How much money is really enough?
AS WE enter this season of contemplation and reflection, we all have more than the usual number of everyday financial questions weighing on us.
How much more might we pay for health care under president-elect Donald Trump? How will any new trade policies affect our household budgets and job prospects? How much less will some of us pay in taxes after his promised reforms, and what might we do with what could be many thousands of dollars of extra money?
Step back a bit, however, and you will see that every money question eventually boils down to a single line of inquiry: How much is enough?
It is a quantitative question for sure. How much insurance is enough, how much federal revenue and how much personal income and spending.
But the question’s qualitative nature is what makes it special and singular. It is about how money makes us feel and, ultimately, it is an inquiry into the nature of our values – about what our spending, saving and giving say about us and what we and our families ultimately stand for.
It is not a new question. We find some version of it in the liturgy of various world religions, on the covers of books by financial services professionals and economists, and in the title of an 82-second song by the punk band Bad Religion, that decries our “rapacity, tenacity, capacity for more”.
But addressing the question is an appropriate task right now, given an unpredictable president-elect and a Congress nominally behind him poised to make good on at least some promises to change our financial lives. Absent any certainty about what will happen in Washington, we can at least try to get ourselves square in our heads about what feels like enough for us.
Enough awareness
How much do any of us really know about what our spending, saving and giving add up to? Could we draw an accurate pie chart that re- flects a year of household outflows?
This is not another call to write down everything you spend in a notebook. But it is a reminder that if you don’t like what you see when you glance at the credit or debit card statement or the pile of receipts, then it’s time to reconsider a few things. My colleague Carl Richards has offered short courses here recently on spending awareness and aligning spending with values.
“Money’s value is, in part, as an observational tool, as something to meditate on,” said Vicki Robin, whose classic book Your Money or Your Life is an excellent longer course on defining enough. “Does spending money bring you pleasure in proportion to the hours that you spent earning it? ”
She, too, is reluctant to order anyone to start new spreadsheets. She does note, however, that you probably won’t achieve Zen mastery with just two breaths or forgiveness and enlightenment by taking communion once in a while. “Rigor is the tiller on your boat,” she said.
Enough is enough
Once you have a baseline on spending and quantity, the qualitative work begins.
Manisha Thakor, director of wealth strategies for women at the financial advisory firm Buckingham, speaks often on the topic of defining enough and laments all the noise that gets in the way of getting it right.
First, there is nonreality television, where every policewoman, nurse and paralegal live much larger than their professional station in life would suggest is possible. “All these humid East Coast cities, and they’re clearly getting a $40 blowout before every shift,” she said.
Switch from television to a smaller screen, and you are confronted with curated social media profiles, where everyone is editing themselves. Combine that with the ever-present pressure to maintain a prominent personal brand, and it’s no wonder that so many people think that the right definition of enough is just a little bit more. “It just creates this feeling of lack,” Thakor said.
She said that one good place to start is the most elementary of benchmarks. She is often surprised, for instance, by how few people have heard of the basic one that Senator Elizabeth Warren suggested years ago when she was still a professor: Spend 50 percent on needs, 30 percent on wants and 20 percent on savings.
Not everyone will be able to meet those targets, especially if they live in a high-cost area, if their income is irregular or if temporary job loss or illness interrupts their earning. But at least those percentages give people something to shoot for or revise from when attempting to define enough savings and discretionary spending in their own lives.
Enough for children
Embedded in Warren’s definition is the concept of wants and needs, something that is well worth defining and discussing with any children in your life from their earliest possible age.
John Bogle, Vanguard’s founder, learned this early, and by necessity, when his family fell on hard times, an experience he describes in his book Enough.
In an interview this week, he described the advantage of having to stand up for yourself financially and help your family get along. “I worked from the age of 10, 11, 12 when my friends were out playing tennis, and it never bothered me one damn bit,” he said.
His own children worked, too, even though it was no longer financially necessary. “They were all trying to get high sales of the day at the County Seat,” he recalled.
In his book, he laments that so many children growing up in an affluent world don’t get enough opportunities to build character – to fail and contemplate and pick oneself up again.
Giving children an allowance to budget and practice with can help get them started. How much is enough pocket money? Just enough so that they have the things they need and some of what they want, but not so much that they do not have to make hard choices.
Tradeoffs are what we adults do each day, after all, and all parents are ultimately in the adult-making business.
Enough money
Robin, when I pressed her for a universal definition, seized on the discernment necessary to arrive at an answer. “Enough is the quality of having everything you need and want but nothing in excess, nothing that burdens you,” she said.
Hers is an ecological sensibility. She indulges, she said, in thrift-store clothing and investments in local businesses on the island she lives on outside Seattle.
Her notion of excess happens to be an essential concept at a time when many people of above-average means may end 2017 or 2018 with extra money, if the tax laws change. Giving that money away to people who need it more than you do is a worthy reflex, but Thakor isn’t sure that is the right answer for everyone.
“What would bring you one step closer to feeling more joy?” she asked. For many people, it may be paying off debt. Others may want to do something nice for themselves after years of frugality.
Perhaps there is a family member who needs help, or you want to spend money in a way that will contribute to economic growth while also helping you save in the long run, by, say, putting money toward energy-efficient home improvements or other similar investments.
Whatever it is, talk about it with your spouse, friends or family.
You will be richer for having had the conversation, but just don’t expect an easy answer or one that won’t change over time as your goals do. Thakor has an MBA and is a certified financial planner, so she is surprised by the lack of a clear solution to the challenge that the question poses.
“But as I travel around the country, it’s clear to me that there is not a numerical answer.”