Finance

What Number is Enough For You?

This is a question that will likely attract a lot of answers from different persons. To a billionaire, no amount is really enough. To some, in the middle class, a million dollars might do and some might have a more thoughtful number according to their estimations. We’ll likely come to a point in life that we would like to do things that we find interesting in life, look for better ways to spend our time other than chasing for money. Defining your Target number (which is how much you think is enough), will keep you focused and committed to achieving it.

A study conducted by economist Angus Deaton and psychologist Daniel Kahneman, of Princeton University reported by TIME in 2010, shows that happiness doesn’t increase beyond an income of $70-75k per year. In most countries, it can be seen as a decent living with contentment, and you can’t possibly be on vacation every summer, buy a new Benz every two years and easily sponsor your child or children to a top university like Havard on a salary of $75,000.

How much is really enough, depends largely on you and your circumstances and your considerations of how much you need to fully live by considering your:

1. AGE: How old are you now? What is your current age? How long do you intend to live? What’s your life expectancy? You could use an actuarial life table (a life table is a table that shows, for each age, what the probability is that a person of that age will die before their next birthday.) to estimate how long you’re expected to live. At 90, you’ll probably require less money for the rest of your life than a 30-year-old. here’s a link to an actuarial calculator
2. EXPENSES: How much are your monthly and yearly expenses? How much do you need to survive for a year? What would your expenses be if you’re living your dream life? A new boat, a new car every three years, vacation every summer with family and loved ones? Carefully plan how you want your dream life to be and determine how much you would take to finance it.

3. RESPONSIBILITIES: What and who are you responsible for? Do you have kids that will attend college in 7 years’ time? Do you have aging parents to care for? Are you currently providing financially for others?

4. DEBT: What is your current debt status? Do you still have a mortgage to settle? Medical bills? Credit cards? Auto loans?

5. TARGET TIME AND NUMBER: When do you intend to retire? How much do you need monthly in order to live comfortably? The target number is gotten by multiplying the yearly expenses with the target time.

6: TOYS (POSSESSIONS): What toys do you want to own? A private Jet, Ferrari, A boat, A mansion?

Just like we say in the beginning, there’s no fixed answer to the question “How much money is really enough” depends mainly on your desires and present circumstances. Consider how much you think is enough thoroughly before settling on it, the number might be small or very high. It’s yours and you can always change it at will.

Money basically solves monetary problems and provides choices but has a limited value aside from these two purposes. Money should not be seen as a means for establishing status, that’s left for teenagers to play with.
Rather, create a means to generate income, save to invest, and increase income to boost your net worth in order to acquire the freedom and toys (possessions) that will enable you to live your dream life. Take your time to address this vital issue.

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