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How To Manage Having Enough

Striking a balance between continuing to save and spending money.

The Calibrating Capital blog took an in depth look at the concept of enough as in having enough financially. The author isolated three levels of enough; essential (roof and food), established (achieving your financial planning number) and emotional which here meant being content and avoiding envy. Based on the pictures of the author and his family, he appears to be quite young and so the way in which someone who is 35 or 40 might define enough and then act on it might be different for someone in their 50’s or 60’s.

As with other aspects of financial planning, having enough is a state that needs to be managed. If you have enough, that’s great, but even with enough it only takes a couple of behavioral mistakes undue that outcome.

An undramatic example of having enough is that maybe you’re now 50 and you’ve benefitted from the glorious run in stocks since the March 2009 low having not panicked back then and continually adding to your savings with each paycheck and you’ve hit your number. Maybe you were targeting $1.1 million by age 65 and you have that much already at 50.

If in this scenario you plan to continue working to the same 65 that you mapped out in 2009 then you really need to focus on not screwing it up. A normal bear market will not screw anything up. You’ve been through a few of those and you know how they work. The market goes down a lot, scares a lot of people as somehow being different (it isn’t) and then it recovers to make a new high. And while the only variable is how long that all takes, it is a good bet that the recovery to new highs will take a lot less time than 15 years until you’re 65. But even if a new high takes a long time you’re still contributing with each paycheck.

Sequence of return risk could be an obstacle but not until you’re very close to retiring and that is easily mitigated by setting aside a couple of years’ worth of income needs in cash to better ride out a bear market that starts two months after you retire.

Greed however is something that could really screw up having enough as touched on by Calibrating Capital. Once the meme-stock era has ended there will be stories about investors who speculated with way too much at the top resulting in permanently impairing their capital. If you have $1 million and you lose $500,000 speculating on meme stocks or Doge or whatever the next one is then you’ve got a real problem. If you blow $10,000 or $20,000 you might feel silly but with no long-lasting problem.

Envy/aspiration is another way to screw up having enough that Calibrating Capital also mentioned. The picture in the header of this post is from an eBay listing for a 1966 Ford GT that is for sale for $139,000. I can’t tell you how cool I think these are. To me they are like sculptures, as are older motorcycles and trophy trucks. If I knew where there was a museum of them, I could spend hours taking pictures but I’ve never for a second had any interest in trying to buy something like this. At some price point, a purchase of envy/aspiration becomes a problem. In our $1.1 million scenario. Spending $5000 on a baseball card (something else I have no interest in doing) is probably frivolous but not by itself plan alteringly stupid but a six-figure vintage race car probably is.

Calibrating Capital talked about being tempted by envy/aspiration which I suspect is very common. My wife teases me about being a robot. I’ve disclosed before that when I was 50, my doctor said I was pre-diabetic. The day he told me, it took me ten minutes to find the role carbohydrates play here and that cutting them would probably help. I started that day and haven’t looked back. I often say cutting carbs is simple, just eat less of them but that it is not necessarily easy…for me it was easy. It took no time at all, I just stopped that day hence I am a robot. It is the same for me with envy/aspiration, I don’t have it. Recognize in yourself whether you are or are not susceptible to this and if so, how you can overcome it.

As I’ve gotten older, I’ve noticed that I have become more willing to, I’ll call it invest, you might call it spend, money on things that will make our lives easier. The biggest and simplest example is putting our house on solar last year. The system cost $28,000, really though $20,000 factoring tax credits. If we’d gotten a regular propane generator we would have spend about $15,000. A generator is pretty essential up here, we were lax in not having a real generator (we have a small Honda portable) all this time. The extra $5000 is the cost of peace of mind for not having to worry about running out of propane during a week long outage in the winter if the propane delivery guy can’t get up our hill in the snow (this has been the case before). While I don’t think the extra $5000 was frivolous, it is valid to think it is but again, I find in my 50’s I am willing to spend a little more on making our life easier or better.

We live next to a 15 acre lot that hasn’t been developed which means no people there. Last summer the guy who bought it 40 years ago decided to sell. We bought the three acres nearest us as a buffer. It makes our life better not having people there. We spent $45,000 which turned out to be a steal. Our first assessment on the property was for almost double what we paid. This might have been frivolous, we might have simply gotten lucky but there is immense value to us in not seeing a new house go up in line of sight of our rental house.

I think I’ve figured out a way to articulate striking a balance between spending money in this manner versus not impairing our financial plan. I have X amount saved. You have X amount saved. If you’re lucky enough to be a little ahead of the game, we are but not so far ahead that we couldn’t still screw it up, how are ahead are you? Are you like our 50-year-old, you already have the amount you hope to have by 65? I’ve been able to quantify a number below which I am not willing to spend through in the name of convenience.

I’m not talking about paying for life-saving medical treatment but for example we’ve very superficially considered getting some sort of tractor to plow our road in the winter and grade it in dry conditions. We have someone come a couple of times a year to grade it but in the winter, the plow on my ATV is not enough for a big storm. We had a foot and a half fall in a very short time on January 25th. At the end of that week a friend came with his front loader to clear our road. It took him five hours. That same piece of equipment with a plow on the front and going downhill would have been less than an hour. Clearing the road is a priority for our rental and my ability to respond to fire department calls in a timely fashion.

The tradeoff of what you have versus the number you won’t go below is up to you, it will be different for everyone. Our 50 year old with $1.1 million, should he not go below $900,000? Should he not go below $800,000 or $1 million? I can’t really say what someone else should do but I would encourage anyone in this situation to figure this out for themselves. “I can spend $X and not impair my financial plan in the slightest.”