Jagoinvestor

April 29, 2019

How much money is enough for you?

Do you know how much money is there in this world?

It’s $36.8 trillion (or 2569 Lakh Crores)

What if you get all this money? Imagine you wake up one day and your bank balance shows 2569 Lakh Crores. However, you also find that you are the only person left on this earth while every other person is missing.

All the malls, all the shops, all the movie theaters, all the entertainment parks, all the jewelry shops, all the real estate, all the fruits and restaurants and everything you can imagine is intact. It’s all available there.

how much money is enough

 

So what can you do with all that money with you?

The answer is NOTHING.

You can’t do anything, because you can only exchange money with something and if you already have everything available on earth lying there and already available to you, the money just loses its role completely. That 2569 Lakh Crores with you is nothing but trash.

Coming back to our life, at the start we do not have much and money is something which can help us get access to lots of things in life. However, we move from having “Nothing” to “Something” to “Good enough” to “A lot” and then slowly “Almost everything we wanted”

In this transition over years, the importance of money comes down in our life. We already have most of the things we can wish for. You already have a house, a car, nice furniture, a second home, great vacations, eating out, etc. etc.

The Race of Earning Money

While money is very important in life, we are conditioned to think from our childhood that money is the solution to everything in life. We are subconsciously in this race of earning more and more money without setting a target. More is always better it seems.

Note that.

  • There is a limited amount of food you can eat in this world
  • There is a limited number of vacations you will take
  • There is a limited number of houses you can live in
  • There is a limited number of cars you can drive
  • There is a limited number of things you need to have a great life

How much money do you need?

5 crores, 10 crores, 50 crores?

I strongly suggest that you need to target a number or a range after careful thought and then let that number define your speed. There has to be a number which is ENOUGH for you.

You will be able to lead a very good, desired lifestyle in that much money.

Trust me you will eat the same thing and dress quite in the same manner if you have 10 crores or 50 crores. Rakesh Jhunjunwala or Mukesh Ambani eats the same thing as you do.

running after money

It should not happen that you keep acquiring wealth in life, and later it turns out to be nothing more than trash.

The Dalai Lama when asked, what surprised him most about humanity, he said:

Man.
Because he sacrifices his health in order to make money.
Then he sacrifices money to recuperate his health.
And then he is so anxious about the future that he does not enjoy the present;
the result being that he does not live in the present or the future;
he lives as if he is never going to die, and then dies having never really lived.”

 

So what is the role of money in your life?

You need to define how much money you are targeting to acquire in your life. How much money is enough for you? Are you in a mindless race, acquiring all the money you can imagine and later, think where did my 60 yrs go? Or you are going to define the range which you want to acquire?

Something like “10 crores” is good enough for me once I retire. This is important because whatever time you give to earn money can potentially go somewhere else.

  • If you are working later hours for money, and coming home at 11:00 pm at night, then it means that you can’t wake up early and go for an exercise.
  • If you are working in some other city away from your family to earn a better income, it means you can’t spend that much time with your loved ones
  • If you are away from home during festivals so that you can earn/work extra, that means you are not going to spend that particular time with your family.
  • If you are not attending a wedding for your close friend, because you don’t want to lose those 6 days of a pay cut, that means that you will have that money, but then you will not have that memory of your friend’s wedding
  • If you are not taking your family to a nice vacation, then you will have that money in the bank, but you won’t have something to talk about years later when your kids grow.

Just like these examples above, there are multiple instances in life, where we have to decide between using our money and exchanging it with something.

Your Target = 1000 times your monthly Expenses

A simple calculation tells us that when a person accumulates around 400-500 times of their monthly expenses, they have enough to last for another 30 yrs.

This means that if you have monthly expenses of Rs 1 lacs per month, then 4-5 crores is a reasonable corpus for you. Let’s take 1000 times? So for a person, 10 crores if enough to last his lifetime (a very high-level calculation tells us that). In the same way, you should know what amount you are targeting for yourself.

