How Much $ Do You Really Need?

I thought this would be an interesting conversation given many on here are very comfortable financially, whilst more and more seem to be getting burnt out or questioning if the WLB sacrifices are really worth it. I've spent quite a bit of time thinking this through recently and have come to conclusion I can live very comfortably off $150K p.a. and still do all the things in life that make me happy.

This obviously makes me question is it worth putting up with the WLB sacrifices that comes with the job if I don't get significantly more enjoyment out of earnings beyond this point. For context, I'm in a MCOL city, and have no kids. Obviously this impacts the number going forward, but I'm also working on basis that if I do settle down it'd most likely be with someone who has broadly similar earnings.

So, what $ do you think you need to live the lifestyle you want? 

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Comments (42)

May 4, 2022 - 4:55pm
WSO Monkey Bot, what's your opinion? Comment below:
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May 6, 2022 - 11:10pm
mooyi, what's your opinion? Comment below:

I'm pretty big into FIRE so I don't think of money as income but rather net worth. Aiming for net worth of $1M, from which I expect around $40K passive income, then I'll deem myself financially independent and either retire or more likely just keep working but be open to taking more career risk / be willing to pursue things that may not make as much but would make me happier. No plans of kids. Partner expected to have similar NW trajectory.

My COL is pretty low, as I don't really have a strong desire to live in a big city (only in one rn for work reasons). The things I spend the most money on each month are probably rent and food. I'd maybe spend a bit on travel as well, but I'm quite a homebody so it's not like I'd be globetrotting 365 days of the year haha; also travelling doesn't even have to be that expensive if you travel hack.

In terms of WLB, the me in the past (prior to feeling burn out) would've said sacrifice anything to reach that number as soon as possible, but I've since changed my mind. If you push yourself so hard that you ruin your mental and physical health, then what's the point? Take it at a comfortable pace, where you're making progress but not so much that you're gonna hit a wall one day because you pushed too hard. Believe me, the wall hurts.

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May 8, 2022 - 12:15pm
arbjunkie, what's your opinion? Comment below:

seconding this, for those saying they "need 150k" to live, to me that means you really need 5mm net worth.

personally I'm from a rural area, so think that is a bit much, but feel like 3mm would be a good base for true FIRE

May 8, 2022 - 8:22pm
MonkeyNoise, what's your opinion? Comment below:

Have the exact same goal. Hit 1M net worth (maybe a bit more) and open to truly working for self and take risks aka entrepreneurship. With that much money banked you could easily just buy a truck and haul junk for a living if you wanted to, or something equivalent  

May 11, 2022 - 9:45am
money.monkey, what's your opinion? Comment below:

I'm curious, how do you live with $40K a year? 

Array

May 11, 2022 - 2:10pm
Isaiah_53_5 💎🙌💎🙌💎, what's your opinion? Comment below:
money.monkey

I'm curious, how do you live with $40K a year? 

You move to Indonesia.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

May 11, 2022 - 7:41pm
mooyi, what's your opinion? Comment below:

Rent + additional utilities (water, internet, etc.) -> $1000/mo. * 12 = $12K (This may seem low but that's because I live with my husband so we split the 1 bedroom + den rent, actual rent is 1750$/mo.)

Food -> $300/mo. * 12 = $3.6K (I mostly grocery shop and cook, eat out a couple times a month. Once again, I cover half, husband covers other half.)

That's all I really need to survive, anything above that can be used to travel or eat out more or donate or whatever. I keep track of my spending so I know for a fact last year I spent ~$22K (yes there were some 'fun' expenditures above and beyond the bare necessities). $40K/y would be an upgrade haha.

For additional perspective, the national median family income for families and unattached individuals in Canada is $66800 (https://www150.statcan.gc.ca/n1/daily-quotidien/220323/dq220323a-eng.htm), so if I have $40K/yr coming in and so does my husband (similar NW trajectory), that adds up to $80K/y. That's literally more than the median family income. If those families can live just fine, there's no reason why we shouldn't be able to.

On healthcare costs, I live in Canada, so I don't worry about that.

The secret to surviving on $40K/yr is just to not let your lifestyle inflate much past university days :P

May 7, 2022 - 1:54am
GoLiftSomeWeightsBro, what's your opinion? Comment below:

I'm currently in a MCOL city, apartment paid off. Realistically 3k to spend a month while working 20h +/- is very reasonable for me. No debts, no mortgage, no kids. With the free time I work on my "side hustles" and maybe one day I can quit my job for real. When you spend a lot of time reading, doings sports, painting, you don't need a lot of money. Travel would be something I have to save up though. 

If however I decide to move to a more "fun" city, probably 5-7k a month? Im a relatively simple person. 

May 8, 2022 - 8:24pm
MonkeyNoise, what's your opinion? Comment below:

3k a month, and supplement that income with side hustles and if cash strapped things like uber/door dash.

Freeing up time spent working and used on a side hustle IMO anyone could get it to generate 40k profit or so in a fair amount of time. That, with a decent amount banked, is all you need. As you said - sports, outdoors, hiking, all that shit you dont need a ton of money for. People make GOOD lives work on 40-50k a year

May 7, 2022 - 11:36am
famejranc, what's your opinion? Comment below:

I just launched a startup I'm hoping to grind sales to get my startup to $8k a month in revenue (I am a 50/50 cofounder). Low expenses for startup so $8k in revenue would probably get me to $3500 in take home each month. I won't just stop selling once I get there but I'm hoping to get there within a reasonable time frame.

May 7, 2022 - 1:09pm
EatClenTrenHard, what's your opinion? Comment below:

25 y/o, currently think high single / low double digit mm net worth. Priorities might shift when kids come in the picture. 

