Income/wealth inflection points

On a previous post I note that it’s easier to spend money on things when you’re making say, 300K per year compared to 100K per year, not that I would know about the 300K from personal experience.

In the comments this got into a discussion of how life would be different at different levels of income.  And something I said was that although I have a good idea of how our lives would change were we making 250K/year, I don’t actually have any idea how life would be different between 250K and 300K.  Based on our current income, I can’t really fathom how life would change past like 250K.

Of course, in graduate school, I couldn’t fathom a joint income of 100K/year or more.  At like 90K, all our money would be accounted for and we’d have no worries.  Anything higher than that just didn’t register.  But within a few years after getting real jobs (and a house and kids) it became pretty obvious what more we would do if we were making a combined say, 200K/year.  These days I can understand 250K/year (even if we’re not making it), but I’m not sure how much more than that we would need to make for our lives to change.

Obviously at some point we’d have enough to buy a house in Paradise and we might move there.  (In fact, with 250K/year, we’d be able to buy a house in paradise so long as we either had job security or savings after we sold our current place.)  At some point we could have a highly paid personal assistant to just deal with life details.  And at some point we’d have so much it would be irresponsible not to set up a charitable foundation.  But when does that happen?  At what income?  At what wealth level?

Completely unfathomable to me.  I get upper middle class now.  But I don’t get “rich”.  (But I’m willing to accept funding to try it out!)

What’s the infimum in the set of money that’s more than you understand?  (Or do I mean maximum in the set of money that you do understand?  Help me miser-mom! … I think they’re the same.)  That is to say, what’s the inflection point in money where you’re like, well, I know how my life would change with $X, but how would $X + Y be different from just X, I have no idea.  Or more concretely, what’s the number for you that you would say, well I know how my life would change if I were making $250K, but I don’t have any idea how $300K is different from $250K.  Do you have multiple of these inflection points or are you short sighted like I am?  Are they based on income or wealth or both?

53 Responses to “Income/wealth inflection points”

  1. Miser Mom Says:

    Mathematician to the rescue! Yes, the infimum of what you don’t understand is equal to the max of what you do understand (assuming linearity/ordering of the set, and that there are not jumps — such as, “I could understand $200K or $1 million, but not $500K”).

    As a completely irrelevant aside to your main question, my thesis actually used a neat mini/max argument called the “Mountain Pass Lemma”. The basic idea is that you imagine you’re at sea level with a ring of mountains around you, and that there’s another spot at sea level outside of that ring of mountains. There are a lot of ways to get to that outside spot: each one involves a different path over the mountains. Each of those paths has a highest point (supposedly with a spectacular view); if you take the lowest of all those possible high points, you’ve got yourself a “Mountain Pass” — the best way through the mountains, involving the least amount of climb. It turns out that point is really helpful in locating solutions to differential equations.

    But back to your main question, I don’t really think that way. The idea that having more money would change the way I live kind of creeps me out — not that I don’t think it *would* actually, but I try really hard to resist that. I do a lot more fantasizing about how I’d live on a fraction of what I make, if I didn’t happen to live with, y’know, normal people, who actually like having clothes dryers and refrigerators and store-bought food and thinks like that.

    • nicoleandmaggie Says:

      You don’t have any charitable dreams?

      I like being prepared for income increases before they happen. I also have plans for a 50% drop in income in case DH loses his job.

      • Miser Mom Says:

        Charitable dreams? Those are basically “give more”. I don’t think that earning (inheriting, whatever) more money would affect where I’d live, or how I’d live, or such. I see how it could for other people, but I’m basically happy with math, a sunny garden, a big dining room table for all our funky dinners, and the chance to run/bike with friends.

      • nicoleandmaggie Says:

        The way I would give would definitely change if I had lots more money. Right now we just cut a check that is usually unrestricted to either local charities (ex. DC1’s private school, our public radio station) or big industrial charities (ex. Planned Parenthood, my alma mater, the Brady campaign etc.)

        With a lot of money it would make sense to have more of a vision for that money. We could endow DC1’s school, or focus on a specific piece of legislation, or provide a specific scholarship, and so on.

  2. Leah Says:

    We were talking about this recently in regard to the lottery. I sometimes buy lotto tickets, mostly as a cheap way to concretely dream. I buy infrequently enough that it’s perhaps a $50/year outlay for me. Not nothing, but not anything that damages our budgeting.