So make sure you are clear about the importance of money in your life. While we have seen that a lot of people are not working hard enough to achieve all their financial goals targets, we see that a lot of people are putting too much emphasis on earning money and spending all their limited time into the race of earning money. While earning money is not bad in itself, make sure you know how much you need in life?

Question for you

I would like to know from you – “How far are you from your target?”. Do you think money has a bigger role to play in our happiness or a smaller role? Please comment below

Note: Note that I am not saying money is not important. I understand and acknowledge that money brings peace of mind, a sense of security and makes us powerful in away. I am only trying to give a perspective about the role of money in life. I am not saying that earning more money is bad or good. So in case you have hate comment, please read the article once again fully and point of the para or line which you want to debate on.

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113 Comments
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Sanket
Sanket
20 days ago

Great Article.
What if someone has just 250 times of Monthly expenses? Can he/she still take the plunge, assuming a 12% return can be generated from investing (12% of 250 = 30 months’ expenses, while withdrawal is only 12).

Do you know of people who have done that ?

Rushabh
Rushabh
1 year ago

1000X agreed but where should this money be that needs specification. Do you mean having 1000X in a bank account or fixed deposit or stocks where? Again if you get 1000x you want money to be working for you so how do you calculate how much you want on monthly basis?

Ravindra
Ravindra
1 year ago

This needs to be taught in schools from their childhood ….

Great Article …Thank you..

Gunesh Apte
Gunesh Apte
2 years ago

Hello,
I liked the article and message.
I assume that, 1000 times of the monthly expenses are considered including the inflation over next 20-30 years after retirement. Then yes, it looks a good number, and should be sufficient.
Good article and logical thoughts.

Dan
Dan
Reply to  Jagoinvestor
2 years ago

I think it also depends on the location and community you live in. For example, I live in a remote indigenous village farming community. We have free water, and free food growing in nature or in our farms. We use money for things like used clothes (cheaper), medicine if needed, and for building a house if you don’t have one. And also electricity, but that bill is around the equivalent of $4 USD per month. Old people don’t really “retire” here, they keep active to not slow down, and they stay with their families. It’s certainly better than the rat race in my opinion.

Ramsh
Ramsh
3 years ago

An eye-opening article! Thanks to the writer. Earning money may seem difficult, but that is not always the case in spending it. Keeping control over the income ensures financial stability in the long run.

Bob
Bob
3 years ago

So according to this, I will need 6 million dollars. Ridiculous

HS
HS
4 years ago

Hi,

I read this article only now and commend you for it. It is thought provoking for most of us who slog for 5-6 days a week not having the time to think the future through completely. The immediate thought that came to my mind when i read this piece is that i need to define the difference between need and greed for me. If i calculate on the basis of need, perhaps 300 – 500 times corpus will be enough. The moment i get into the greed zone (I also want this) the requirement of the corpus will keep going up.

Again, appreciate the article.

Rajesh Shekar
Rajesh Shekar
5 years ago

I really appreciate the article, All are working hard to an unknown goal of wealth accumulation and not sure of how much actually needed, the thumb rule mentioned is quite simple to understand and make it clear where do I stand.

Anuradha Singh
Anuradha Singh
Admin
Reply to  Rajesh Shekar
4 years ago

Hello Mr. Rajesh, Thank You for appreciating.

Anuradha

Bala V
Bala V
5 years ago

Great Article as it makes one to see the “Accumulation of Money” in a very different perspective of “Real Needs”.

Most of the articles and Calculators take in to account various factors like Inflation over years, Diminishing return on Corpus, Increased medical expenses over years, etc etc

But finally they most often come with a bloated corpus for Financial Freedom at 60, making people simply amass I think this thumb rule of 400 to 500 times the Monthly Expenses as Corpus itself is an excellent one as it takes care of all the above factors indirectly. In fact it provides a safety margin too as 300 times itself will be good enough

Hope this article will make people pause and think for a moment

“Do I need to run in this rat race or I can call it off?”

and live life more fully.

