How Much Money Do You Need to Be Set for Life (15 Tips to Help)

If you want to know how much you need to be set for life, you will find this article very helpful.

It explains this concept of how much money we need and reveals as many as 15 powerful tips to help you.

 

Importance of Knowing How Much Money You Need to Be Set for Life

I recently read about a high school football game in which a high school athletic committee of sorts that provided oversight to the various high school games criticized a winning team for their play against their rivals.

The criticism was about how many points the winning team has scored.

The final score of the game was 106 to 0.

The winning team was criticized for un-sportsmanlike playing and running up the score.

Of course, people came down on both sides of the argument with one side saying that it indeed was poor sportsmanship while the other side of the argument was that it was competition, and you continue playing until the game is over.

The question is when is enough money enough?

In sports or life when do you ease up on the accelerator or the gas and apply the brake.

As it relates to our finances, how do you know when you have enough money or how much money do you need to be set for life?

In other words, is there a need to let up off of the financial gas pedal?

 

Personal Story

I am a glutton for personal finance books.

Whenever I have the chance to go to a bookstore, I would immediately gravitate to the personal finance book’s section and eagerly look for the latest written book from my favorite authors or browse through new books with catchy titles on how to increase or learn new things about budgeting, investing, gold and silver, etc.

Generally, the books were replete with sound advice on how to accomplish the basics of managing one’s finances, investing, tips and tricks to get out of debt, etc.

The advice was endless.

However, in retrospect, I can’t ever recall thinking about a question posed by an author on how to know when your financial portfolio when your net worth was enough.

At what point would they recommend that when an investor reaches a certain level of finances that you no longer need to worry or be aggressive in gaining more money?

I guess the thought for them as well as I was the typical response when an individual is asked how much money they need to be satisfied.

Typically, the almost flippant response is just a little bit more.

 

Your Purpose Determining How Much Money You Need to Be Set for Life

 

1. What Does That Life Look Like? 

The first question that needs to be answered in regards to how much money you need to be set for life is what does that life look like?

Is it an attitude that he or she who has the most toys or the most money wins?

Is it a matter of having sufficient resources that you can step aside from the proverbial rat race and do something with your life that you’ve always envisioned or dreamed about?

So, what is your goal or your aim in getting up each morning and working hard at what you do, and setting aside monies towards your future?

 

2. Money or Life

Another critical perspective that needs to be weighed carefully and thought through is to differentiate between the purpose of your life being the achievement of money or living life as it was meant to be lived.

The question, as it relates to money, “Is your purpose in life to work for money or make money work for you?”

Answering that question honestly will drive or determine how much money you will need to be set for life.

 

3. What Is Your Goal? 

If your goal is to work for money, then most likely that will be your continual drive in life and probably will never be satisfied even if financial goals are met or succeeded.

However, if you wish to make money work for you, what does that look like?

What sort of life do you wish to attain knowledge that you have sufficient money to realize that life’s achievement?

Another great question to ask yourself is if you could formulate the perfect day and its unfolding, what would that day look like?

Who would you be with, what would you be doing, where would you be?

Those types of questions will set the financial goal of how much you need to be set for life.

 

4. What Brings You Joy? 

Also, in making money work for you, it is important to know that money is definitely not everything in our lives; it is just a commodity.

Money enhances our life and gives us the financial freedom to do what we want to do and to be involved in those things that bring us and others joy and happiness.

Therefore, another critical question to ask is what brings you joy?

If that joyous experience involves living in a home that is adjacent to a golf course and golfing every day and that brings you joy, then that will help to inform your financial goal towards being sufficient.

However, if your joy is to simply live a quiet life, enjoying one’s grandchildren, and occasionally taking a trip or two, then that also will help to determine what financial level is sufficient or enough.

 

5. Legacy 

Another area that will help to determine what level of financial goals are being set is the matter of your legacy.

If you desire to provide an inheritance to your family through your hard work and efforts, then it would seem that this goal would motivate you in achieving an aggressive goal of financial worth.

However, if it is your philosophy that the last check that you want to write will bounce upon your demise then that also helps you to set the needed goals and objectives towards financial net worth.

 

Arriving at Your Number

Knowing the life that you wish to live, you can now begin to crunch numbers and determine how much money is sufficient.

 

6. Evaluate

In taking a serious approach to this question, it is important to get alone with yourself or with that other individual who has a financial stake in working towards these goals.

After determining what it is that you see your future life looking like, then it is important to ask the financial question of how much will it take to live that life?

A good starting point would be your current level of income and if it is a comfortable level then that may be a part of the monthly or yearly goal that you will want to continue to realize.

 

7. How Much Do I Need? 

If not satisfied with the income or the expenses, then it is important to adjust appropriately.

Other considerations to take into account would be the reality that as we grow older, there may be associated medical issues.

Therefore, the expense side of the budget may need to be increased and proportionately on the income side as well.

Also See: How Much Money Can You Make in the Stock Market.

 

8. Considerations 

Also, if there are anticipated vacations or lifestyle changes, those need to be taken into consideration as well.