    The money we make now was unfathomable at some point, but it’s still not tons. We max out our HSA and Roth IRA and that’s about it. So, it is nice, but I can totally imagine what I’d do with about twice what we currently make. At some point, I also agree that I’d mostly just really increase charitable giving. I think we’d also bank up a lot of money so that working becomes optional, though I don’t see us quitting work at this point. I think the incomprehensibility to me is in what we could make and not how I would spend it; I do not see us making $200k+. But life can change.

    When the powerball got super huge, that’s when money got really incomprehensible. What would one even do with $550 million or so? I figure we’d set up trust funds for our kids, nephew, and nieces. We’d find a way to help family and friends, tho I wouldn’t want to drain everything. And we’d use the vast majority to set up a charitable foundation. I actually really dream about helping out in the town where we live. I think that would be fascinating, econ-wise. I think I’d invite some graduate students to help advise and possibly set up threads of research that could generate PhDs or even careers. Imagine what one could do to alleviate poverty, or improve racial relations, or strongly improvement environmental conditions if one invested heavily in one small geographic region. By even a conservative estimate of 4% dividends/gains, $500 million spits of $20 million a year worth of spending. How amazing.

    • nicoleandmaggie Says:

      “What would one even do with $550 million or so?”

      I have no idea! But if someone wants to try that experiment on me… I do like that last idea of turning it into a dividend stream, but what does one do with 20 million a year? No idea. (Well, I mean, after we fixed and endowed DC1’s former private school, after that no idea.)

    • Rosa Says:

      Ha! I just bought a powerball ticket today, actually. I have real estate development dreams, I think I could run through several hundred million dollars doing that pretty easily.

      On the other hand, my mom is rearranging her will again, and she pulled me aside to tell me she’s leaving me several hundred thousand dollars (which, whatever. She’s convinced she’ll die soon but I am expecting her to actually live a long time and need the money for long term living/care expenses) and we make enough that all I can imagine doing with that kind of money is putting it into our own retirement savings or the kid’s college savings. If I had a dream (like starting my own business, or going to grad school, or something) that cost six figures, I could lay hands on the cash somehow – debt, plundering the retirement account, something. It’s not money stopping me from doing something like that.

      • nicoleandmaggie Says:

        Real estate development to make more money, or to revitalize communities, or .. ?

        It’s not (entirely) money stopping me from moving to paradise full-time either.

      • Rosa Says:

        Both/all. We have such energy-inefficient buildings, it is a big part of our greenhouse gas emissions that we could just end with rehab and new construction. And my own personal beloved Paradise has both a terrible housing affordability problem and a lot of empty lots and decrepit old houses (you should see the neighborhood hit hardest by the foreclosure crisis – it’s beautiful, central, poor, and still not recovered). I am always biking by empty or underdeveloped lots and imagining building things there.

  3. Ana Says:

    Yeah, I think $250K is about it for me, too. I can concretely figure out how to save/spend that amount easily. Maybe $300K (for a little extra saving and charitable giving), but beyond that, no idea, other than just “save it” or “give it away”

    • nicoleandmaggie Says:

      I don’t even know how I would save it. I guess just in taxable accounts.

      I did read a really neat thing about starting a charitable foundation through vanguard last night though, which would be a smarter way (for tax purposes) to donate large amounts of money than we’ve been doing for our smaller amounts of money.

  4. Anu Says:

    I actually have no problems thinking about how I would spend money well above 300K. Probably because we make around 250K now, live in an area with expensive COL and will have to figure out how to pay for childcare when we have children (probably soon) – we could get exactly the childcare we want to allow us to have the most flexible lives possible. We just bought a condo, at a ridiculous price, so we could pay that off sooner, maybe rent it out and buy another place. I could travel a lot more (even more than we do now) – more international trips, more guided trips (like an amazing culinary guided tour of Mexico), visit my parents in India on a whim, visit my cousins and aunt and uncle in New Zealand more often than we do now, pay for family members to visit me. I could up my charitable contributions, not have to make decisions about whether I care more about education in India or Planned Parenthood in the US and so on.

