How Much Money is Enough - Two Ways to Figure it Out
Hey gang. Given the unusually high number of posts lately on how much money is enough to retire, what rolex should I buy, what luxury car should I purchase, and how much to spend on an engagement ring, I’ve decided to offer up a slightly different take with two ways to finally figure out how much money is enough.
But first, let me start with a story.
My grandpa was honestly one of the happiest retirees that I’ve ever met. He lived in the same house since the 1970s in a middle class to lower middle class neighborhood, never accumulated much wealth, and lived on a meager pension. In his retirement, he enjoyed his hobbies: working in his garden, tending to his orchard out in the country, and doing woodwork. Almost every day, he would get together with a different neighbor and have coffee. In the evening, he would read a little and watch a little tv and would then call his friends too old to visit any longer.
I remember watching tv with him one night and I asked, “Hey grandpa. Do you want me get you a better package with more channels? Don’t you get bored with these?” He replied, “I’ve never been bored a day in my life. There’s always something to do. Don’t worry about it.” The guy lived an outstandingly satisfied life and was loved by all.
Now, to the question...
How can we get enough money to fulfill our dreams?
1. Alternative one is familiar to this website. In fact, WSO does a great job of guiding the way. Go to the right school, the right bank, the right PE firm, and so on and on. Buy an intro level luxury car, then a Porsche, a better rolex, get the right suit, the right shoes, etc. etc. With this career path, all of that can happen if you play your cards right. But strangely enough, I can’t tell you how many people I’ve met that have $5 million in bank but are still trying to get more. At a certain point, it becomes absurd…how much square feet do you really need in your mansion?
2. Alternative two is work on your spirituality. Reflect on what matters in life. Read the great authors, about Buddhism, Jesus, Allah, whatever floats your boat. Read some psychology books, some philosophy books, the arts, anything that gets you thinking. Every week try to reflect on what is important and what is not and what you really need in life. Try to get to a point in life where you no longer care about the Porsche, the rolex, the right suit, etc.
These paths are not necessarily mutually exclusive.
You can work hard and achieve success and at the same time have enough insight to not spend it on stupid bullshit. I’ve been down both roads at the same time. When I started finance, I only thought about being a BSD, driving a Ferrari, and owning a rolex. Now, I don’t want any of that. At the same time, I own a nice home in an upper middle class part of town, have a basic luxury car, and earn a decent low 6-figure comp. It’s way more than a lot of people, but I honestly don’t need a penny more. I don’t want a Porsche. I don’t want a rolex. If an extra $100K popped into my account tomorrow, I might buy an $80 scotch and pay off part of the mortgage. There is literally nothing material that I want beyond what I have (which is no monastic lifestyle). It took a lot of self reflection to go from being the kid trolling the rolex website to where I am now. You can follow both paths and end up somewhere in the middle.
Only you know the answer.
So, there are your choices. Either keep running the rat race trying to earn more or figure out what you really need or do a little of both. So how much money is enough? Only you know the answer to that. For some people like my gramps, just growing your garden and drinking coffee with friends was enough. However, note that just like working for money is hard, it took him a lifetime of character building to get to there.
In short, you get to decide how much money is enough – there is no magic formula. You can work your ass of for more or you can start caring less about that crap. It’s up to you.
duplicate, sorry (strong first post)
This is an awesome post and I really appreciate you making it.
Your grandpa sounds like an absolute baller in his own right, and what an example for you. I really do think people of that generation were a different breed.
I could not agree with you more that it's very sad how many people seem to "need" $20 million, or even worse 45-year old MDs with no savings to their name.
Would love your thoughts on my old post, re. (1) living life now vs. (2) saving & compounding returns: https://www.wallstreetoasis.com/forums/burnout-life-choices
Thanks! Read over your other post, I think that your best solution might be grinding it out a few more years and then getting out. What you've got going for you is a reasonable quantifiable exit sum - sort of what I'm describing above. The real problem is when people have open-ended goals or are looking to hit ridiculous retirement totals. If you want to build a $300K cushion, you could do that over a few years and then do something else. You won't be giving up your entire youth.
I remember a few months back there was a post from a PE guy who made $50 milllion and now loved being a high school economics teacher. It was a good story, but I kept thinking to myself, "Dude, you don't need $50 million to become an economics teacher if that's what you really love doing." He could have made just $1 million or much less and called it quits and lived comfortably as a teacher for the rest of his life.
I think one of the big misconceptions by a lot of people on WSO is that you have to accumulate this giant mountain of money where all risk is off the table and only then can you consider doing anything else in life. A small cushion can go a long way....would I ever want to be a high school teacher? Ummm no. Would I want to be a high school teacher with $300K in the bank and continue to live in my same house. Wow, that sounds pretty awesome! That cushion can completely change your outlook on a potential different route.
Yeah, I remember this post, but it sounded like he enjoyed private equity and that's why he started his own fund to have control over the process and to have more challenge. Eventually he got tired and wanted to switch careers. His end goal was not to become a teacher.
