How Much is Enough Part B

In Part A of this blog, we began to explore the question, “How much is enough?”We looked at the importance of defining a dollar number as a goal you drive toward and a philosophy that guides your accumulation and expenditure of wealth. If you haven’t had a chance to read or listen to that blog, I invite you to start here.

In Part A, I posed the question: “As you continue to accumulate assets for personal use, how do you determine appropriate caps?”

The idea of setting a cap and leaving it there is not something many entrepreneurs can live with. It pushes against who they are and their innate drive to build and succeed. I am the same. Therefore, setting a cap helped me to avoid going beyond what we had available. Kathy and I live off a percentage of what we make and have based our personal budget on this percentage. Each year, review what is a reasonable amount to run a home and maintain our lifestyle. 

As the business continued to grow, instead of maintaining or increasing our percentage, we decreased it. The world dictates that the more you make, the more you deserve to spend. However, because of our philosophy, we went in the opposite direction. Even though our net dollars grew, we kept reducing our percentage. We ultimately maintained a comfortable lifestyle but never had the money in our personal budget to buy yachts or planes, as is often expected.

The idea of determining how much is enough is not an easy concept. Frank J. Hannah, in his paper, What Your Money Means, offers a useful approach to defining this by providing the four different categories that help determine one’s financial situation. They are bare necessities, genuine needs, profession-related needs, and beneficial goods. 

BARE NECESSITIES

To establish how much money is enough for our bare necessities, we look at how much money we need to keep ourselves and our dependents alive with no excess left over.

GENUINE NEEDS

These are the things you need to develop. They include physical, moral, intellectual, and spiritual needs. Someone who does not have enough to pay for their own genuine needs, as well as those of their dependents, does not have enough money.

PROFESSION-RELATED NEEDS

These are needs that are required to fulfill your profession. These needs will vary from person to person.

BENEFICIAL GOODS

Things that are good for you. If you don’t have it, it won’t necessarily prevent you from becoming who you’re meant to be physically, mentally, and spiritually. These are things that may improve you and leave you better equipped but are not essential to your development. Without them, it may be harder, but it won’t stop you from developing fully into the person you are meant to be.

A question to ask to distinguish genuine needs from beneficial needs is, “Would it be morally permissible to refuse this if someone offered it for free?” If it can justifiably be refused and is optional rather than obligatory, it’s not a genuine need and is only a beneficial good.

Generally, you have enough when you are able to cover your own bare necessities as well as those of your dependents, your genuine needs plus those of your dependents, your own profession-related needs, and beneficial goods for you and your dependents. Any money that remains can be defined as non-essential wealth

Non-essential wealth should also be carefully planned for. If not managed well, it can create an illusion of being invulnerable or even above the law. If left in the hands of younger people, non-essential wealth can potentially impoverish both humility and gratitude in a person’s character and keep charity and wisdom from developing within them. I share more on how to effectively plan for non-essential wealth in my series on Estate Planning.

UNDERSTANDING THE HALF-TIME CONCEPT

Bob Bufford’s book Half-Time ties in nicely to our question of, “How much is enough?”The premise of the book looks at the second half of life. Often, the first half is about acquiring, accumulating, building, and growing, whereas the second half of life should look different as one moves from having success to significance. 

In his book, Bufford breaks down five main areas that someone in the second half of their life should be looking to impact. These five areas are your marriage, family, career, finances, and ministry (serving others with your gifts). 

If you don’t determine what the second half of your life will look like in the important areas or don’t have a vision for it, you run the risk of not arriving at all, not knowing when you have arrived, or not appreciating it when you do. 

ACTION STEPS

Take a look at the handout titled Your Halftime Life Chart. It breaks down the five categories listed above. For each category, write a brief description of what you would envision for your second half. It is a useful exercise in dreaming and visioning, and you may be surprised at the positive goals you have.

Take your time with this exercise and look again at what you have captured. How do you feel about each category? Does it clearly describe what you envision for your future? Upon realizing each of them, do you anticipate a sense of fulfillment based on that advanced state?

To determine where you currently are, refer to the second exercise, Your Half-Time Lifeline Chart, on the same handout. 

Remember, in each of these categories, there won’t be a moment where you instantly shift from the first half to the second half. It will be a gradual period of transition where you steadily shift toward your desired goal.