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What’s Your “Enough” Number?

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What’s Your “Enough” Number?

Do you remember the ING commercials that asked consumers: What’s your number?

The idea was that everyone has a “number” that defines how much they need to retire. While it’s absolutely true that you need to set clear retirement savings goals for yourself, it’s also true that you have a “number” right now as a working professional.

That’s right, in this stage of your life, you have an “enough” number. That number defines the total income you need in order to meet your basic needs, reach your goals, and enjoy life.

It’s key to define what your “enough” number is, and how that goal aligns with your personal and professional priorities. When you have financial goals that are actually tied into your lifestyle goals, you’ll be able to start working with your “why” in mind.

Defining “Enough”

Too often, people fall into the trap of setting arbitrary salary goals for themselves. While it may sound amazing to have a $100,000 salary or to run a million-dollar business, you have to ask yourself whether those numbers will actually move you toward the life you want to build.

Sometimes, the arbitrary financial goals you set for yourself are coming from a place of vanity. For example, a seven-figure business may sound better to you than a business that grosses $300,000-400,000 each year, but do you actually need that much revenue to support yourself and your team?

If you’re a W2 employee, it may feel better to have a $100,000 salary, but will that income be enough to move you toward your goals? You may find your “enough” number is actually more or less depending on your unique vision for your life.

In order to calculate your “enough” number, start by reflecting on your goals and priorities both during this season of life and in your future. Prior to setting these priorities, it can be helpful to do a values check-in. Jot down the 4-6 core values you live your life by. Not sure where to start? Take five minutes to run through a free program like Life Values Inventory to determine what you value most. You can also look at a longer list of values (like this one) and pick the ones that stand out to you.

You may find that you value:

  • Family
  • Travel
  • Education
  • Giving

With those values in mind, you can start to clarify your priorities and set clear financial goals that support them. Looking at the values list above, you may find that your priorities are:

  • Having a job that allows you to spend more time with your family.
  • Having flexibility to travel once a year minimum both now and in the future.
  • Earning enough income to successfully send your kids to college debt-free, and to go back to school yourself to earn your Masters.
  • Being able to donate to charity, or support family members in need, as part of your annual financial plan.

Once you prioritize your goals, you know what “enough” looks like, and you can work backward to determine your “enough” number.

Determining Your “Enough” Number

Wondering how to create a clear income goal based on your priorities? Start by adding dollar values to the priorities you’ve already set. Carrying on our example, you might say:

  • Having the flexibility to travel at least once a year both now and in the future. $6,000/year for a big trip for your whole family now through retirement.
  • Earning enough income to successfully send your kids to college debt-free, and to go back to school yourself to earn your Masters. $60,000 for each of your kids in the next 5-15 years (depending on when they graduate high school), and $40,000 for you to earn your masters in the next 5 years.
  • Being able to donate to charity, or support family members in need, as part of your annual financial plan. $5,000 per year dedicated to charitable donations. 

There are, of course, other ways to achieve these financial goals beyond just setting a salary you want to achieve. For example, your employer may be able to cover the cost of your continuing education or offer a charitable matching program that could increase the impact of your giving. Given these possible options, determine how much your goals will truly cost on an annual basis. Then, add those figures to your other financial goals (like retirement savings or debt repayment), and current living expenses. Your equation should look like this:

(Annual Priorities Costs) + (Annual Living Expenses) + (Annual Emergency/Retirement Savings + Debt Obligations) = Your “Enough” Number

Sometimes, this number may be more than you expected. Other times, you might find that your current salary is actually more than enough. Let’s look at an example:

Annual priorities: $20,000/year

Annual living expenses (including taxes): $70,000/year

Annual emergency/retirement/debt obligations: $30,000

Your “enough” number would be:

$20,000 + $70,000 + $30,000 = $120,000

If your salary or income is currently $120,000, you’re on the mark! If you’re lower, you’ll want to aim to increase your earning potential.

How Does Your “Enough” Impact Retirement Savings?

Are some of your priorities going to impact the amount you spend in retirement? If you want to travel the world during retirement or continue to donate to charity as a retiree, you may need to add these expenses to your savings goals. Remember to add them to your total retirement cash flow needs, and plan accordingly. You may find that you need to save an extra amount each month, or set a lump-sum of money aside to achieve your goals as a retiree.

Having trouble figuring out what your ideal retirement savings is? A good rule of thumb is to estimate that you’ll spend 80% of your current salary during retirement. Ideally, you’ll have paid off your mortgage and other debt to free up additional cash flow. You can also use a retirement savings calculator to estimate the total retirement savings that will fit your needs and life expectancy. Calculators like these will also help you determine how much you need to save each month to meet that goal.

If you find that your priorities don’t fit within an achievable retirement savings goal, consider an option to continue working during retirement in an encore career. You could also make work “optional” and only continue to work in your field, or as a freelancer if you decided those expenses were still a priority for you. In this situation, your current retirement savings would fund basic living expenses, and any additional income earned would be the “extra” that moved you toward your values-based goals.

What If “Enough” Doesn’t Feel Achievable?

Does your “enough” number feel like an unachievable goal? It’s time to assess what roadblocks are holding you back from your dream life. A few questions to ask are:

  • Does my current employer offer the necessary opportunities for me to earn my dream salary?
  • (If you’re an entrepreneur) What would need to change in my business for me to reach those goals?
  • Do I need additional education or training to level up in my career?
  • Would I be able to bring in more cash flow through passive income, or a side hustle?

You may need to focus on leveling up your own experience or training in order to increase your earning potential or look for a position at another company. Alternatively, if you love your job but won’t be able to make your dream salary there, look at other ways of adding income to your household. A side hustle, or freelance and consulting work, might be a great fit.

Making a Plan

Once you know what your “enough” number is, you’re able to create a plan with confidence for how you can achieve that income. If you’re uncertain about how to reach that goal, reach out to a financial planner. Together with your advisor, you’ll be able to discuss your current priorities, how they translate into financial goals, and what you need to do financially to move the needle.

Related: How and Why to Invest Intentionally

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