I do agree that you probably only need a small amount to truly be happy, but you have to remember that the more money equals more security as well.
Reducing your expenses and burn rate is better than slaving your life away to have a lifestyle you don’t need. One of my buddies is a Buddhist monk with very few possessions (he does have a $300 Burberry beanie which matches his monk robes, which I think is hilarious). Happiest dude I know
Great post. I appreciate you taking the time to share it.
While there’s no use in getting angry/upset at other people having their own opinion and thoughts, I can’t help but feel that 90% of the users (Mainly prospects, like my self) who see this will go and comment “Wow, great insight, thank you!” And then make a thread asking for “prestige rankings of XYZ” and other frankly stupid shit.
I don’t know what my point is. I guess that everyone has their own way of understanding life, purpose, and what’s worth working for.
I won’t lie, once I started my whole research/prep, I fantasized about having sports cars, Rolexes, etc, but after talking to my girlfriend about my ambitions and what I could possibly be able to afford, she told me “And is that what you really want?” And sent me into introspection regarding my motives and expectations.
I’ve started reading daily, meditating, writing my goals, thoughts, journaling. Listing anything that I want to achieve that’s not monetary. I can safely say I feel like I have more purpose, and I feel happier and less stressed overall.
Sorry for the ramble. Thanks for the post. I sincerely hope you keep feeling as fulfilled and satisfied with your life and your choices as you are right now.
I think you're totally right, but at the same time, that's not necessarily a terrible thing. It's just the way that we're all built. In my opinion, it's a lifelong struggle trying to nail down what's important and humbling yourself. You're not going to wake up one day and have it all figured out. It's always a struggle between doing what you know you should be doing versus where your ego and the values of the world are trying to pull you.
As I noted above, I own a pretty basic luxury car.....I could afford a much more expensive one, but do I really even need a basic one? Probably not. I'm still on my own personal journey where I occasionally succumb to more base desires, but in the long run, I've gone pretty far down a road where I care less and less about that sort of thing...nonetheless, I still have more road to travel as well.
The important part is realizing that there even is a road worth traveling. Once you figure that out, it starts eating away at your ego more and more and you start making wiser decisions as time goes on. Sounds like you are on the right track.
SB’d as definitely agree. Tbh I was one of those kids 10yrs ago - and I admit when I started making good money in PE I actually bought a BMW and then swapped it for a Porsche, and also a Rolex.
Do I regret those purchases? Well not really, I got a lot of fun out of the time. However the law of diminishing returns really apply here - at first material stuff gives an amazing buzz, but tbh it quickly wears off. And your friends and family might be impressed for 10 minutes before they go back to whatever is important in their lives and it becomes just a footnote from their perspective. Girls might be impressed - but tbh are those the type of girls you want a long term relationship with anyway?
By all means I’m not saying live like a monk - I still have a nice car, like going on nice holidays etc. But personally now I’d much rather have $100k+ in the bank rather than buy a Ferrari - that was my dream car growing up, but it doesn’t impress me that much anymore (ultimately it’s just a car, buying it won’t magically change your life).
Anyway this is all just imho, feel free to disregard (I know I would have if I’d read this even 5yrs ago). Just wanted to add my perspective.
Are you a prospect? I assume you are.
Having done my years in IB. it's not like that. Far from it. If you're working in NYC or SF or even Chicago, you aren't gonna be driving a sports car. You're taking the public subway to the office in the AM and a late night 3 AM uber home worst case, maybe a midnight one regularly.
Your rolex is a dime a dozen. Bankers aren't the only ones with them.
Banking is a risk adjusted way to make an above average amount of money.
It's been said before many times, but I think it's worth saying again (plus this time I have an apt illustration). That is: be happy with what you have and stop comparing yourself to others.
Let's just say you've made it. To many here that is something like being an MD at a BB/EB pulling in $1M+/year. You have a big house in Greenwich, a supercar, a house in the Hamptons, etc. Congratulations, you've done it. Next thing you know, you visit Monte Carlo (Monaco) where everyone has 100+ ft yachts, private jets, collects rare art, and donates enough to universities to get their name on buildings. Chances are you're going to feel left out and unaccomplished. You can see the conundrum.
I would say the point is to avoid triggers. Just like a recovering alcoholic steers clear of things he knows may induce him to relapse, you need to do the same. Stop looking at Billionaires' instagrams, unsubscribe to the Robb Report, etc. Surround yourself with like-minded people and compare your life to your own goals (no one else's).