May 7, 2022 - 4:33pm
Isaiah_53_5 💎🙌💎🙌💎, what's your opinion? Comment below:
EatClenTrenHard

25 y/o, currently think high single / low double digit mm net worth. Priorities might shift when kids come in the picture. 

You have $9mm - $12mm net worth at 25?

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

May 10, 2022 - 10:35am
PeRmAnEnTiNtErN, what's your opinion? Comment below:

Around the same age and want to try and grind to get 1mm then do the semi retire - by working a job that is like max 20 hrs a week or jumping to a nice local shop at the VP level and trying to just generate business.  

May 7, 2022 - 9:30pm
Lester Freamon, what's your opinion? Comment below:

All this really depends on your wants and lifestyle. COL also plays a huge factor. For example, if I wanted to live in NYC like a lot of people here, I'd need to make a significant amount more money than I currently do because of the taxes/rent I'd have to endure there. I personally would prefer to live in a more moderate cost area, like Austin/Chicago/Denver, so I don't need nearly as much money. 

Further, I have a much more tame lifestyle and wants than many on here. I have a select few things I really like that I'll spare almost no expense for (i.e. travel, outdoor activities/fitness, learning new skills), but I have almost 0 interest in buying expensive cars, going to exclusive nightclubs, indulging in fine dining/drinking, etc. like many on here do, so my number where money starts to have diminishing returns is a lot lower. Also, net worth probably matters more in the medium-run because your investments start earning passive income too. My salary isn't that spectacular (relatively speaking), but I saved a shitload of money the last 2 years with the pandemic/being remote that I'm earning a decent amount of money from my investments that'll continue to compound till I die.

So all-in-all, I'll give you every consultant's favorite answer - "it depends". Since everyone loves quantifying everything these days, I'd say that as a single guy living in a non-NYC/SF/LA type of city (think Chicago/Denver/Austin/Houston/Atlanta, etc.), I'd be extremely comfortable at the $150K+ mark. If I lived in one of those really expensive cities, I'd probably want at least upwards of $225K, if not more just because of how much taxes/rent would start eating into my savings and how much less I get for the same price (i.e. a $2K 1BDR in Austin != a $2K 1BDR in Chicago, which absolutely != a $2.5K 1BDR in LA). I don't want to estimate my foot off the accelerator number if I get married/have kids because that introduces a whole bunch of other variables that I have no experience with and might not be able to guess about right now.

May 10, 2022 - 10:38am
PeRmAnEnTiNtErN, what's your opinion? Comment below:
I don't want to estimate my foot off the accelerator number if I get married/have kids because that introduces a whole bunch of other variables that I have no experience with and might not be able to guess about right now.

I think ideally this number is higher but can be meet much faster because if you and your wife are on the same page, You can have a lot of cost savings and bank a second salary.  

May 8, 2022 - 8:20pm
MonkeyNoise, what's your opinion? Comment below:

In a MCOL I can live in a highly desirable area (safe, walkable to bars, restaurant, educated population), do 2 abroad trips a year and another smaller trip a year, be able to go out to eat or buy things without seriously budgeting, and max out the 401k at around 70-80k.

Really doesnt take much.

May 9, 2022 - 12:05am
IncomingIBDreject, what's your opinion? Comment below:

For all the FIRE people how are you modeling inflation into your final number?

Array

May 9, 2022 - 11:09am
thebrofessor, what's your opinion? Comment below:

the assumption is that their real returns will be high enough so that the growth outweighs the inevitable recessions they go through and that the folio inflates at a rate faster than their spending. if inflation is 8% but you're making 12% it doesn't really matter, until you go through 2000-2002 or 1969-1974, or worse.

May 9, 2022 - 12:48pm
IncomingIBDreject, what's your opinion? Comment below:

But how exactly do you measure if this assumption is correct or not? How would you backtest it? Ever since I've learned about "owners equivalent rent" I've lost any respect that I had for the CPI as a true measure of inflation. I've heard other people propose the SPY as a measure of inflation, but I don't know how well that works when you have rapid price increases because people will try to shift capital to say real estate or commodities to get a better return. I guess the contrary is shifting to fixed income during market downturns so SPY is assumed to just "average out" everything but I question how well it holds.

Array

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May 10, 2022 - 9:31pm
Devils Advocate, what's your opinion? Comment below:

As someone who enjoys nice stuff and wants to reside in a very high cost of living city, I think I need a minimum $500K pre-tax, which assuming as a passive income stream at a 3% yield is $17M. I'm trying to get to Fat FIRE rather than regular FIRE so I don't have to severely compromise my standard of living without a job.

The other way to do the math is to say I'll get favorable tax treatment with passive income likely from capital gains so if you assume a blended W2 tax rate of 55% for illustrative purposes that $500K translates into $275K post-tax. You gross that up at a favorable tax rate (titled towards capital gains) of let's say 35% and that's $423K pre-tax which at a 3% yield is $14M

Not even factoring kids in this equation 

May 11, 2022 - 9:52am
money.monkey, what's your opinion? Comment below:

Well - put it this way. I want my kids (I suppose that'll happen) to have at least the life I had or better. That means, good childhood, appropriate amount of toys, private school, college, etc... That means at least $75k/year post-tax expenses for each child. Assuming there's 2, that's $150k. Then I need money to live comfortably for myself/partner, that'd be $150k-200k or so post tax. So, $500k/year pretax would be the number. Anything more is just gravy.

Array

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May 11, 2022 - 10:26am
Anonymous Monkey, what's your opinion? Comment below:

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May 11, 2022 - 9:12pm
SafariJoe, what's your opinion? Comment below:

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SafariJoe, wins again!
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