For a few dollars more

If shortage of money is one of the factors that can contribute to our resentment of situations we find ourselves in, is there a quantum of money that could for the most part banish such instances? How much money do we really need to not have it impinge on the minutiae of daily life? How comfortable, financially, does one need to be to not have to think about the mundane daily stuff that might cause the dissatisfaction that comes from making compromises?

A financially successful person I met recently said something that seemed contentious at first, “If you are engrossed in making money that you do not have a spending plan for, your activity is a waste of life.”  Wait. Waste of life? Seemed a trifle strong, but the more I think about it, the more I find myself agreeing with it. What is the rat race after all, if not working hard at a job we don’t like to buy things we don’t need, to impress people we don’t really care about, or a yearning for a bigger house, a bigger car, and a bigger bank account and the bigger designation that it takes to get us there?

I am not condemning ambition here. There is merit to wanting to improve one’s lot in life. A number of people in our parents’ generation, mine included, have had to work hard to climb out of the relative poverty of their childhood into the abundance they have today. A certain drive was crucial to success. Being fatalistic was not going to get them there. These examples are not, in fact, contradictions to my friend’s hypothesis. Our parents had a clear plan for the money they were making. They wanted their families to live in homes with running water. Their children would have the benefit of education in a school better than the village school they themselves went to. Their children were not going to use hand-me-down books or clothes.

If the primary driver for you getting out of bedding and going to work, after your home and car and your children’s education is paid for, is not clear to you, then you are victim to the rat-race and the inevitable mid-life crisis that follows. Been there, done that.

So how much money do we need after the house and car and education and a rainy-day fund has been arranged for? The spreadsheet for this part is simple. Add up the amounts you need for your monthly expenses, the groceries, utility bills, fuel. Multiply by 12 to get to the annual figure. Add in the amount you need for eating out. Add the amounts required to buy stuff that you have planned to buy this year. If you need a new refrigerator because your old one has copped it, sure add that in, but you might want to reconsider if you feel you really need the new Sub-zero 48 series  because your colleague just got one. Add in the amount you plan to spend on your holiday. 

You should now have a good annual number. If your annual post-tax income comfortably exceeds this amount you can curl your money-moustache. If it doesn’t add up, you might want to think about the size of refrigerator you really need without feeling that you have made a compromise. Better yet, you can ask yourself, “What am I going to do about getting there?”

Remember, this is not a post about how to be frugal, only a post about how to plan to spend your money before you step onto the tread-mill. If you are reading this before you have hit your mid-life crisis i.e. before your home and car have been paid for, you might want to take some time to make some decisions now. What is the kind of home you wish to live in? What kind of car do you need to own to check that item off your hankering list? What things in life do you aspire to? These decisions will provide a target to work for.

Those who say they will figure this out as they go run the risk of ending up chasing a moving target. The dream floats out there on the horizon like a mirage that maintains its distance from you. And it gets worse. You are on the figurative treadmill, running hard on the same spot.