  5. Solitary Diner Says:

    When I started working as a physician, I hit my infimum. I was living quite comfortably on my resident’s salary, and when I took the big jump to a physician’s salary, the only major change I made was to start saving almost everything beyond my resident’s salary. My lifestyle isn’t fundamentally different, although I may buy a house/condo in the next few years, and I am a little less careful with my day to day spending. If I earned more, I would mostly just save more.

    • nicoleandmaggie Says:

      How would you save it?

      • Solitary Diner Says:

        Minimizing taxes is a big priority for me, so my savings right now are going into RRSPs (roughly the Canadian equivalent of a 401(k)). I have a lot of RRSP contribution room to use up, as I didn’t invest in RRSPs during residency, and we can carry forward RRSP contribution room indefinitely. I also invest in a TFSA (equivalent to an IRA, I think), as my spending is low enough that my TFSA is not coming out of income that’s taxed at the highest tax bracket, and it will help to minimize my taxable income when I retire and start taking money out.

        Once my RRSP room runs out, I will probably form a personal corporation, which will allow me to defer a lot of taxes (about 11% up front taxes instead of my 47% marginal tax rate). It’s a nice Canadian tax loophole that is utterly illogical and slightly immoral but that I intend to take advantage of as long as I can.

        My biggest debate right now is how quickly to pay off my student debt. I owe $140,000, with interest set at prime, and I have to pay it off over 10 years at the longest. Psychologically I would love to pay it off faster, but with the tax situation being what it is, it makes the most sense to spread the payments out over 10 years. If I had a sudden increase in my income, I would probably allocate more money to that evil monster!

  6. Cloud Says:

    I’ll have to think some more to put a concrete number on when I’d hit a point where I can’t currently comprehend how I’d spend the money. I have a lot of pent up travel desire that would blow through quite a bit of extra income. But depending on how I was getting that extra income, the travel might have to be deferred while I earned the money! I know that I’d hit an inflection at $500k/year. I suspect I’d hit it well before that, maybe at $350k?

    And I know I can’t fathom what it’d be like to have the income come from investments instead of our labor.

    • nicoleandmaggie Says:

      oh man, if it were investments instead of labor we would move to paradise in a heartbeat… and then spend several years paying off the mortgage (though I suppose we could dip into the principal and decrease our income instead)

      • Rosa Says:

        I think that’s the actual inflection point for me – not income, but wealth. Income NOT from work would change our lives a lot. Income from work…our shortages are time, not money.

  7. Leigh Says:

    We were discussing something similar to this yesterday on a long drive. A friend is getting married and he is experiencing sticker shock at the price of having a wedding in this city of ours. The wedding they’ve come up with at the moment is $30-40k and he’s not prepared to spend that much – he’d rather spend that much on so many other things. We both agreed we both feel that’s about our maximum we’d be willing to spend on a wedding…but we’d rather not spend it now. (We want a fancy-ish wedding with about 100 guests.) I jokingly said that I would only be comfortable spending that much on a wedding if we were both entirely debt free, i.e. neither of us had a need to have a mortgage, and he agreed – he would rather have a paid off house than a wedding too. The problem is that even at our income level, a $30-40k wedding is still about what one of us spends in a year, which is a huge inflation to spend normal amounts plus that much on a wedding! I’m guessing this is why your parents paid for your wedding when they did :) My parents don’t care if we get married vs live together and we could technically afford it, but we don’t want to.

    I would say that for me the inflection point is a matter of how large my nest egg already is combined with my income. BF moving in and sort of being DINKs (plus the size of my nest egg at the time which was just over $500k) pretty much eliminated my worries about money – our combined household income should break $400k this year and our combined net worth broke $1M. (Woo!!!) I would guess my parents have a net worth around $5M plus or minus a few million and my mom still worries they spend too much at the grocery store. I don’t do that. I buy whatever food I want, whenever, and don’t worry about it. I also finally stopped budgeting which is so wonderfully feeling – no more guilting myself over spending too much. The question though is whether BF’s less anxious personality rubbed off on me, whether it was the high combined household income, or the size of my nest egg that was the largest factor…

    For us, $400k looks like spending our normal $90k-ish/year (including my mortgage payments), paying a ton in taxes (six figures possibly!), maxing out two 401(k)s and Backdoor Roth IRAs, donating 1% of our gross, and saving the rest. I don’t think we’d reduce our spending unless our combined income went below $200k/year (I’m not interested in spending more than half of my gross income unless I could support myself off my investments forever or it was only planned to be temporary). I want to increase giving as wealth increases. My plan was to do 2% of gross once the mortgage is paid off, 5% when I’m financially independent with a 4% SWR out of all of my investment accounts, and 10% at some later point. I would like our donations to be similar to our marriage tax penalty before we get married.

