The Goldilocks Theory of Being Rich (What's the Ideal Amount of Money to Earn?)

[MTF]

Just wanted to share this interesting article with you guys: http://casnocha.com/pros-and-cons-of-wealth-the-goldilocks-theory

The article essentially answers the question of how much money in the bank account you need to enjoy the best of what wealth has to offer without suffering from too many of its drawbacks.

Well worth reading and contemplating, especially since it discusses some unpopular uncomfortable truths about wealth.

 

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[Sheps]

I'll keep going till I get my porridge just right, then I'll be content until I set my sights on lunch.

 

[CaptainAmerica]

Nice article. It happens to match my current financial goals. I figure that with $10 million, I will have $4.8 million in ready money. That's enough to make an impact.

 

[V8Bill]

In my opinion; being "rich" is not definable for everyone the same way or with the same amount of money. People tend to (way) over estimate how much they need to feel wealthy by as much as 10x in many cases in my experience.

Once people understand what it feels like to actually "feel" wealthy they'll realise it takes far less than they imagined. People say massive numbers just to "be safe" ("I want to be a millionaire because by then I'm bound to be financially free - right?" - wrong) but it's not about how much money you have compared to another person. It's about how much you need to escape financial stress and enjoy some fun and luxury and feel (and be) wealthy according to one's own definition.

It's very easy to spend any amount of money really fast so "having millions" isn't always necessarily the answer (I/we could spend any amount of millions in 1-7 days). IMHO and in all my interviews and consults it's nearly always about destroying financial stress then knowing that you're building a future.

It's true we (most people who strive for wealth and financial freedom) need more money than we currently have and we need a "fair bit" more but the feeling of "wealth and financial freedom" occurs way before we become millionaires (which I naturally hope we all do) and it's a shame that more people don't understand this sooner because it'd save a lot of unnecessary stress.

 

[Cyriex]

Just wanted to share this interesting article with you guys: http://casnocha.com/pros-and-cons-of-wealth-the-goldilocks-theory

The article essentially answers the question of how much money in the bank account you need to enjoy the best of what wealth has to offer without suffering from too many of its drawbacks.

Well worth reading and contemplating, especially since it discusses some unpopular uncomfortable truths about wealth.

Great article. The way I see it. After getting your (after tax) million $, don't spend it. Ever. Just by holding onto this money you'll never have to work again.

See my investing thread: https://www.thefastlaneforum.com/co...s-portfolios-at-100k-1m-weekly-updates.64476/

Keep earning, keep re-investing. In a 5% return environment on a million, that is $50k a year. If spent in SE Asia or South America, you're living very very well.

 

[MTF]

@V8Bill and @Cyriex, I think that in the end it comes down to managing your needs and wants.

If you want a luxury car (or two) and a mansion, your costs go up by a lot. Suddenly your financial independence is nowhere within your reach - and will most likely never be because the more you have, the more you tend to compare and consequently want more.

If you're happy with a reliable mid-size car and a nice, not unnecessarily big apartment or a house, you can save a LOT and never have to worry about money again (as long as you're smart about your expenses).

You get the best of wealth (high-quality, but not overly flashy products) without the cons of it (like beggars approaching you when you leave your expensive Mercedes, people being envious of your mansion, gold diggers, fake friends, etc.)

In the end, if you're a smart investor and entrepreneur, you probably know that having, say, $100k in precious metals or real estate, is ultimately a MUCH, MUCH better feeling than having a $100k Mercedes attracting all kinds of wrong attention and costing you thousands in maintenance.

In a 5% return environment on a million, that is $50k a year. If spent in SE Asia or South America, you're living very very well.

$50k a year is enough to live comfortably in many places around the world, not just developing countries. In most of Europe (outside of expensive capitals and the most developed countries like Switzerland) $50k a year allows you to have a very nice lifestyle, probably even better than in South East Asia or South America because of better infrastructure.

 

[V8Bill]

Keep earning, keep re-investing. In a 5% return environment on a million, that is $50k a year. If spent in SE Asia or South America, you're living very very well.

$50k a year is enough to live comfortably in many places around the world,

$50k per year is a full time wage for many people in Australia and more than a wage for some. To those people, being told they can go home and keep their wage or retire on a full time wage (though totally anti FL) would make them very happy. No extra money but every day off forever? I'd have taken it.

 

[CaptainAmerica]

For you readers, there's a terrific book (Affluence Intelligence) on what we believe to be true about wealth. It's pedantic in places, but for someone changing their mindset about money, it's a fantastic resource.

 

[ExaltedLife]

I was thinking $10 million, but then I started thinking about how awesome it would be to own an island in Panama and a private jet. So my number rose a bit.

 

[MTF]

Wanted to bump this thread as I just re-read this article and find it even more fascinating today.

This is a pretty solid view on this:

So we’re left with a critical question: how much gas should you ideally have in the tank at any one time? How much money in the bank account promises a bunch of the pros and not too many of the cons of wealth?

Maybe wealth needs its own Goldilocks porridge story: you want not too much, not too little. And I think that ideal middle ground is the “Rich” category in the hierarchy I opened with. More crudely, this ideal amount of money is termed “f*ck-you money.” With f*ck you money, you can’t fly around the world on a private jet (so you’re not as rich as the Super Rich) but you do have the power to say f*ck you to essentially anyone or anything that doesn’t interest you (which means you’re richer than the merely affluent).

Put another way, if you work on stuff that doesn’t excite you for more than one day a week, in my estimation you do not have f*ck-you money. You’re still working for the man. At the other end of the spectrum, if you find yourself being invited to more than a few charity galas a year, worrying about physical and cyber security at your home, and asking a PR person to review your public statements, you have a lot more than f*ck-you money and all the corresponding drawbacks.

 

[thechosen1]

Honestly, I don't see a reason to speculate on how much money is "enough" because I can tell you right now I'm not there yet.

A lot of people get into these philosophical and political debates over stuff like this, when none of the people arguing are anywhere close.

Certainly very few are ever going to hit the "too much" category - that problem is a bit of a non-issue, considering how easily you can spend it, give it away, or take your eye off of it and have it evaporate.

 

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[MTF]

Honestly, I don't see a reason to speculate on how much money is "enough" because I can tell you right now I'm not there yet.

And what if you were there? Many entrepreneurs believe in this "keep hustling" mentality only to one day wake up and realize they've spent the majority of their lives working just to get "enough" even though they've already had enough for a long time. Or worse, they die, never understanding that they sacrificed their entire lives for nothing.

The article mentions this here:

Suppose the real treat in life is, say, hiking through Yosemite or spending time with good friends in New York. By Tim’s metaphor, some ultra ambitious crazy people are stopped at some gas station in the middle of nowhere trying to get enough gas so that they can drive from Yosemite to New York City without once having to re-fill. Sadly, for some of them, it takes years and years—even a lifetime—for them to figure out how to extract enough petrol from the station, and they go to their grave having lived out what Tim Ferriss would call a “deferred life plan.” They had a plan designed to make them enough money so they can eventually live the life they actually want…but they never ended up getting around to living the life they really wanted.