A Ashok
A Ashok
5 years ago

Very much informative. It is a kind of eye opener and clarifies a lot of issues especially for retirement planning and fixing a financial goal. All the points discussed are genuine. Thank you for sharing my friend.

Raghu
Raghu
5 years ago

When you say monthly expenditure does it include the current outgoing EMIs aswell?

Nilesh
Nilesh
Reply to  Raghu
5 years ago

Beautifully put.
Thing is we should reach our full potential (buy financially as well as career wise), Leo what you need and donate the remaining to the needy.

Manoj
Manoj
5 years ago

Interesting post. We should set a limit for everything including making money. 1000 times monthly expenses is more than enough to put a stopping point. Well said.

Kumaraditya Sarkar
Kumaraditya Sarkar
5 years ago

Like Chatur in 3 Idiots, we are all chasing success. Instead, if we chase excellence, success will naturally follow. If we try to excel in whatever we do and start finding meaning in our daily jobs, we would excel in whatever we do. Money will follow, and at the end of our lives we would not feel that we have lived in vain.

Sambaran Mitra
Sambaran Mitra
5 years ago

Can you please show the math which explains that 400-500 times monthly expenditure is good for 30 years?
Can you please show the math which explains that 1000 times monthly expenditure is good for a lifetime?

Please ignore if the calculation is a part of Jagoinvestor trade secret.
I have been a fan of your writings since you started and cannot thank you enough for your blogs.

Sambaran Mitra
Sambaran Mitra
Reply to  Jagoinvestor
5 years ago

Thanks a lot for your detailed reply Manish.
In your reply to my question, is the 300 a typo in your penultimate paragraph? Should the motto be reaching 500 times (instead of 300)? You just showed that 300-times-monthly-expenditure is not enough (assuming 8%-inflation and 10%-return). The money finishes in 34 years.

GuruBox
GuruBox
5 years ago

Excellent..Eye opening article

gspal
gspal
5 years ago

Both, my wife and myself, are senior retired citizens with no more medical / accidental insurance LIC endowment policies have matured and gone into our bank accounts. Bank balance is getting depleted over the years to cover our expenses of daily living. A year later daughter would be working in another city and we need to provide some money to her to cover her aged parents medical insurance, rental, etc. I estimate needing Rs 5 lacs per annum. An inheritance is in the pipeline of about 2.5 cr. I believe to invest the same in low risk cumulative and non-cumulative govt/RBI securities and bonds. After IL&S crash, etc. I don’t want to invest in stocks and mutual funds. Quite a headache. Fixed deposits in PSU banks provide lower interest than govt/RBI securities and they are at high risk because such banks have very high debts. Any eyeopener advice?

Gurmeet
Gurmeet
Reply to  Jagoinvestor
5 years ago

It is a query to u shared with ur readers where I have given my situation as an example

Pradeep
Pradeep
5 years ago

Is it possible to share this article to our humble politicians?

Senthil Balaji
Senthil Balaji
5 years ago

It’s really a good article… we need a stop point. But considering inflation, 1000 times of current monthly expense may not be sufficient…

Hitesh
Hitesh
5 years ago

It was a nice eyeopener about living in present and spending !

But, at the same time, the figure 1000 times of monthly expenditure needs to be kept at retirement – seemed huge and it may not be achieved, by many, with their current profession… In order to achieve 1000 times, they might have to stretch too much and that will put them in a situation you’ve described in your earlier para (distant living, not spending time with family, etc.)….

Ultimately, through this article, the reader’s might have got confused ! Whether to live in present without thinking much about Future? Or, to work/over-work for 1000 times monthly expenditure! Because, for many both together seems distant dream…

This is solely my point of view.

nikhil Bhandare
nikhil Bhandare
Reply to  Jagoinvestor
2 years ago

cool

R
R
5 years ago

1000 times at which stage of your life Manish?

Retiring @ 40 with 1000 times the monthly expense is different than @ 60 years?

R
R
Reply to  Jagoinvestor
5 years ago

Thanks for your time Manish!