    In reality, our lifestyle didn’t change past I would say $200k combined income other than less worrying as we both set this lifestyle we have when were each making $100k separately. Past that point, we just save more. To be financially independent jointly in our current city, we need about $2.5M if we stay in this condo or probably about $3M if we wanted a larger place. I can’t fathom what we would do when we reach that point (which should be within the next 5-10 years).

    • nicoleandmaggie Says:

      If we had access to a mega-backdoor Roth, that would definitely be a place to stash additional income. But eventually even that room runs out!

      (Good memory– my parents paid about 2K for our low key wedding in the middle of nowhere. :) #2 had a much fancier, much more expensive wedding that they paid most of the expenses for. It was great. :) )

      • Leigh Says:

        Yup, watching how much BF’s even index funds in taxable toss out in dividends helps contribute to me actually using the mega-backdoor Roth IRA even though I already have lots in retirement accounts…

  8. chacha1 Says:

    Looking forward to reading everyone’s comments as this discussion goes on. :-)

    fwiw: an estates/tax/trusts attorney at a firm I used to work in said that for individuals to set up charitable foundations was often a waste of money. What with attorneys and accountants, you end up complicating your life quite a lot, and less money gets to your preferred destination than if you did one-time research to find the existing foundations that already serve the need, and giving money to them.

    If I had stupid money (it’s a nice dream) I would first pay off our property, build our house, and set aside a regular percentage (if it’s income) or a large chunk (if it’s a lump sum) to fund a longer-than-anticipated retirement. And I would seriously advance my quit-my-job target date. Note that if it was extra-stupid money, in the 10,000,000+ range, I would pay off our property and then go buy a different piece somewhere else, probably Sonoma County, and build the house there.

    Then I would look into buying additional land in the area we want to retire to, just so nobody else buys it and messes it up. If it was undeveloped and appropriately situated I would then give it to the Nature Conservancy.

    After that I would look around in our future community and find downtrodden areas, and start funding the local programs that serve them. Everything from infrastructure to parks & rec to schools to repairing old peoples’ houses to animal shelters.

    And depending how much was left over, I would then start putting some travel on the to-do list, because fixing up our living quarters is more important than seeing Barcelona, but I sure would like to see Barcelona.

    If we’re talking REALLY stupid money (100,000,000+) … well, one would have to batten down the hatches because one would get swarmed, wouldn’t one? I’d probably set up a trust so that I could do all transactions through a hedge of lawyers.

  9. Rosa Says:

    My old “infinite capital” daydream was to set up a charitable foundation with basically the sole purpose of providing day-job sinecures to artists & entrepreneurs I know, basically a minimal stipend, a job title, and a health insurance pool.

    Then the ACA passed, and now even the starving artists I know have insurance. Obama ruined my dreams!

  10. gasstationwithoutpumps Says:

    My income inflection point is somewhere around $150k/year, which our household just exceeds (I think—I’ve not done 2015 taxes yet!). I already don’t know what I’ll do with the extra money, and have started increasing my donations to local charities (I’ve only been giving away about 3% of gross income, so I should up that).

    I’ll be retiring in a few years, and my retirement savings plus defined-benefit plan already are enough to provide more than my current salary for the next 30 years (barring major economic disasters, of course). I have no debts, and I’m not fond of expensive travel (I am considering doing bike touring again after I retire), so there are no huge expenses likely to crop up during early retirement.

    My son is halfway through college, and it looks like his 529 plan will still have money in it after he finishes his M.S. degree—we haven’t decided whether to keep the account around in case he decides to do a PhD, transfer it to a different beneficiary (closest relatives who could benefit are his cousins once-removed), hang onto it for when he has kids and transfer then, or close it and pay the penalty.

    • nicoleandmaggie Says:

      And here you are saying I won’t have enough in the accounts for my kids! Better to pay from income rather than deal with a penalty. (DC1 has almost 90K in there at age 9 at the rate of $500/mo.)

      BTW, if he’s going to have too much money because of scholarships, I read that you should be able to close it without penalty (though you probably still have to pay taxes on the interest).

