I love hearing from readers and I had a conversation recently with a reader around the topic of the ‘why’ behind personal finance. We got into a conversation around FIRE (financial independence, retire early) and had a discussion on my take vs. her take on it. The one pointed question that I struggled to answer was around “at what point do you think you’ve accumulated enough, i.e. at what point do you think you’ve arrived and can be done”. The reader didn’t have an answer for this either, and it really stumped me. My first answer was around “well if you’re not growing you’re declining”, but that response gave me pause as I questioned if that was really how I was going to live my life. 

In an effort to help myself better answer this question, I wanted to lay some of my thoughts out. I mean if I have already ‘accumulated’ enough financial resources (which is doubtful), why keep going at the speed in which I’m going? What is actually driving my hard work to be financially successful? What does this success look like?

Accumulating for a secure foundation

I think the first area I’d say I’m working towards is having a secure foundation. As we’ve seen as of late, we live in a very turbulent and uncertain world. Early COVID was really scary for a lot of us, and plenty of us either were laid off/furloughed, or we were worried about our jobs. I personally did think a lot about what it would look like, and a) was thankful for my emergency fund but b) was thankful for a good job that I enjoy working at.  

I’ve worked hard to setup a secure foundation for my family and I. It started out simply with opening up a separate, high-yield savings account that I opened shortly after getting my first professional job out of college. I didn’t have much to my name and wanted to ensure a setback wouldn’t completely throw me off course. I worked up to getting $1,000 in that account, then 3 months worth of expenses and then stopped at about 4 months. I stopped at 4 months and didn’t go all the way to 6 months, which is traditionally recommended, as I have other savings accounts and other non-retirement accounts that I could tap into. However, those 4 months of cash are sacred to me, and I won’t ever touch it or move it around unless it’s a true emergency. 

Fun fact – I’ve only once tapped into my emergency fund, and it was due to poor financial planning on my part. We were buying our house and to prepare for the down payment, I had planned on selling some company stock but failed to correctly realize when I could sell the stock, as there are limits to when you can buy and sell company stock, and when I needed it, we were in a no-sell period. My emergency fund came through, and about a month later when I could sell my company stock, I did so! 

The other area of a secure foundation I believe is insurance. I would say I do a decent job at having good insurance, health, dental, vision, accident and life insurance, but I could do a better job at life insurance. Having 2 kids now really has made me think and reflect on how Mrs. Money or I would solo raise them, and I do feel that I could use more coverage. I’ve always shied away whole life, and instead prefer term life insurance. I get (and purchase additional) coverage through work but I think the overall number could be a bit higher. 

In reflecting on where I stand accumulating to protect my family, I’d say I’m close but not quite there! Hopefully once I add-on some additional coverage of life insurance, I’ll feel that I can check this box off!

Accumulating for the future

Nobody wants to work forever, or perhaps if they do because they love their job that much, they probably won’t want to work at the same speed. I have these grandiose visions of traveling the world, chilling on a beach, and spending time with family and friends. To achieve that goal, I’ll need to put money aside now, and have it grow at hopefully a healthy enough return to where I can stop working and live off my retirement nest egg. 

It seems simple enough, save and invest now for the future, but there’s a question of how much I’ll actually need. It’s hard to predict what’ll happen tomorrow, much less when I’m 60, and hard to know what the world will look like and how I’ll interact and spend money in it. In the absence of certainty you make decisions based on the information you have, so I’ve tried to assume I’ll spend a bit less than what I do now (assuming I’ll have my mortgage paid off). In my head I’d like to stop working a bit before the traditional retirement age of 65ish, and would like to have enough for a good life. Is that number $2M? $5M? $10M? Hard to say but I have been toying around with some investment calculators online and it appears that I’m doing good, if not slightly ahead. 

Perhaps in 10-15 years from now the assumptions will have changed, or perhaps I’ll have been able to save and invest more, or perhaps I get luckier with some of my bigger investments. At this point in time though, I think it’s safe to say I’m not there yet (which I wouldn’t expect to be) but that I’m hopeful of achieving my goal of early(ish) retirement. 

Accumulating for my family’s future 

I’ve had a lot of conversations with friends and families about leaving a legacy (i.e. an inheritance) to my children or my children’s children. Neither Mrs. Money nor I came from wealthy families, but I have to come to understand we were more upper-middle class than I think either of us realized. Fast forward to our world today, Mrs. Money and I have done well professionally and have been prudent with our finances, have said ‘no’ to a lot of things and have save/invested well. However, I like to think that a lot of these accomplishments we’ve had I believe come from a) being taught or quickly learning but b) having had a good work ethic instilled in us.

Can you teach your children a good work ethic even if you’re ‘rich’? This oddly is a question I wrestle with, despite not feeling ‘rich’. I like to think that BabyMoneyFinance and SegundoMoneyFinance will be out there with us cutting grass when they grow older, doing chores, having their own little bank accounts, and getting summer jobs when they’re a teenager. 

I’d love to be able to have them be able to graduate college debt free, and although who knows what the college tuition bill will look like in 18 years, I’m saving now via a 529 account, which allows your money to grow tax-free assuming it’s used for educational expenses. I also think I’d like to leave, or give them a small(ish) amount of money when they’re getting started in life. I think that getting a sum of money into the hands of someone who’s hungry and will put it to good use is a huge leg up for them. Outside of that, I don’t think I want to leave them piles and piles of money (sorry BMF or SMF if you’re reading this in the future and this surprises you), but I also don’t think I’ll be in a position to do so. 

In summary, I think right now I’m preparing well for my family’s future and am happy with my progress so far! 

How I know when I’ll be done 

This post has honestly been a helpful exercise for me, reflecting on “why” I’m working so hard, both professionally and financially, and putting some mile-markers on my destination ahead of me. I’m certainly not done yet, I’ve learned (although I definitely knew it) through this reflection, but do feel like one day in the future I will be able to know when I’m done. We only have this one life to live (YOLO) and I definitely want to live it to it’s fullest, both today and in the future, and I believe my current financial strategy is helping me achieve success today and also will later on in the future! 

I will also say that in thinking about where we are and where we want to go, I am very thankful for having a job that I really enjoy and working for a company that really cares about it’s employees. I know that no job is perfect, and I’ve spent a lot of time reflecting on what I do have vs. thinking the grass is always green on the other side. For right now I’m very happy in my work and feel like that’s a big part of me being able to continue the progress I’m making!