How Much Money Do You Need To Live Your Best Life?
A new study reveals the surprising answer
Take a moment to imagine your “dream life.”
If you never had to think about money…
Where would you live?
How would you spend your days?
What luxuries would you indulge in?
Have a clear picture of what that would your absolute ideal life would look like?
Before you read the rest of this article, Leave a comment and let us know how much money you believe you would need to fund that ideal life you just imagined?
Don’t worry about accuracy. Just write down the first number that pops into your head.
How does your number stack up with the average person?
A 2022 study titled “Evidence from 33 countries challenges the assumption of unlimited wants” by Paul Bain, and Reneta Bongiorno asked 7,860 people across 33 countries a similar question to the one I just asked you; how much money would you need to fund your ideal life?
The most common answer was between $1 million—$10 million (USD).
That is a surprisingly low number when you consider that they were not asked “how much do you need to retire?” but how much to fund their “ideal life”.
It’s not difficult to imagine that most people’s ideal lives would include living in an ocean-front mansion with a garage full of sports cars.
Either people are less obsessed with living large—or they have no idea how much it would cost to fund a flashy lifestyle in perpetuity. $10 million would provide $400,000 in annual income using the very flawed 4% rule. That’s enough money to fund a fantastic life, but not going to keep you eating caviar and driving Lambos every day.
The original purpose of the research study was to determine what percentage of the people have “unlimited wants.” This was of interest to the researchers from the perspective of economic sustainability— If everyone truly had an unlimited appetite to consume, it would be impossible to deliver that without severely compromising the environment.
I want to move this in a more useful personal finance direction.
While you might need $10 million to fund your ideal life in perpetuity, saving that amount of money is not a realistic goal for the vast majority of us. If you had a take-home pay of $100,000 per year and invested half of that at 8% per year, it would still take you 36 years to save $10 million.
But here’s the good news; you don’t need $10 million to fund an amazing life. You need to align how you make money and how you spend money with what makes you happy.
Funding an ideal life without winning the lottery
Here’s a shameless plug for my book, The Financial Freedom Equation, because the majority of the book is about spending money on things you value and making money doing work you love.
The best part is that it does not require you to fund your happy life with some giant—unrealistic— pile of money like $10 million.
The entire goal of personal finance and living a happy life is managing the trade-off between two assets.
Time
Money
You’ve heard the saying time = money.
The reverse is also true, money = time.
If you clear $20 per hour, then a $20 lunch order does not cost you $20; it costs you 1-hour of your life because that’s how long you had to work to buy that lunch. Whether or not that’s a fair trade depends on a few factors like:
How good was the food?
Who did you eat with?
What was the occasion?
How much do you enjoy—or hate— your job?
If you had to trade in an hour of your life to eat at Subway by yourself at lunch before heading back to the office to do work that makes you bored and miserable—that’s not a good use of time or money.
The trade-off gets a bit better if you’re having lunch with a close friend.
If you do work that you find fulfilling, working for an hour in exchange for lunch with a close friend can be a great deal for you.
The expense tracker spreadsheet I created can help you think about your spending in this way (Don’t forget to enable Macros).
Doing work you love instantly improves the quality of every purchase you make
Once you start thinking of each purchase as a trade of time rather than money, you’ll be less likely to buy things that add no value to your life.
The less we spend, the more we invest. The more we invest, the quicker we build financial freedom.
But it still takes years and decades for most people to completely fund their life from the wealth they have accumulated.
That is why doing work you love is the shortcut to buying happiness.
If you can find a 9-5 job doing work you care about, all you need to do is focus on aligning your spending with your values.
For many people, they are not exactly advertising our exact dream job on Zip Recruiter. That’s why I decided to create my own dream job by starting Making of a Millionaire.
Here’s how I approach the trade-off between time and money.
Right now, I work a full-Time job and run a writing business on the side.
I try my best to spend money on what I value and ruthlessly cut out what doesn’t.
I take every penny of my monthly surplus and invest it in low-cost index funds to grow my wealth.
Eventually, once my financial wealth hits a certain point, I’ll transition to writing as my only job.
Once I hit that point, I’ll continue investing and building wealth until doing work of any kind becomes optional.
It’s hard, but I am further than I ever would have thought when I started writing four years ago.
Interested in pursuing a similar path? Then pick up my book and read it from cover to cover.
Envision your dream financial life
I started this post by asking you to guess how much money you would need to fund your dream life.
Now, I invite you to take a moment to envision a more realistic version of a dream life…
If every job paid the exact same amount of money, what would you choose to do?
What is the minimum amount of money you would need to pay the bills and still hit your financial goals?
What is the single biggest obstacle holding you back from pursuing your ideal job?
Leave a comment, and let’s talk it out.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
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If every job paid the same, I would want to work in the space industry. Aerospace engineering maybe, rocket scientist 😃