      • gasstationwithoutpumps Says:

        I was saving for private school, and if he’d gotten into his first choice, the 529 would not have been enough, but he ended up at UCSB in the College of Creative Studies, which has turned out to be a pretty good choice for him.

      • nicoleandmaggie Says:

        Well, it seems like trying to save 100% private school full tuition in a 529 isn’t the optimal strategy unless one has multiple beneficiaries in mind.

      • gasstationwithoutpumps Says:

        It is true that saving 100% for private college in a 529 plan was probably not optimal. In my defense, when I started the automatic payroll deduction, I was making less money, and I could not then have made up the difference out of income. Private college looked extremely likely until April of his senior year in high school, at which point it was too late to make any adjustments.

      • nicoleandmaggie Says:

        But if you’re making less then you are eligible for more financial aid.

        Just saying, you shouldn’t be telling people in my situation that they need to put more money in a 529!

  11. First Gen American Says:

    Some of My neighbors make 7 figures. They fund a lot of nonprofits (like underwriting multiple plays, etc). That part is awesome. At some point, you have enough money to keep important community things afloat because it’s the right thing to do. They buy season tickets to things and then give them away.

    They have many homes. Some of them are very wasteful. Many homes around here sit empty all but a handful of weeks a year. But they pay to heat, cool, mow and maintain up to 5 residences. My neighbor next door bought a perfectly good (but small) house, immediately bulldozed it and then changed his mind about building the bigger house further back on the lot. So now the lot is just sitting empty. There is a $6mm house that Has been up for sale for a while. I have never seen people in it and I’ve been here 3 years. The consumerism is just on a much grander scale. The investment bankers are the most wasteful and I generally don’t have a high opinion of them as a whole.

    We are the only ones in our neighborhood that do our own yard work or any kind of house projects. My neighbor told me he paid contractors Extra to get stuff done faster when he was renovating his house.

    I guess I can’t see myself past that $500k mark because in the great majority of cases, it involves a lot of risk and long hours. My customers who are doing well now emptied their retirement accounts to break out on their own. I know I could achieve that kind of success, but I don’t have the balls to do that. If I got a huge windfall, I would put it into creating jobs in the region but I wouldn’t do that until house, college and retirement funds were in order first. So it’s unlikely it will happen on that scale even if I do start a business someday as a second career.

    Interesting topic.

    • nicoleandmaggie Says:

      That houses sitting empty thing is irritating and has negative effects on other people in big cities. Toronto is thinking about giving homes that aren’t lived in or rented an extra luxury tax.

      How that extra income comes does seem to be important. DH and I marvel about how we make way more than we need to be living where we usually live, and yet don’t really have enough to move to paradise permanently without jobs already lined up. Technically, we could move with just his job lined up and live in a 2br apartment, assuming I could find *something* to shore up the difference, but it would be pretty risky. Too risky for our tastes at the moment. And we just don’t have enough saved to make it not risky. If I could move my tenured job and tenured salary to paradise we’d be set!

  12. Rented life Says:

    This is fascinating. Over the last few years we’ve consistently made 68-77k. Last year we made $111k and I felt very good about that because things were comfortable. We were paying down debts, both contributing to retirement and we could purchase things that would save money in he long run but required cash upfront (meat from my farmer friend, CSA, etc.) It’s a number I understand and would be happy at, but I wouldn’t complain if there was more. Hubby lost his job unexpectedly this spring (if it were up to me, all of you would avoid a certain restaurant chain) and while he found employment quickly in the grand scheme of things, we were still without his income for almost 3 months. While I had savings to help, it was a big set back. Plus rent is going up where we live ($450! More! In one year!) so we’ve been researching other places to live and then my hours at my job got cut. My job has never been stable but I really do like what I do so its hard to walk away from unstable income when I actually am happy work wise for once. Hubby’s new job is a big pay cut-10k less a year. My recent pay cut is closer to 20k, I make the bulk of our income.