I think one thing worth bringing up is that most people don't go through life solo, which limits the freedom you have have to take a big pay cut. I'm 25 and in a position where I could stop working for an entire year and just travel if I wanted to.... but in 5-10 years, I hope to have a family, at which point I will try to give my children every opportunity that I can... (and that I received) I'll have a mortgage, my wife (or I) may want to take time away from work while the kids are young. Most of my friends also have money... there's no doubt a bit of keeping up with the joneses. I'd like to be able to take my family on vacation, possibly send my kids to private school or at least be able to pay for their undergrad. All of a sudden, the ~$1mm I may reasonably have saved by age 30 doesn't feel like very much. I don't own a nice watch or a nice car and I don't really plan on spending money on those things, but life is expensive.. especially in NYC. And having money in the bank is also great security for pandemics, natural disasters, etc. Plus, there's the sunk cost mentality -- why step away just as you start earning real money in your ~30s?
I guess in summary, I have no desire to be a "big swinging dick" or show off my money. If anything the feeling I have of needing more money is a form of risk aversion, which I think is pretty common in finance. Despite what you see in the movies, most of us are nerdy rule followers.
Great comment. It really provides perspective.
I think other posters oversimplified things, unintentionally, when they didn't account for other expenses in life such as weddings, kids, private schools, college, and NY being very expensive.
Since people are uncertain in their life, I think it's best to rake up as much cash as possible for greater flexibility down the line.
As someone with plans for exiting the rat race very early, the key is absolutely to keep your expenditures low. I’m just estimating, but I have probably kept my annual spend at around $75k - $100k with the vast majority of that going towards rent / mortgage. This has been true for nearly the last 10 years. If you can resist the urge to blow a lot of money on designer clothing, expensive cars, and other such things, you’ll accumulate wealth at an alarming rate in this industry.
As mentioned above, the game changes when you get married. Unless your spouse is on board, you can’t simply decide one day that you want to quit and become a high school teacher. This is even more challenging if you have children because you’re going to want to ensure that you have enough cash built up that you can afford to pay for their education and other needs. A two bedroom home becomes a necessity, perhaps even three bedrooms if it is multiple kids. All of a sudden you’re probably paying to support four humans rather than one. To eliminate any risk that you won’t be able to support your kids, you end up accumulating significantly more money than you’re likely to ever need to pay for expenses.
My advice: Resist the urge to increase your spending alongside your pay increases. Keep flying coach, stay in reasonably priced hotels, and don’t order get bottle service at the club even if you can afford to throw around the money. Most importantly, make sure you find a partner that is onboard with a “reasonable” lifestyle and is on the same page as you are regarding spending money.
Yeah, this is where it starts getting tough and it's probably a conversation worth it's own thread. The toughest part is that everyone wants the best for their kid, but at the same time, does little Johnny or Timmy really need to attend a $30K per year elementary school to insure his happiness and success in life? I know people who are SAVING money when their kid finally goes to college. I mean that's kind of insane.
It's almost become an arms race of parents trying to get their kids into most expensive primary schools. When I was growing up, most parents would throw their kids into public schools and some would pay for a cheaper private school, but nothing like what goes on today. I don't know....we all survived to tell the tale.
Outside of reducing spending habits, have you invested most of your savings along the way, i.e. public markets?
that is a great story, I still have to enter the rat race, although I don't care about materialistic things ( i used to when i was like 14) I am on the borderline of poverty(parents) so I want enough money where I can support me and my parents and siblings (hence pursuing IB and wanting to be part of the rat race), money comes and goes its how you use the money that truly matters, but going back my goal is that I want financial stability where I can use the money I have to make a positive impact (donating and helping people out, parents, traveling, or making sure my future kids won't go through the financial struggles I went through (I'm 21)) instead of buying all these materialistic shit to show off in IG or Snapchat., we live in a very materialistic world which is very sad. there is no end to human desire if we have 300k we would want 600k and so on, you have to learn to control that because you can be jeff bezoz rich and still not life a fulfilling life but make 100k a year and life a fulfilling life that is up to you to decide
boot the dipshit that gave this MS
Lol, was wondering about the MS as well. I'm gonna assume that guy just happened to buy a rolex yesterday and then read this...
This is obviously a trick question. It is never enough.
I'm just an intern so maybe this is naive, but I'd like to save a nice nest egg through 2-3 years in banking and then move to something more chill, probably corporate and probably in a lower COL area. I think if you can save 100-200k by 25, then that alone is a pretty solid amount to compound over the longer term and taking a pay cut to corporate is still above average money to continue saving on. I never had an end goal of sports-car, Rolex, etc. I'm more along the FIRE idea not necessarily to actually retire early, but to be able to make career and life choices without the burden of money being a motivating factor until I'm 60.
I want a home which I can call my own, some land, 4 kids and a beautiful wife (in every sense of the word). Give me that and I'll be genuinely happy
Enough money is when all your costs are covered with revenue, and you still have something left.
It’s all relative. Could I retire today in theory? Yes.
Would I have to cut back on my lifestyle? Yes, and that’s why I want more
My walk away number is inclusive of the invested capital to support my current lifestyle and more, so I need more than a 5 million
For some, that number is always a moving target and they’re never satisfied because they compare themselves to the next rung up.
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