How much is enough?
The argument for spending down your assets
This is the biggest question people have about their money. It’s a deeply personal, complicated question, fraught with feelings of guilt, scarcity, desires, and fears. We’re taught to save, to hold on to what we’ve got, and be secretive about what that amount actually is.
I am a firm believer in spending down if you have more than you need. But that just begs the question again — how much really is “more than you need”?
As I’ve mentioned before, if you have more than $1 million in the bank, you’re in the top 10% of folks in the US. And if you have more than $10 million, you’re in the top 1%. So if either of those is you, you need to recognize that you have much more than most people, and stop just comparing yourself to the Gates and Buffetts of the world.
You are also rich.
Caveats-a-plenty: Yes, it depends on where you live. The cost of living is much higher in cities like San Francisco or NYC vs. Knoxville or Orlando. Is the money inherited or did you earn that money yourself? And everyone’s got different needs and expenses. But you still may have more money than you need. See the chart for where most wealth actually comes from:
So how much do you need?
The biggest factor is what stage of life you are in.
What milestones are ahead of you in life?
Big life decisions like buying a house, marriage, kids, and college can play a big role in this decision, and if you don’t know about those yet, you may need to save some more for now.
If you are under 35, have an inheritance, and aren’t sure of the answers to the above, I like this advice from Resource Generation:
Start by putting your stock market money on pause: Give away at least 7% each year, so you’re giving away approximately the same amount you are accruing in interest. Then, revisit this number once a year, and see if you can increase it.
Do you need the money to live on, or are you also currently working a job that pays for all of your daily expenses?
If you’re working, you can also think about giving 10% of your income away each year, in addition to giving from inheritance. This is what my partner and I are working towards — giving away from inherited wealth and 10% of our income. More on that here.
If you’re 60 or older, what kind of legacy are you hoping to leave for your kids and others in the next generation?
How much do they need to inherit? Probably not as much as you think.
If your kids are adults, do they still have big things on the horizon: college, house, kids? They may need some support, but we have to think more broadly.
Let’s talk college and health care as examples.
Last year, average costs for college were around $40K per year. So that’s $160K for a four year degree. That can add up if you have a few children or grandchildren to think about — or if they are looking at post-graduate degrees. Prices of college are seemingly always going up, but frankly, do you think that in 10 years or more, we still won’t have free college?
As for medical expenses, same question — do you think that in 10+ years, we still won’t have universal health care and access for all?
So here’s a bold idea: Put more of your money into changing the system for all, so that everybody’s kids can have these basic needs covered.
Yes, you want to make sure your kids have some “slack”, as one of my clients calls it. Something to fall back on, support them in between careers, and cover the “what ifs” of life. Sure. But how much do they really need?
The world is on fire, and we need to plan everyone’s future, not just our own. EVERYONE needs a habitable planet and vibrant communities with strong safety nets.
Let’s fund the future we want to see.
I get that this may seem idealistic, or you may have way more complicated finances than I laid out here. Get at me on Insta to share your reactions or dispute my ideas. Or sign up here to talk about how I can support you in getting clear on your goals and give with abundance.