    So reading the post and comment, I’m trying to wrap my head around 200-250. I’m not sure I can. I can think of a lot of grand plans, but then I wonder–would that money really go as far as I think? I’d want to learn more about saving/investing if I made that much. I’d figure out giving my brother a “loan” (I wouldn’t expect it back) to start his business that he wants to start. I’d donate a heck of a lot more which would be a neat thing to do. There are some local charities I wish I could support more than a tiny bit here and there. Any other decisions depend on how the money is coming in–am I earning more? I imagine that means a major shift in working hours (my boss probably earns that but I don’t want her travel schedule). If it was lotto or inheritance that’s a different story–I’d keep working but worry less or find new things to worry about. I could go back to my hobbies that I can’t afford at the moment (pottery). We would still want to live in the same area and I don’t see a need for a second car (a bigger first car would be nice). Maybe do a summer rental vacation like we’ve always wanted to. Can all that be done on 200? I don’t know. More than 200, I can’t even imagine. I see myself just saving as much as possible, which is my current pattern anyway. Once I felt I had enough for job changes, layoffs and emergencies, I could spend money.

    • nicoleandmaggie Says:

      Pay cuts and unemployment spells are so hard to deal with.

      I do think it’s a lot harder to conceptualize numbers that are farther away than what you’ve experienced. And you’re right that where that money is coming from is important– I’ve been assuming pay increases given the same kind of work, not more hours, but like you and Cloud and others point out, it could come with more stressful work or more hours, or moving to a different part of the country where things have different costs.

    • chacha1 Says:

      For me, <1 million would not really affect the way I live. Given California COL, it's just not enough to make a significant difference over the remaining 40-ish years of my life; I would still have to work for at least ten more years, and our retirement would still be modest. So there is no inflection point <1 million.

      Job losses/cutbacks are THE WORST, especially when you've just had the experience of getting ahead a little. Best wishes for improved fortunes.

      • Rented life Says:

        Thanks. I felt like we were just getting somewhere secure and then wham. The good part of husband situation is his new job is one he likes and finally weekends and holidays off! Never in the 17 years we’ve been together has he had that so its a big deal, despite the massive pay cut. For me, I’m just hoping either 1) something else will work out–I’ve been applying, or 2) my colleague will the get contract I really want to work on and I can work under him. He has a lot of knowledge so I’d love to work under his projects.

      • nicoleandmaggie Says:

        I hope something works out too. And yay for weekends and holidays! Too bad it came with a paycut. :(

  13. Rumpus Says:

    As my perceived wealth has increased over many years, I’ve generally adjusted my perspective proportionally. I tend to think in terms of purchasing power, and at any given time or situation any specific purchase could be insignificant, mundane, possible, or unimaginable. I typically think long and hard about “possible” purchases…things that are affordable but expensive enough that the purchasing decision is weighty.

    As a result, I only tend to notice changes in my purchasing power as purchases drift from unimaginable down to possible, or from possible down to mundane. The obvious extension is that my horizon is slightly greater than whatever purchasing power I currently have…if and once I adjust to that new level, my horizons will stretch naturally. So I’d guess my horizon is something like 20%-50% more than whatever I’m currently perceiving as my wealth (though my perception is not necessarily well matched to reality). Go any further beyond that and my heuristics/model breaks down…
    “If I had a million dollars
    We wouldn’t have to eat Kraft Dinner
    But we would eat Kraft Dinner
    Of course we would, we’d just eat more”
    Barenaked Ladies

    A corollary to the above is that I’m not so good at considering things other than purchases…savings makes sense to me only in terms of delayed purchases, but that involves predicting (about the future value of the savings and about the future purchasing needs) which makes it very noisy. And donations don’t fit in my mental model at all, which means they have a completely separate model that’s not nearly as well developed or natural.

    • nicoleandmaggie Says:

      How do you decide on donations?

      • Rumpus Says:

        My poorly-developed, uncommonly applied, and unnatural process is difficult to put into words, but it is probably most analogous to resorting to a higher power: http://www.magicmgmt.com/gary/magic8ball/index1.html

        Once I’ve gotten to the stage of serious consideration for making a donation there’s some pondering about my finances and the murky future, I settle somewhat randomly on what feels like a reasonable sum of money given my constraints and how much I trust the entity, weigh my options and whether the entity (and therefore my support) will actually positively impact on the world, and then a decision is made. Or sometimes put off until some later date, but I’ve found it’s usually better to finalize such decisions unless there’s a clear reason, because putting it off just means I have to go through the whole process again sometime in the future.

