much Is Enough?

When you don’t consider this question, then the hardest financial skill becomes this: getting the goalpost to stop moving. As Housel says, if expectations constantly rise with results, you run the risk of pushing the goalpost out faster and further than your accelerating ambitions can reach. This will not bring you contentment and satisfaction. We know this from studies.

One of the best quotes of the book encapsulates our double-sided reality:

"Modern capitalism is a pro at two things: generating wealth and generating envy."

Life isn't any fun without a sense of "enough". And so, this equation is put forth: Happiness = results - expectations. This is a big issue, and I think it is one of the reasons behind the data point that 36% of households earning $250,000/year or more report living paycheck-to-paycheck. They're always reaching, leveling up their lifestyle, stretching for more, not setting levels of attainment and contentment, perhaps not exchanging their expectations for gratitude.

Social comparison is the problem. The ceiling of social comparison is so high, and ever-changing, that it's virtually impossible to think you've reached any sort of pinnacle compared to anyone. It's all relative. Don't try to keep up with other people's wealth. It's a game you should not put yourself into. It only results in loss. Loss of mental, emotional, even physical well-being. Loss of time, energy, and opportunity cost. How could you be seeking contentment in other ways?

"Enough" is not too little. And I paraphrase Housel once again because his work is so well edited and succinctly explained. The idea of having enough might seem like conservatism, or underachieving, or quitting. It might seem like "leaving money on the table". But think of it this way: Finding your "enough" is realizing a healthy boundary. Knowing that if given no measure, you could develop an insatiable chase that will push you to a point of regret.

Go back to one of the two hard truths about money when you leave. "You take nothing with you". What kind of lifestyle you want becomes the question. Many who do not define their "enough" and chase endlessly ending up being forced to quit. By burning out, or getting sick, or doing something illegal (like white collar crimes), or losing it all on the gamble, or sometimes early death.

Housel wraps the chapter by appropriately calling our values, well-being, and livelihood to the fore:

There are many things never worth risking, no matter the potential gain.

Reputation is invaluable.
Freedom and independence are invaluable.
Family and friends are invaluable.
Being loved by those who you want to love you is invaluable.
Happiness (as I like to think of it: contentment) is invaluable.

As he points out, the best shot at keeping these things is knowing when it's time to stop taking risks that might endanger them. Determining when it's enough.

We believe that answering this question honestly puts you on a much more efficient, effective, and emotionally rewarding path from the (re)start.