I’ve recently been thinking about the concept of setting a personal “savings ceiling.” In other words, figuring out how much I need to live a happy, fulfilling life, and then giving the rest away. Now, before you start thinking that I’ve lost my mind, I want to say a few things…
For starters, it’s important to recognize that everyone is different, and that you need to do what make the most sense for you. Admittedly, the idea of capping your savings is probably not for everyone. Also, even if you agree with my view that you really only need “so much money, ” your target amount will most likely differ from mine, and that’s fine.
A few months ago, J.D. Roth published an article entitled “What Next? The Third Stage of Personal Finance.” My article today was written partly in response to J.D.’s question, though I go beyond simply answering the question to propose a general financial practice.
In J.D.’s post, he said:
“Despite my increased wealth, I am not happy. I love what I do — I love writing every day and interacting with readers — but I do too much of it. I spend about 60 hours each week working on this site. I’m neglecting other parts of my life.
I’ve reached a place of financial security. My income is good. I save and invest. I don’t spend frivolously. Now I find myself in the enviable position of having to decide: Should I decrease my workload, or should I use some of my income to invest in the things that make me happy?
The entire reason I paid off my debt, increased savings, quit my job, and built a business was so that I could live a pastoral lifestyle. But I’m not living it. In fact, I’m working harder than I ever have before.
I love this job. It’s a joy and a privilege to do what I do. But I wonder: Am I burning myself out? Am I sacrificing time for money? Maybe thereÃs some middle ground. Or maybe it’s time to move to a new stage of personal finance.”
This “new stage of personal finance” is my challenge for the day.
A personal savings ceiling
In a recent video I saw, a credit expert shared this single best piece of advice for saving more money:
“Figure out why you want to save. What is your goal? What is the intention for you to save money? Once you figure that out it makes it easier to save because you have something you’re reaching towards.”
Until about six months ago, these questions had never really resonated with me. Now that I’ve set a goal of complete financial freedom, I’ve given these sorts of things a great deal of thought. What most people fail to examine, however, is the question of “How much is enough?”
The idea that it’s possible to have “enough” has led me to the concept of a personal savings ceiling. In other words, as long as I have enough to lead a happy life, why not give away the excess?
- My goal is to build a substantive nest egg, and then live off my investment income, supplemented by income from my part-time, self-paced, passion-chasing hobbies
- I am already freely giving a portion of my time and my finances to worthy causes, and I consider this sort of giving to be one of the most valuable things I do in life
Now that I’ve formulated a solid plan for getting out of debt, living frugally, and saving/investing my money, I’m well on my way to reaching my goals. Yes, I still have a long ways to go, but that hasn’t stopped me from thinking ahead and working to define how much is enough.
Give it away
Anyone who has ever given to a worthy cause knows that it truly is more blessed to give than to receive. In the many comments left by readers in response to J.D.’s article, there were around ten mentions of giving. Most of the people who advised J.D. to focus on giving were already happily giving themselves, and were thus speaking from experience.
I intend to take this advice to heart, and have thus committed to giving away not just some, but all of my excess. I also intend to give of my time. If I’m successful in achieving my goals, then I won’t have to work a 40+ hour work week, and will have free time to do as I please.
I plan to continue on my current path of giving not only my money, but also my time. If I do not have to work a 40+ hour work week I will be free to do as I please. I plan to pursue my passions, to help myself, and to help others.
What do you think of my proposal? Have I indeed lost my mind?