        I want to help the world (or at least the parts I can reach) become a better place, but time is precious and I have both responsibilities and a selfish desire to relax and enjoy my precious hours. Seen via one viewpoint, I find it easy to spend or give away money because doing so just means the numbers in the bank account will go down. Those numbers don’t control my life the way they have in the past. In other respects, I find it difficult because those numbers could someday be very precious to my loved ones. It’s maybe like the Schrödinger’s cat dilemma applied to money…every day I open an imaginary box and look inside to see if my situation/fortunes have changed and my past decisions regarding money have set me and mine up for pain, or the reversal of fortunes has not happened and I could have made things better along the way and been less selfish, short-sighted, and insular. Until I get to that day and observe the opened box, both possibilities weigh upon me, and when I do get to it…well there’s another day around the corner. I use the potential for future problems as one excuse to keep my eyes down, which means I don’t even see the things I find distasteful about our society, or develop the knowledge about how to make things better. Ignorance is bliss, and I’m free to focus on my immediate environment such as my job and family, but I worry at times that I’m just pulling the wool over my own eyes.

  14. CG Says:

    For me the big inflection point is when you don’t have to worry about money. You have enough to maintain the lifestyle you want and not have to worry about going out to eat or taking a (reasonable) trip. You live in a house that satisfies you and you can save for retirement and education. Whatever that number is, beyond that, I don’t think for me it matters much. I actually know this is true because spouse was making more money than he is now at his last job and was on a trajectory to make much more. He left that job because of the crazy travel and hours to take a more reasonable job* that paid slightly less and had almost no upward trajectory in terms of salary. When he left the previous job we didn’t have to adjust anything about the way we were living. If he had stayed at the previous job I don’t think much would have changed. Our savings rate would have probably just gone up even more. If we made more money I might be able to persuade him to give more to charity. I came from a family that gave away 10% and we do much less than that–it’s the one money issue we fight about (he believes in saving first, giving away money later). So I think if we made more money I would be in a stronger position to insist that we give more away.

    *or, I should say, a job that initially seemed more reasonable until he got promoted and now has to travel a lot more

    • nicoleandmaggie Says:

      I thought that was true, but then we hit that point repeatedly at increasing income levels (even adjusted for inflation). There’s always room for additional savings and additional giving, but how one does that changes after a certain level.

      And, of course, lifestyle inflation can happen… the life we’ve been living in Paradise has been very different than the one where we normally live where we’re tired of the restaurants and there’s not much worth spending money on. (Though there’s more space in the house for stuff!)

  15. ralucacoldea Says:

    Oh, I undestand pretty much any money, up to a gazzilion billions a year. I wouldn’t have problems dealing with the sudden influx at all, because I doubt I would want to spend a lot more than I do right now. Yeah, I know how that sounds, but basically, I have enough now and we’re saving plenty of what we’re making. Those savings are our freedom fund, so if I had more money, it would simply mean freedom faster. I also doubt we would succomb to peer presure, we have been blessed with normal people as family and friends.

    We’re already donating a percentage of our money now, so that wouldn’t change. We would probably just get better at identifying charities where our buck would make more impact, purely because we would have more free time in which to investigate said charities.
    We are also planning a life where we’re investing in our business, so that would not change.
    We’re already giving money to the family now, so that would not change, because I don’t see us donating money to my sister or sister in law in a way that would not destroy their sense of purpose. We would probably set up trusts for the future generation instead.

    All and all, money is only a tool in our life, so more money would only mean a more efficient tool, not a different life.

  16. becca Says:

    If I had a *possible* amount more money, I’d move back to Chicago and make sure my retirement was funded and my kids 529s were overfunded (by which I mean like, enough to afford total cost of attendance for undegrad plus Harvard med sticker price. If my kids don’t use it, I’ll pick up a few extra degrees like an MPH while traveling the world after kids are grown). So I’d figure anything up to about $280k/year would get easily adsorbed in living expenses (~60k/year after taxes) and tax advantaged accounts of some sort. In the real world I might save in taxable instead of 529 to have the flexibility, but I think that’s about the amount where I’d say “this is an amount of money I’d mentally earmark for retirement and higher education and consider worth funding”.
    If I had a *lot* more money/wealth (i.e. financial independence), I’d move to Seattle and spend all my time volunteering for the global health arm of the Gates foundation.
    If I had *crazy* money, I’d do what the Gates foundation does, but replace the evil domestic education policy stuff with good domestic education policy stuff. Also, I’d buy a few islands.


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