A recent post in the forums at www.earlyretirementextreme.com had a link to the following video:
After watching this I had to get the book as well. The question of how much is enough has been on my mind since I started reconstructing my financial life. The idea of early retirement really brings up the question of what is enough, because it is imperative that one acquire enough assets that can support oneself after retirement. Everyone will have a different dollar amount of what constitutes enough. What I want to focus on in this post is how do you decide what your enough point is??
The question itself begins with an assumption that there is such a thing as enough. I’m sure some would contest this point, especially when talking about money, but I think with further investigation most would agree that there is such a thing as enough and it is of no small significance that we attempt to answer what it is.
It was from my attempts at answering the enough question that I decided to leave a high paying job with great benefits to return home. Each month I saw this large amount of money being deposited into my account and realized that I had more than enough. Sure, I could have stayed and continued to accumulate assets at a fast pace, but our financial lives and goals do not exist in a vacuum, they are a part of larger whole. Focusing on a part at the expense of the whole seemed a flawed way of doing things.
When I approach my investing activity how much is enough is always in the background. I’m not out trying to beat the markets or make a killing off of them. My goals are simple; preserve capital, achieve a return on capital that outpaces inflation and gives me a risk premium (typically 6%), and a steadily increasing cash flow that will allow me to be independent of paid employment for my living expenses (this is why I like dividend paying stocks and starting to consider rental property). As you can see these are simple goals and are really not that difficult to achieve once you have structured your financial life to reflect those values. This saves me a lot of emotional turmoil in stressing over whether I could be getting a higher total return on this or that investment. Sure, I don’t want to leave money on the table, but I know what my enough point is and there is little need in chasing after more.
Looking at how much is needed for retirement I like to focus on what my expenses are rather than the total sum needed to fund those expenses. The two are coupled tightly together, but looking at what I need/want and then working backwards as to what is needed to cover those needs and wants is much more relative to my situation. It avoids the irksome amounts you find when using the retirement calculators that state a couple of million dollars is needed to fund your retirement or the 80% of current income rule. Pleeease. As Jack Nicholson said in the movie As Good as it Gets: “…sell crazy someplace else. We’re all stocked up here.”
If you have an enough point you will know when you can retire. Period. It’s a question of what it takes to make you happy in this life. Don’t let the absolute numbers scare you. They are all relative and reflect the diversity of human capacity for want, which in the developed world often seems boundless.
A classic example of enough.
What you see above is a picture of The Stoic with his new love. Her name is Simone, named after the French philosopher Simone de Beauvoir. We met two months ago and have enjoyed a thrilling relationship since.
I’m new to the world of riding and I have learned that there are two types of riders, those who own Harleys and those who do not. I fall into the latter group, but my father finds himself in the former. He is trying diligently to convert me. I’m holding out. Simone pleads with me, ” Am I not enough? What more do you need? Have we not spent many miles roaming the countryside together “sucking the marrow out of life” in a way that would make Thoreau proud? Does my single cylinder engine not provide you with miles and miles of wandering bliss while costing you little? Dear Stoic, Am I not enough for you?”
And I have to answer, to the chagrin of many a dedicated Harley owner, yes Simone you are indeed more than enough…