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« Defining success #1 - Passion | Main | Defining success #3 - Time abundance »

June 08, 2005


Joshua Allen

So true. Inflow vs. outflow is a good start, but I think that outflow as a percentage of net worth is better (assuming outflow is less than inflow). For example, if your lifestyle consumes just 5% of your net worth per year in expenditures, you are at the right spot. Assume that your *only* source of lifestyle expenditures is your net worth; not your income. This way, spikes or drops in income do not affect your lifestyle directly, but are folded into net worth and the impact to lifestyle is blunted over time. In this model, every bit of income that you chose to earn is being earned to bolster your net worth rather than support current expenditures. If you have a bonanza year, you're forced to forgo spending it (or only increase expenditures by 5% of the net increase in income). This way you're never enslaved by your lifestyle -- work is purely a choice. And finally, if you raise your kids this way, they'll be accustomed to a lifestyle which is modest, but more sustainable than many, and an added bonus is that you'll have a solid net worth to pass on when your children enter the workforce.

Hanna Cooper

Defining the 'enough' part in this culture, especially in terms of money, is a tough one.

I've heard about a study that found that regardless of how much money someone made - $30,000 or $100,000 - that when asked how much money would be 'enough', the response was twice as much as the person was currently making.

When I got my first job out of college, I remember feeling - at the time - that my salary was a lot. While it met my needs as the time, that salary wouldn't be 'enough' now - not only because of my increased experience, knowledge, etc., but because my expectations and consumption have increased.

Part of how I try to define 'enough' in my own life relates to what I'm trying to acheive in the other areas of success you have/are going to post on - in particular, the trade off with time. It has seemed in my life that I either have money or time - usually not both in the same place. Success could be defined as trying to acheive some balance among all of these elements - career passion, time, money, love, meaning, being present...?

Hiren Shah

Well, from books like "The Millionaire next door", one can infer that if one sacrifices one's expenditures and concentrates on building a good net worth by around 35, financial freedom can be achieved and then the choice of working or not can be left to the individual.Joshua has correctly pointed out that if one controls expenditure as a percentage of net worth, long term financial freedom is assured.

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