How Much Money is Enough?

Steve Cummings

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How much money is enough

Life brings us troubles and concerns especially dealing with money. Every day we wake up either happy or sad or even depressed that we have to go to work. So the question that arises from us is how much money is enough?

Truthfully, we want to know how much money do you need to be happy? You have probably heard that money doesn't buy happiness, but it could buy other things. 

Then we think maybe happiness is around the corner by having enough money to stop working. So how much money is enough to stop working? That all depends on how much you tend to spend or plan to spend. 

What about how much money is enough to know that my family is cared for fully? We tend to think about how we can obtain more money and do things that will create more income streams. 

As people, we can be greedy, selfish, going after it all, and never quitting. These things can drive you to the point of believing that the amount of money you have is never enough. Truthfully, we never step out and realize how much money is enough. Day after day, night after night, we sleep, work, eat, and repeat. There is no magic number or goal we are seeking, and it never crosses our head until we wander about having freedom from it all. 

Financial freedom gives you the ability to stop and figure out how much money is enough. So as we seek this, we need to figure out many things along this road to wealth. 

Money Doesn't Buy Happiness.

We have heard this a million times. Money doesn't buy happiness. That is true; a study done by Princeton University determined that at an income level, around $75,000 is the perfect medium for happiness. Any more money would not produce a more happy person. 

So does money buy happiness? Not really. It can buy many things that happiness accompanies, and it can buy us freedom. The money we use to increase our wealth works for us to create, produce, and make us have enough to set us free to pursue our passions. 

Money can help buy others more happiness. Through generosity, other people can benefit from the gifts of money. It may not be something to bring you happiness, but it certainly can others out. 

It doesn't matter how much you make; at a certain point, the amount of money you make may not bring happiness into your life, but you can use that money to create many opportunities to produce great feelings around you. 

So How Much Money is Enough?

That is the question people want to know. If money cannot buy happiness, then at what point can we determine how much money is enough?

So you have to think about it in a couple of different terms.

Pursuit of Passions 

First, you need to know how much money you think you will need to pursue other passions in life. Does this mean you need to retire? Nope, but it can mean that it is ample money to help you have some other projects without the worry of money. 

Money problems bring about stress in many people's lives, and that is why they say money issues mainly cause that divorces. There are expectations in life, and if money issues arise, stress can create tension that causes relational problems. 

Financial Goals

Second, you need to determine what your goals are. Having financial goals can help you determine how much money is enough. 

Do I need enough money to stop working? Will I have enough money to travel around the world? How much is enough money to raise kids?

These are all valid questions to help you determine your financial goals. When I think about having a financial goal, my thought process is the ultimate goal; then, I create many plans to achieve it. If you want to retire young, you need to have the goals to make that happen.

If I want to hit financial independence then I need to know my number to stop working. 

How much Money is Enough to Retire?

We have all of our financial goals set. Maybe the goal is to have an income of $40,000 per year to travel the world without going broke. As you can see, this number may be different depending on the individual. Some may want a high liquid net worth, while others want a steady stream of cash flow.

How much money do I need to retire and pursue this goal of a yearly income of $40,000? It is time we do some math. 

Determining Our FI Number:

When we determine our FI (financial Independence.) number, we need to do some math. 

We are going to spend $40,000 a year. At a rate of inflation of 3% and a yearly increase of our assets of about 7-8% per year. We can determine that a safe withdrawal rate is between 4-5%.

The Trinity Study done in 1996 came up with the 4% rule as a simple way to determine your FI#. The creator of this rule has started to advocate more than 4%, but I would rather be conservative. If you would like, you can be conservative as well. 

Next, take your annual spending multiply it by 25

$40,000 x 25 = $1,000,000

We have a number that we can use to determine how much money is enough to retire. All we need to do is determine this number and get working on our goals. 

How Can I Obtain More Money?

This is the point when you have determined your goals, and now you realize that. 

A: You are spending too much money, or 

B: You do not make enough money.

These are both issues as you try to reach that coveted number. It is time to change our mindsets and do things to obtain more money. 

1. Spend Less Than You Earn

The amount of money you spend is the amount that will either crush your dreams or help make them a reality. Your savings rate is something that can help you increase your wealth super fast. 

If you are a frugal person, you will find ways to save money without making yourself look stingy and cheap. In that pursuit, you will learn how to live a more fulfilling life on less. 

It is all about living below your means. Once you learn how to spend less, you can use that leftover money to create more money in the process. 

