You can live as well on $1 billion as you can on $5 billion. Notice diminishing marginal returns. More is not a lifestyle value.
At the other extreme we have minimalism. Some Eastern mystics, perhaps a Zen master whose idea of wealth is a strong staff and a warm cloak. My younger daughter suggests “Luxury Zen.” Not many things but each is the best, exquisite even. I don’t know how she got that to work with children, but it is so.
Come to think about it, her brother and sister have done that too. Maybe it is not hard.
The quantity /quality choice is difficult.
Quantity does matter sometimes. Ray Kerzweil points out at TED, that a larger neo-cortex gives mammals a significant advantage. Learning needs a tool for collecting experience, defining patterns, organizing and executing.
Maple trees produce thousands of seeds with an expectation that only a few will survive. Quantity matters.
Politicians require vast sums to win. The quantity of donations matters more than the quality here.
In life quantity of money owned is precise and matters only at some points. Too little does not work at all and too much adds no additional value.
There is an intermediate quantity between none and too much, that is the fulcrum. Where the outcome tips towards either success or failure. If not enough quantity, even a little short, failure ensues.
Financial plans work like that. No planning will fail because it overvalues the present at the expense of the future. Too much saving overvalues the future at the expense of the present. Life works best in balance. Commitments, present enjoyment and future lifestyle, all with a margin for error.
Find the fulcrum beyond which you hold assets that you will not use and short of which you have too little.
The balance is a moving thing.
How much money will I need in the future relies on preferred lifestyle then, health, energy to do things, companions, and expectations.
How much should I save today relies on future yield, inflation, taxes, the world and local economy, my ability to live long enough to fulfill the plan, continuing employment and a narrow range of possible adverse events.
You can model the requirements and you can develop a range of possibilities. What if inflation is much higher? What if there is economic crisis? What if I cannot work for a year?
You try to find a corridor of success and react when actual results falls outside.
Once you have an idea about your fit and act on that, you must notice the 3Rs. Record, review and revise. Plans do not work, but planning gives you the skill to decide and the impetus to change. Review matters, and for that you must have records and an inventory of possible choices for revision.
If you understand what you are trying to do and what limits there are to those choices, an advisor can help with the arithmetic and the processes and products that help to keep you in the corridor.
Enough, but just enough. Zen.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.