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"Enough" is seemingly a simple concept. Yet, in a culture where we are constantly told by the media that what we have is insufficient, it's hard to wrap our minds around this moving target. Our entire economy is built around our appetite for consumption. I highly recommend that you take 20 minutes to view the video at www.thestoryofstuff.com to better understand why this concept is so important for us to grasp!
Living with the additional uncertainty of a recession makes it all the more imperative that we decide for ourselves what is enough. How much is enough to spend? What lifestyle is enough for our family? How much is enough to give away to help others? How much is enough to save?
Ironically, financial planners have generally not been helpful in addressing the ultimate financial planning question..."How much is enough"? This is partly because it's a highly personal question and partly because of potential professional liability. For example, if your financial professional suggests that perhaps "enough" for you should be a budget of $5,000 per month and you're accustomed to a $10,000 per month lifestyle, you would likely be at the very least perplexed and perhaps even insulted. You might feel as though your financial professional has just accused you have being wasteful or having the wrong values. You may even feel as though he or she has overstepped some professional boundaries.
In another example, think through what might happen if a financial planner runs some projections for you and determines that you should have adequate savings to cover your retirement. Let's say you then quit your job, live a few years into retirement, and then you run out of money. What would be your first reaction but to go with your pitch fork and torch in hand to find the monster who ruined your retirement! (Never mind the fact that you spent well above the recommended amount each year or that the market happened to decline drastically right at the beginning of your retirement). Do you see the potential array of liability?
I've come up with a list of "enoughs" that I suggest every person should define for themselves (with the guidance of a financial professional when appropriate). Drawing a line in the sand and deciding for yourself what reasonable goals look like will give you the satisfaction of having a way to mark your success! Then you won't be running a race with no finish line.
- What monthly budget is enough for my household to attain a reasonably comfortable lifestyle without excess? The answer to this question will inform your many of your life decisions, not just what purchases you should avoid day-to-day, but what type of job you pursue and how many additional years you will work for income!
- How much is enough for my household to save in order to responsibly plan for our future care after we are no longer able or willing to work for income? Retire the notion of "retirement". If you are in a job that you can't wait to get away from, make a career change now! Find a way to work at a comfortable pace and contribute to society in a manner that fulfills your purpose. This approach will not only make "retirement planning" much more attainable, but it will also make your life much more enjoyable!
- How much will my household need to save in order to meet near-term goals? Closely examine your goals to make sure they are truly consistent with your values and beliefs. Don't let yourself get talked into thinking you need something that will leave you feeling unfulfilled or disillusioned. If you find yourself saving up for an upgrade (in your car, your house, or even your kitchen appliances) be careful to think through the ripple effect that a certain purchase might have on other areas of your life. Beware of what I call "gateway purchases" that lead to a whole barrage of additional purchases. A classic example of this is a client of mine who needed a new refrigerator...and ultimately ended up with a kitchen remodel! A good question to ask is, "will this new _______ be enough, or will it just shed light on the inadequacy of the things around it?"
- How much is enough to give away? For those of you who are philanthropically inclined, I challenge you to think of your giving as another financial goal. It's a paradigm shift for most of us since we traditionally have held the view that giving is what you do with your "extra" money. I'd like to suggest that if supporting certain causes is central to your value system, that you treat this like an important goal. I feel it's important to clarify that this is not about what's right and wrong so much as it is make your money count by using it in a way that is really meaningful.
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