All of us are always working toward more money. It seems like none of us ever has enough. Since our first jobs out of college, Johnny and I have been working to put ourselves in the best financial position possible. And while budgeting has probably played the largest role in making that possible, another big part of it has been trying to make more money.
So the question is, at what point can we sit back and say, Boom-shakalaka! We’ve hit financial nirvana! We’re making enough money each month and we never ever need to make more than this. Does that ever happen? I wish it did, but something tells me it doesn’t. After all, have you ever heard someone say, “I’m pretty satisfied with my income. I don’t need to get a promotion or a pay raise ever again, except for the standard 3% to keep up with inflation.”? You haven’t heard someone say that because they would be the most boring person in the world. Anyone who mentions the rate of inflation offhand in a conversation is no friend at all — they’re probably a robot. And you should be wary of robots.
But you SHOULD be able to say that you’re satisfied with your income. And I’m here to tell you that there is such thing as enough. In fact, a study we talked about a couple months ago says that $75,000 hits that sweet spot for the average American.
How can you find out how much is enough for you? “Enough” is found somewhere between “surviving” and “thriving,” which I’ll explain in a second. Johnny and I were talking about this just the other day because we don’t want to spend our whole lives working toward some elusive amount of money, only to realize our lives were spent mostly working and not living. So we calculated our “surviving” number and our “thriving” number, and it went a little bit like this:
In this case, surviving means having the money necessary to get by each month. Basically, we’re talking about your emergency fund (which we show you how to calculate here). In this scenario, we’d rent a cheaper apartment, downgrade our phone plan, get rid of cable, and spend only what we absolutely needed. Here’s how that’d break down by category:
- Necessary Utilities
In this scenario, thriving means having everything we could think of that would contribute to our happiness. We’d have a house, we’d eat out more often, buy more clothes, put money toward a few vacations, have the sports cable package (Johnny), etc. This isn’t pie in the sky living, but it’s definitely a small but notable lifestyle upgrade. As with the survive scenario, we added all of the following categories together to get a number we’d need to thrive.
- Property Taxes
- Vacation Fund
- Retirement Contributions
- 529 Contributions
In both situations, we overestimated just a tad to give ourselves some breathing room. Our Survive number came to somewhere around $3500/month. And our Thrive number came to about $6500/month. So we figure our Enough number is a sweet spot somewhere in between those two. In this case, “Enough” equals the amount we’d need in order to live a comfortable life, while also having enough for our children’s college funds and our own retirement. And only that. The goal here is that when we both die of old age, we’d hope to have $0 in our bank account.
We’re not sure if it’s totally conventional thinking, but when we all die, all we really need in our bank accounts is $0, right? We just need Enough to get us there. If we have a ton of extra money left over in our bank account when we die someday, great. Our children/grandchildren/some random zoo will get lucky. But we just want to make sure it’s not at the expense of spending our whole lives working instead of living. Because otherwise, what’s the point?
Does it make a difference when you think about your salary this way? For us, it does. It doesn’t mean we’ll not try as hard at work or not look for career advancement opportunities. But someday, we’d like Johnny to be able to work from a home office with flexible hours so he could be around the fam more often. And knowing our Enough number makes us realize it’s possible, but it might mean saying “No” to a larger salary or tweaking his career path at some point at the expense of that goal. That’s what would make us happy, not him working for one pay raise to the next in the pursuit of some unreachable monetary satisfaction.
What’s your Enough number, and have you already hit it? If you were just working towards Enough, how would it change the way you’re living (or not living) life?
I can’t even begin to fathom what my Enough number would be. Not with $90k in student loan debt still lingering about. I make $9 an hour. That’s not even close to enough for sure.
Enough is the freedom to choose whether to work (because you love it) or whether to quit (because you hate it) without having to consider paying the bills. Enough is less for me as a single guy than it would be if I were married with kids, but it will probably always be *relatively* less for me because I was brought up frugal and I have no desire to keep up with the Joneses.
I like this surviving and thriving idea. It’s putting numbers to dreams so you know exactly what you need to do.
I was just talking to my husband about this the other day. For example, when we first started dating we saved up $800 and literally thought we were rich. I remember thinking “Wow! I can’t wait until we have $5000 saved up!” then we got there and the number just grew. When will it be enough?!?! Honestly even if our net worth was $1 million which seems incredible right now, I guarantee when we’re there I will want to strive for $2 mil. It just never ends and you’re absolutely right – find the number that makes you happy and accept it!
This post is a perfect example of why I love your site, and why it’s become just about the only personal finance blog that I read on a regular basis any more. You guys really know how to put things in a perspective that everyone can understand and appreciate.
Based on this criteria, I’d say I fall somewhere between “Enough” and “Thriving,” but it certainly wasn’t always that way. I remember some lean times, and they were only a few years ago when we were living in a very expensive part of the country (Northern Virginia). We were doing OK salary-wise, but quickly found that “doing OK” is often not good enough for the area we were living in. We’ve since moved from there to a less expensive part of the country, but my income remained the same (was fortunate to keep the same job, just work remotely now), so it was very much like getting a raise.
That being said – I know how fortunate I am, and try very hard not to take it for granted. With that in mind, I try to occasionally stop and think about what I have – including things aside from finances, like a wonderful wife and kid – and remember how tight things were before. Keeps me focused and working hard so that we don’t get back into that situation.