For retirement purposes, a generally accepted rule of thumb is that whatever your present monthly income is that you most likely can “get by” on that amount by reducing it by 20%.

 

 

9. Formula 

Once the decision has been made as to what is the baseline of monthly income that is needed, then it is important to add or subtract the other variables that may or may not affect that foundational revenue that is anticipated.

Therefore, if part of your dream is to take one or two dream vacations throughout the year then that needs to be added to the yearly budget.

Depending upon the destination of those excursions, it may range anywhere from twenty-five hundred and upwards depending upon the vacation plan.

This should be added to your normal budget and whatever increase or expense adjustments that needed to occur.

Therefore, if an individual’s income is $4,000 a month, then their needed revenue for the year would be $48,000.

If this can be reduced by 20% that would be a reduction of $9,600.

That leaves you needing $38,400 a year to live.

If however, vacations are planned or other events separate from your current budget then those need to be added to the total revenue needed for the year.

If adding two vacations, amounting to $7,000 then your needed revenue for the year would be roughly $45,400.

It is then suggested that you divide that $45,000 by twelve months and multiply it by fifteen, to give you a buffer.

That would be the total amount of money that you would need yearly or $56,750.

Click here for a retirement calculator.

Under options, you can record other anticipated sources of revenue.

 

10. Strategy 

Once your number has been crystallized, then it is important to develop a strategy to achieve that financial goal.

The strategy should be embraced by all who have a stake in achieving this focus of having enough money to be set for life.

Therefore, the embraced strategy should be supported by all involved and each member is dedicated to the strategy.

The strategy would include based on what is needed each month, how that money will be invested, and the appropriate benchmarks determined to make sure that the plan is going as designed.

 

Working the Plan

 

11. Budget 

A critical component of achieving that goal is to modify your budget so that, in particular on the expense side of the ledger, you have set aside enough money as a savings goal to invest towards reaching that perfect number.

It also may mean that on the income side one may need to take an occasional extra job to earn income to set aside that needed amount monthly amount.

Also, on the expense side, it doesn’t hurt to cut and trim where needed so that the goal can also be achieved through added income, if necessary, and cutting expenses.

 

12. Anticipating 

As part of working towards that financial goal, it is also paramount to remember that life is not going to be smooth sailing from one point in time forward.

Life is notorious for presenting challenges and issues that sometimes can have a devastating effect on our finances.

Therefore, as part of working toward your financial plan and goal, it is also important to keep an additional focus on what could occur if the worst-case scenario arises.

Some of those worst-case scenarios could include a medical illness, loss of a job, a major repair within the household, replacement of the vehicle, etc.

It is important to not only reach your financial investment goal but also set up a goal that can be classified as a nest egg that can cover these anticipated negative events that we all may experience.

 

13. Adjusting 

Remember, that your budget and your plan in working towards having enough money is not a static plan.

It is good to revisit the plan on an ongoing basis to make sure that all of the goals are being met or are on track to being met.

Consequently, readjustments or modifications may need to be accomplished to get the plan back on track.

Remember that your plan is dynamic and not static.

 

14. Stay Focused 

Equally critical is that you stick with the plan.

This is your effort to be set for life in reaching your financial goals.

The things that may happen today or tomorrow can have direct implications for the future.

It is critical to stay the course and stay focused and if there are a few speed bumps along the way, take them in stride, accept them, and move forward.

 

15. When You Arrive

Remember to celebrate.

By this, it is meant that your self-worth and the size of your portfolio is not a measure of who you are as an individual.

When significant milestones are met, celebrate your discipline and commitment to your future by utilizing money as it was intended.

Do not be afraid to spend occasionally and simply include that in your budget so that there is no remorse or feelings of guilt because you celebrated on a splurge.

 

How Much Money You Need to Be Set for Life FAQs

 

How Much Money Would I Need to Never Work Again?

The generally accepted rule of thumb is that an individual or family should have enough money saved and invested in a diverse portfolio so that an individual would just need to draw out 4% of their portfolio to exist on a monthly and subsequently yearly basis.

The idea is that if you are invested in an average to a well-diversified portfolio, you can anticipate a return of 7% to 8%.

Therefore, drawing out 4% on that return one would not have to touch the principal.

Also See: How to Become Financially Stable… and powerful tips to help!

 

How Much Money Do I Need to Live a Comfortable Lifestyle?

The answer is dependent upon your household expenses.

A generic budget rule is that the household should set aside 50% of their monthly and annual income and devote that percentage to managing the household and all of the related expenses.

Some of those related expenses could include the rent or mortgage, insurance, utilities, etc.

The next part of the budget formula is that 30% of the budget should be set aside for what is termed discretionary expenses.

Examples of these types of expenses could include vacationing, eating out, entertainment, etc.

The remaining 20% should be set aside for one’s savings.

The average median living wage has been calculated to be in America $67,690.

 

Conclusion

You have determined that you want to focus on your finances and have sufficient financial resources that can be defined as being set for life.

You have determined what your goal in life is and have answered the important question as to whether you will continue to work hard for your money and let your money work hard for you.

You have a workable plan of action and have laid the foundation.

Now it is time to work the plan.