In an era of constant financial pressure, it's time to step back and ask ourselves a critical question: "How much is enough?" This isn't just a question about money but also about the quality of life, the pursuit of experiences, and the inevitable trade-offs we must navigate.
"Whoever loves money never has enough; whoever loves wealth is never satisfied with their income. This too is meaningless." -Ecclesiastes 5:10
How Much Is Enough?
One of the most crucial financial questions we face is determining what enough means for us personally. In the United States, we're often caught in a culture that prioritizes and prizes consumption. To consume (or spend more), we need more income, investments, and returns. While preparing for the future is essential, focusing solely on growth or solely on wealth preservation can overshadow more immediate needs and joys.
When I was growing up, I was taught to clean my plate. I still remember the ladies at daycare asking me if I had a "happy plate." This meant that I had eaten all of the food I was given. This practice continued through my teenage and young adult years. If I had food on my plate, it needed to be eaten—even if I was already full.
As Thanksgiving approaches, I think of being "miserably full." Most of us will gladly do this next week. We will feast and enjoy the time with our loved ones, and because the food tastes so good, we will go well beyond our finish line. Bring on the food coma.
This is a micro example of what I'm talking about when it comes to "Enough." Have you ever considered what "Enough" looks like in your financial life? Could it be that you're already there?
Embracing the concept of enough can lift an unseen burden. Without a clear financial finish line, how do we know when we’ve succeeded? How do we know when we can retire? relax? Without targets, it's easy to feel uneasiness instead of peace and contentment.
Daily decisions about money and resources are not one-size-fits-all. They involve personal economics that dictate how we live and what we value. We must ask ourselves what we’re optimizing for in our financial decisions. Are we aligning our resources with our values?
Many people have a detailed grasp of their finances but lack clear long-term goals or finish lines. It's crucial to ponder what comes next. Are we managing our investments and savings with a clear vision of the future?
The Role of Investing
Investment success can sometimes blur the lines between our current reality and our financial aspirations. When our investments outperform, the temptation can be to hold on, waiting for even greater returns. We can lose sight of the main reason we invested in the first place. Without knowing when to harvest—we might be unreasonably stretching our expectations and taking unnecessary risks.
Another side effect of investment success is mistaking luck for skill. You have a stock that went up 300%. Congratulations! What's next?
“Smart people aren’t exempt from professional disasters from overconfidence.”
- Charlie Munger
Investors should carefully balance short-term market success with long-term objectives. It's vital to strategize based on current trends and consider possible setbacks. We need to prepare our financial plans for both good and bad scenarios.
Plans are only as good as their ability to adapt when reality diverges from expectations. What if our assumptions about the market are wrong? Can our financial plan withstand the unexpected, or are we setting ourselves up for unforeseen difficulties?
This money journey we are on is quite personal and filled with discoveries about what truly matters to each of us. By asking the hard questions—about enough, about our goals, and about our potential missteps—we can create a financial strategy that not only prepares us for the future but also enriches our present.
Remember, there's no optimal solution that works for everyone. However, by deeply engaging with these questions, you can chart a path that aligns with your values and aspirations.
Until next time.
Disclosures:
Investment advisory and financial planning services offered through Advisory Alpha, LLC, a SEC Registered Investment Advisor. Insurance, Consulting and Education services offered through Vertex Capital Advisors. Vertex Capital Advisors is a separate and unaffiliated entity from Advisory Alpha, LLC. All written content on this site is for information purposes only. Opinions expressed herein are solely those of Michael H. Baker, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. This website may provide links to others for the convenience of our users. Michael H. Baker has no control over the accuracy or content of these other websites. Please note: When you access a link to a third-party website you assume total responsibility for your use of linked website. Links and references to other websites and third-party content providers are offered for your convenience. We do not necessarily prepare, monitor, review or update the information provided by third parties. We make no representation or warranty with respect to the completeness, timeliness, suitability, or reliability of the referenced content.