When people send me email, they usually have very specific questions about their very specific circumstances. “What should I do about my ailing parents?” “Should I fund my kids’ college first or put money aside for retirement?” “How should I save for a down payment?”
Recently, though, a Money Boss reader named Mark sent me a simple hypothetical question. Here’s the entirety of his email:
If you had $10,000,000 (in cash) at the age of 60, would you say that you would never have to worry about money again?
At first glance, there’s no much to this question. All it requires is a basic “yes” or “no” answer. But I think there’s a lot of depth beneath the surface here.
You see, I find that folks tend to fall into one of two camps: people who worry about money and people who don’t. I’m generalizing, I know, and really there’s more of a continuum than two binary opposites, but roughly speaking this tends to be true. Some people worry about money no matter how much they have. Others never worry, even if they have nothing.
You can see this division on early retirement blogs and forums. There are folks who have maybe $100,000 saved and feel completely at ease. Others have millions in the bank but worry that won’t be enough for the future.
Plus, there are different degrees of worry.
In another recent email conversation, MB reader Travis wrote:
I look at retirement this way: It’s a balancing act between not working too long on one hand but not running out of money on the other hand. It’s easy to never run out of money — work until you drop dead!! It’s also easy to “retire” early if you accept a really high probability of running out of cash. Let’s say you have a family of five, and you think $2 million will probably be enough to retire on, but feel really confident that $3 million will definitely be enough. You can work extra years to earn that extra million or risk it and try for $2 million.
That extra million is effectively insurance, and the “premium” you’re paying for the insurance is years of your life spent at work to earn money you may not ultimately need. I think a lot of people “over-insure” in the sense that they work too long. The nice thing is, jobs aren’t going anywhere. If you quit your job at $2 million, and find in ten years you need more money, you can always go back to work. Of course, the converse isn’t true…if you work too much, you can never get the time you wasted in the cubicle back.
As I always say, this financial stuff would be so much easier if we just knew the exact date we were going to die. With that single piece of knowledge, we could make much better decisions with our money. Instead, there’s a constant balancing act between today and tomorrow. And people tend to worry about their financial futures even when they have plenty of money.
According to my six stages of financial freedom, the only point at which money is never an issue is after you’ve achieved abundance — when you have “enough and then some”. At this stage, your passive income from all sources grants you the freedom to do anything you want for the rest of your life. But few people ever reach this stage. More than 99.9% of the human population has less money…and more worries.
Even at the fifth stage of financial freedom — financial independence — you probably worry a little about money. Your investment income is enough to support your current standard of living, and that’s great, but what if something goes wrong? Or what if you decide that you want more?
That’s where I am: With about $1.5 million in net worth at age 47, my savings should support my current lifestyle indefinitely as long as there are no major economic upheavals. But if the stock market crashes and never recovers, I’m screwed. If hyperinflation hits the U.S., I’m screwed. If I suffer a catastrophic illness, I’m screwed. Although these things are unlikely, they are possible. (Especially that last one.) As a result, there’s always a tiny bit of worry in the back of my mind.
But if I had $10 million at the age of sixty? What then?
I think that’d put me pretty darn close to the abundance stage of financial freedom. That’d be enough money (late enough in life) that money probably wouldn’t be a concern ever again.
Still, we’ve all heard stories of sports stars or celebrities or lottery winners who have wasted vast fortunes. For these folks, even $10 million isn’t enough to keep them from worrying about money. (The lesson, I think, is that you can’t outearn dumb spending.) So, what’s true in my case isn’t true for everyone.
What do you think? If you had $10 million in cash at age sixty, do you think you’d worry about money? If not, how much would you need? Or do you think you’ll always be concerned with your finances on some level?