Question From a Reader: How Do You Know When Enough is Enough?

A couple of weeks ago I received this email from a reader named Katy:

Hi there,

So I have a question that’s been eating at me. When it comes to savings how do you know when enough is enough? How can you figure out when to relax?

Right now I’m in the process of saving as much as possible, but I find I feel stressed out about the money I have saved and worrying that I won’t have enough. That is how I came to the question of how do I know when I have enough anyway? I’m not sure what the goal I’m looking for is. I imagine other people probably wonder the same thing.


P.S. Keep up the good work, your site is incredibly helpful to us and I’ve hooked a bunch of my friends and family on it too.

It’s impossible to know when enough is enough if you have no savings goals. So, the first place to start is with setting some financial goals. Goals like:

1. An emergency fund
2. Down payment on a house
3. Future car purchase
4. Retirement
5. College funding for your kids or grandkids
6. Any other short or long-term purchase that will require significant money

Once you know what your goals are, it’s relatively easy to know if you’re on track or not to meet those goals. The exception of course is retirement, which can be tricky to figure out since it is usually decades away. Although it is far from perfect, one place you could start is with a simple retirement planning calculator I put together. Like I said, it’s not perfect, but it will give you some idea of how much you need to be saving in order to meet your retirement goal. Once you have some sort of goal, you can analyze your progress on a yearly basis to see whether or not you’re on track to meet that goal and make adjustments as necessary.

What about you? How do you know when enough is enough? I’m sure this reader would appreciate your input.

6 thoughts on “Question From a Reader: How Do You Know When Enough is Enough?”

  1. JLP: I agree with your list of major savings goals. Regarding retirement, however, I would put that at #2 on the list. Why? Because after much study and consideration, I have become a believer in the concept of consumption smoothing as a bedrock financial planning principle. This means that savings goals and levels should be based on maintaining a relatively stable standard of living pre- and post-retirement. This, however renders most conventional “retirement calculators” overly simplistic, causing both undersaving and oversaving in many situations. There is a lot more to this, obviously. I would encourage readers to seek out more resources on consumption smoothing before trying to answer the “how much is enough” question for themselves.

  2. I see a sea of economic uncertainty – enough to say that under current economic uncertainty, no amount is enough.

    As millions of Americans have recently learned, your personal economic position can go south in a hurry. Therefore hoarding is now a prodent defensive strategy.

  3. I think reading Your Money or Your Life may be a great suggestion for the reader. I’m over halfway through and it definitely brings out an internal dialogue with these questions. One of the unanswerable questions it brings up is just that…how do you know when enough is enough. There isn’t even a financial word to describe the state of balance between working your way up and luxurious spending. I think the valuable lesson learned is to enjoy financial freedom you need to become psychoemotionally free from money as well. When you have a decent amount of money coming in from passive sources to where you can live a decent life, you have money if something breaks down, and you don’t feel compelled to spend for entertainment, what else do you want…for some people this might mean $1,000,000, for others it might $100,000,000…the key is looking at a type of lifestyle you wanna live and figuring out how much money it’s going to take to support that lifestyle, no more no less.

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