2. Invest Early and Often

The best time to plant a tree was 20 years ago. The second best time is now.” 

Chinese Proverb

This proverb speaks about investing early and often. The earlier we can invest, the more time our investments have to grow. As they grow, compounding interest will work on these investments to help them grow and produce way more than you would have expected. 

If you invested $10 per day into an index fund that averaged 8% yearly, you could be a millionaire in 40 years.

$20 per day would take 32 years to be a millionaire.

$50 per day would take around 21 years to be a millionaire. 

$100 per day would take around 15 years to become a millionaire. 

This takes some investing early and often, and you can achieve so much to the point that you no longer need to work. 

Investing can be as simple as putting money into an index fund like VTSAX or FZROX and allow automation and compounding to do the rest. You can even invest in ETFs like VOO or VTI

If you want to start investing, you can quickly begin with an account in M1 Finance and begin with as little as $100 and automate funding into the account and let their system rebalance everything. 

3. Improve Your Skills

Another way you can obtain more money is by having better skills. The more skills you have, the more profitable you would be for a future company. This can be as easy as learning how to code, writing a blog, doing social media marketing, learning about money skills, and just improving upon your knowledge set. 

As you improve your skills, you will grab different jobs that can increase your salary and money situation.

4. Work on Side Hustles

Earning more money on the side is key to adding more wealth to your accounts. So picking several side hustles can create some more income. Your primary job will give you the bulk of the money, but if you can figure out how to make money on the side, this can add needed money to achieve your financial goals. 

5. Have Better Financial Habits

Being financially literate is one of the best things you can do for your finances. At this point, you can create better habits to continue your path to have enough money. This starts with tracking your spending. You can then make sure that all of your credit cards are paid on time as well. This will allow you not to get into bad debt. Then continue to spend less than you earn and invest early as often. 

These financial habits will set you up for success. Good habits go a long way in achieving your goals. 

Will More Money Solve Your Problems

We think that the more money we have, the easier our problems become. That is not always true. Greed and selfishness can create even more problems for you, and relationships happen to be more important than money. 

Money isn't everything to people. So having enough money will not always solve your issues or problems in life. It will create freedom but do not sacrifice your lifestyle, health, or relationships for the pursuit of some magic pill that you think will solve all your worries. 

Money is a tool to help you make things happen. 

Final Thoughts:

As we ask how much money is enough, we need to determine what is enough in our lives. How much money will be required to pursue our dreams? The number we are striving for can help us to make goals and plans to follow. 

We also need to make better habits and obtain enough money. This can be done through saving and investing. Plus, with the ability to track our spending and work a bit extra on skills or side income, we can accomplish many of our goals. We will hit the number that is enough for us. 

Continue to learn about money. The pursuit of being free from worries, stress, and the bondage of being a slave to money should be enough motivation to change your ways and create paths to have enough money. 

How much money is enough for you?

4 thoughts on “How Much Money is Enough?”

  1. Howdy! Since you asked, I feel earning $300,000 a year high cost of living area with two children is enough for a middle-class lifestyle.

    Are used to think $80,000 a year was enough for one, and $150,000 a year was enough for two people. There’s more people get added, more money is needed to live that lifestyle you want!

    But thankfully, it’s a fun challenge to invest and make more! That realization you need more money doesn’t just happen overnight. It builds overtime.


    • Thanks, Sam!

      Thanks for answering my question. HCOL areas can be quite expensive. Some people do not understand this at all. I am glad you know how much money is enough for you guys. As life goes by we notice that goals change and life changes. Being single and having a family of 4 is different.

      Right now, my wife and I live on a lower amount. Once we start adding more people to this family the costs will go up more. That is very true that the more people added the more you will need.

      The great thing is that we can continue to grow, create, and make investing a fun challenge.

  2. I tried to answer this question as well. How much does someone need to retire early? Obviously it is different for everyone. Sam says $300K a year, I argue for $120K a year for a family of four. But the reality is that many people can do it for far less. If you can cover your expenses, you are free! And if you can lower your expenses even further, now you are really talking. That is what I am currently looking to do, how can I stabilize my early retirement with some additional income + lowering of expenses, but still maintaining the lifestyle I want to live? That is on my mind typically daily…

    • That is true. Many people can live on less, but it is all personal. I know my father talks about needing to live on like $80k-90K. I am not sure why he needs that much money since he has no kids at home and lives in an LCOL plus he is pretty cheap, but each is their own. Right now, I am working on creating side hustle money that will help my wife and I hit FI faster, and hopefully, sustain us through early retirement.


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