When I was younger, I worked at a consultancy with a friend who was a little older and wiser than me.
One day he got to talking about his “number” – what it would take for him to be able to walk away from work and retire.
This gentleman’s number, at the time (circa 1995), was $2 million – if he could just get that, he’d be done. Out. Retired. I remembered it well because, being the young and inexperienced lad that I was, I had never conceived of my “number” before, and I also couldn’t figure how someone would ever actually save up $2 million without a major windfall. It made an impression.
What’s Your Number, Now
I stayed in touch with him over the years, and in the early 2000’s, he was working at the lucrative end of investment management. I knew a little about the firm, and what folks there were paid. I mentioned casually, “That’s awesome – you have to be really close to hanging it up for good!” He was shocked at my comment, and said he was a loooooong way from retiring.
Now confused, but not wanting to scare him with my crystal clear memory of his old number, I asked, how much did he think he’d need to retire? What was his number, now?
The answer: $20 million
This guy hadn’t developed a lavish drug habit, or taken a mistress or two, or adopted 600 pet tigers. He was married to the same lovely wife with the same lovely kids. Nothing major had changed, except he had starting making a lot more money, and he had started hanging out with people who were making even more money.
I imagine that once his old goal came in sight, he probably thought: “My goodness, I’m going to blow past that with no problem, and think of all the extra money I can make! I’d be stupid to walk away from more high-earning years. My old goal was wrong and misguided – I’m going to update it with something more appropriate to the life that I am (and my peers most certainly are…) accustomed to.”
The problem with this approach is that many of us keep making more money throughout our careers, and with that, we raise our spending, our standard of living, and the benchmark (our peers) to which we compare ourselves.
My Number is Infinity Plus One
My friend’s number was not a goal, but more like a carrot dangling in front of him on a stick. He was never going to catch it. As long as he kept moving up, his number would too. The ridiculous part of it was that he was holding the stick himself.
If you don’t set your number early, and have enough discipline to stick to it, I can tell you your real number: infinity. No matter how hard you work, you’ll never get closer to an early retirement. Instead of working to build a pile of assets as fast as possible, you’re seeing how much in earnings you can cram into your working years. You’ll keep working to 65 or thereabouts, just because that’s what one does. At that point, the game clock will run out, and your final number will be revealed.
It’s All Relative
Unless checked by a disciplined mind, much of our happiness depends on a relative comparison of ourselves to our peers. This was probably a handy feature thousands of years ago, because the competition made it easy to stay focused on goals critical to our survival. It also probably wasn’t the source of as much stress and angst back then – after all, a fellow who caught one rabbit wasn’t going to look across the cave and see a high roller sitting on a billion rabbits. The wild leverage that leads to huge disparities in wealth didn’t exist back then.
But it does now. And since people tend to look across and up when identifying their peers, it explains why a multi-millionaire can be miserable (a Gulfstream 4? All my friends have a G6!!!) while a hunter-gatherer with very little can be happier (I’ve got a full belly, nice status in my group, and that young lady likes the cut of my jib) than you or me.
Once you get to a basic level of wealth, though, this relative comparison to our peers is a pretty useless trait. Nowadays, a person of modest means in a rich country like the United States can have everything a human being needs for happiness. That’s not to say they’re happy, of course, it’s just they have everything they need.
I’ve Got Your Number
I can’t calculate your number for you (we’ll discuss various approaches and key assumptions another day) but I can tell you precisely what it is: Enough
Enough to feed, clothe, and shelter you and yours. Enough to spend time and enjoy life with your friends and family. Enough to take care of emergencies when they arise. Beyond that, you’re just running up the score, and you’re probably not truly happy while doing it.
Think through what Enough means to you. What makes you most happy, and what is critical for you to live a happy life. Describe that life in full – what you do with your days, whom do you spend them with, and what must you have for those days to be rich and fulfilling. Starting there, rather than blindly putting numbers into a retirement calculator or multiplying your current salary, is the first step to determining your own number.
If you find that Enough includes some wildly high-end things, please consider how they got there. If life simply isn’t worth living without a high-end Mercedes, or a second home, or a pet tiger, then by all means keep them on your list – you may still have long working years ahead of you, but I wish you the best of luck and thank you for supporting our economy.
But if you got to those things being “needs” through an arms race of envy with your peers, strike them off. They’re not making you happy, and life can still be wonderful without them. You’ll get to your number much faster, and once you’ve hit your number and early retirement, envying other people won’t be your problem anymore.
We’re not here to cram as much earnings into our “working years” as possible; we’re here to cram as much living into our lives as we can. Your number should be based on that.
One of my favorite stories on this theme is The Fisherman and His Wife by The Brothers Grimm. It highlights this all-too-human trait – we can’t quit when we’re ahead, and our greed and desire to keep escalating our “number” often ends badly. I’d like to think I would’ve stopped at the cottage 🙂