Awesome, Pete. It sounds like your perspective is helping you maintain that balance between working hard and remembering that finances aren’t everything. And it sounds like you’ve found that sweet spot for your finances, so just keep on keepin’ on!
Great topic. I personally think savings/net worth is more important than income in determining “enough”. This goes back to the early retirement argument. Your “enough” income depends on your desired work horizon.
I also appreciate the discussion in terms of balancing income generation with family life. I fight hard every year for a raise but last year the negotiation didn’t seem to be going anywhere. The general response was if I put in more time, the company may do better next year and I could get a larger raise. More money for more time commitment is never a raise, it’s an employer gimmick. Instead I asked for consideration of additional vacation days, increased health benefits, and even some equity in the business. And all of those were unsuccessful : ) But I was just hoping to plant a seed that I value non-traditional and sometimes non-monetary upgrades to the work/life balance over pure compensation at this point in my life.
Good for you for being proactive in asking for that raise… and for seeing through your employer’s response. Work-life balance has become more and more important to us the longer we’ve been married.
And you’re right… savings and net worth are very instrumental in determining “enough.” This post focused on income just as a way to know when to stop pursuing more money so you maintain a healthy work-life balance.
My “Enough” number was taking in enough income to surpass expenses, save some money for future spending/living, as well as have a little extra for some spontaneous living experiences.
Long-term this would eventually lead to financial independence, which is where we currently are (in retirement) where we live off income streams from our Canadian gov’t support programs (CPP and OAS), our company pension plans, and our dividend income from our investments, not to mention our gov’t health care programs. Budgeting our lives within these income parameters, we thus have no need (at the present, at least) to touch the principle in our retirement portfolio investments.
Looking at this in a different way, back when we were both working, but basically debt free (mortgage paid off, no outstanding loans, savings in the bank), we decided that busting our butts getting higher up the proverbial career path, but not having enough free time to enjoy our financial situation, was not what we wanted. Work / life balance was more important. It was at that point (back in our 40’s) when we figure that we had hit our “Enough” numbers.
Very interesting… I always love hearing your perspective. I hope Johnny and I hit that point someday (and are aware enough to know when we’ve hit it) so that we maintain a healthy work-life balance. The last thing I want is to reach retirement and realize we haven’t really been living for the past 35 years.
My husband and I take home around $7000 a month and that is after we have invested 18% between our 401k and our Roth IRA’s. I would say that we have reached the point where we have financial freedom and our able to go on vacations, eat out, and live a pretty free lifestyle. However, in the society that you live in you always will want more or something better. Whatever, it be a nicer house, a nicer car, or expensive clothes. We still budget our money and make sure that we are putting and spending our money on the things that our important to us.
Totally. There is always more to want. It’s such a slippery slope, and a hard one to avoid. It sounds like you and your husband are aware of this and are doing a great job of keeping that balance in your lives!
What a great concept/exercise for looking at finances. In my mind, I make enough, but in reality when I look at the numbers, I’m somewhere between surviving and enough. For me, the biggest change in reaching enough would be that I’d feel more secure overall. The worry about each purchase would lessen. The major worry when faced with unexpected bills would ease (emergency vet bills, car issues, etc.). Despite not being at my enough mark yet, I am fortunate to be able to support myself. I am also steadily saving, paying off debt and trying to enjoy life within my current means. It’s always a balance.
I just did a rundown of what our (realistically sustainable) bare bones budget would be. As for thriving… It’s impossible to know.
We technically have a savings account, but it might as well be titled, “Tim’s dental implants.” My husband will need full mouth implants, which could run as high as $25,000 or even $30,000. It’s hard to know how much is “enough” given that upcoming expense.
Maybe it’ll be easier to know that once we deal with all that. Of course, then we want double pane windows, but comparatively, that’s a piece of cake!
It feels great whenever I hit my numbers set for a month let’s say. It’s really advisable to set numbers for a goal, which defines your scope and limitation, and how you can reach that goal. Most importantly, knowing you get enough of it or have successfully met it is something everyone should experience.
My answer to this question would probably change from month-to-month depending on what we’re dealing with at the moment, but I feel like at this point in our lives, if we never made anymore money than we do now (aside from that inflation adjustment), we would be happy. So I suppose we are right at that sweet spot. We have more than enough to survive but not quite enough to fully ‘thrive’. At least not to the max. We could (in theory) do most of the stuff on the thrive list right now, but not to the extremes. Smaller vacations, smaller luxuries, etc are attainable right now, but I’d be lying if I said we didn’t want to have a little more, or to be able to make the same amount of money without working so many hours. But then again, we are big into saving mode at the moment, so perhaps if that weren’t what we were focusing on and we could spend more, my answer would change to ‘fully thriving’. Whenever I feel like I’m starting to want ‘things’ too much, I really try to think about how lucky/blessed we are and live in a place of contentment. It’s not always easy, but I know that right now, we definitely have enough and I don’t want to ever take that for granted.
I like the differentiation you make between “surviving” and “thriving.” Mr. Frugalwoods and I feel very fortunate to, in our minds, be thriving. We live extremely frugally, but we feel fulfilled and content because we’ve saving towards our ultimate goal of financial independence. I think you’re right that it’s hard to say we have a high enough salary, because more would always be better (in the sense that it would enable us to reach our goal more quickly). We certainly feel we have enough in terms of material possessions, basic needs, and happiness, which I suppose is what really matters in the long run. Thanks for this thought-provoker!