What amount of money makes you feel free?

Wealth does not = happiness, but at some point one obtains enough money that unless it’s frivolously spent, there are many doors open for the remainder of her life. Perhaps she loves her current career and decides too stay in it today and long past retirement. Or, she is set free of the confines of taking jobs that pay well and instead tries sometimes entirely new, without concern that the investment in education may not “pay off.” Or, she decides to create art or travel the world or just sit and study the sunset over the same ocean every day while doing half-assed yoga on a beach.

In reality, my goal in life is to generate enough wealth to feel this sense of freedom. Yes, that likely means I would be in the 1%, and it is not necessary to be happy at all. Most people will never achieve anywhere close to this. I don’t know what the number is, exactly, but it’s certainly more than I’ll ever be able to obtain, especially given my proclivity for purchasing too many shoes. Yet, it’s what keeps me going – that hope that one day I’ll not only be able to afford a house, but also to decorate it, and to invite friends over for reasonably-lavish dinner parties featuring fine wines and whiskies that my husband and I have prepared in our gourmet kitchen.

When I look at my net worth, now a touch over $500k, I feel both thrilled and disheartened. I realize that most people in the US retire with a networth much lower than that – that most people in the world would be ecstatic to have this amount in savings and stocks. But, then I also spend too much time exploring housing options on Zillow.com and see that 2 bedroom, 1 bath houses in the area are now selling for $1.3M or more, and my dream of purchasing a 3 bedroom, 2 bath home with a private backyard goes poof in the night. I look around at my decent 1 bedroom apartment with its sterile white walls — my bicycle parked so elegantly in the living room filled with a Craiglisted, 10-year-old couch, broken IKEA coffee table, and two Target bookshelves that are about to crumble, and I know even at this stage of my mid-30s life I can do better.

I wish I was at a point where spending $100k on IVF wouldn’t put a dent in my savings, or that I felt I could have children and provide for them a life that is comparable to my own middle class upbringing in the suburbs of an east coast city, where housing is much more affordable. I keep wondering what that number is… even as I obtain jobs which provide greater potential for income growth, there is a giant gap between my life today and this concept of wealth I have in my head, that I haven’t fully quantified yet.


What is it?

  • $2M per adult in retirement (so, $4M for a married couple)
  • Ownership of 4br, 3ba home outright (additional $2M – or $1.5M for 3br)
  • 50 years of $50k / year for house fixing as needed, taxes, other fees ($2.5M)
  • 50 years of $100k /  year for eating/travel/shopping ($5M)
  • College tuition for 2-3 kids ($500k)

This is, of course, well exaggerating what is needed for financial freedom, but to put a number on the amount I’d want in the bank account to feel financially free (for family), that would be….


Now, even if I get more realistic here and half that…

  • $1.5M per adult in retirement ($3M)
  • $1.5M house (can’t reduce this / basic house cost here)
  • 50 years of $20k / year for house fixes (~$1M)
  • $50k / year of food and fun ($2.5M)
  • College Tuition (assuming some scholarships) – $200k

$7,000,000 is the minimum amount of wealth for financial freedom if we continue to live in this area.

Is $7M obtainable?

Maybe. But only via compound interest, and with that one wouldn’t know if she met her goals until she was in her 80s… plenty time past when purchasing a home would make sense. So she must have blind faith in the stock market OR figure out a way to expedite the growth of her portfolio. In short, how fast can I get to $7M from $500k?

My goal at this point is to have $1M by the time I turn 40. That will only be obtainable if I maintain my current job for the next four years, perform extremely well (no pressure), and we keep our cost of living low for this time.

Contributing $50k per year for the next 6 years, if my portfolio grows at an average of 5% per year, I will have a net worth of $1M by 40. This requires maintaining my job and living in a 1 bedroom apartment for the next six years, living rather frugally, all during the time in my life when – if I’m going to have kids – I will be having children (hopefully, two, within the next six years.)

If I don’t end up having children, the numbers change significantly – but I definitely want kids and I definitely want to pay for infertility treatments as needed to have them. Which, ultimately means that I won’t likely get to $1M by 40. But I’ll be close, as long as I keep this job for 6 years (or keep this job for 4 and obtain a similar one with equal or greater salary for the remaining 2).

At that point, if I have $1M by 40, I will have 20-ish more years of prime earning, if I work full time for those 20 years. BUT I am convinced that I want to go back to school at 40 to change careers to a lower-paid job such as counseling, not to maintain my position in a role that I’m fighting day and night to pretend to be good at. So, the $1M mark is my first taste of freedom…

This is truly a recognizable moment of freedom because if I invest $1M for 20 years at 5% rate of return, I will have $2.6M by 60, and $3.38M by 65. My husband doesn’t need as much as I do in retirement, so The $3.38M by 65 is basically my half of the $7M goal. What I would be focused on then, at 40, after the $1M is hit, is obtaining a position that I can maintain for 25 years that I enjoy which enables paying annual costs, so we don’t touch the $1M in the bank.

I’d like to own a 3br, 2ba home by the time my first child is 4. At this point, I should know if I’m having 2 children or just one (or none at all.) So – some of my net worth will have to be put into the down payment of a house. I go back and forth on buying a house but I think at this point I’m diversified enough in stocks that I can afford to own real estate, even if its growth does not keep up with the stock market (and I have the liquidity in stocks to pay for mortgage should we have any bad years in the job market.) So, I’d need $300,000 for a downpayment on a $1.5M starter home, in ~5 years.

But – I need to invest for the next 5 years to hit the $1M goal… and then in 5 years, at age 39, I’d have to take $300M out of my stocks (well $366M with 20% tax) for the downpayment. My husband may be able to contribute to this a bit – probably $100k of it in 5 years, but for simplicity (and explaining to husband) we both need to provide $150k in 5 years for our down payment.  That’s a more reasonable $180k stock sale in 5 years, leaving $748k to grow in stocks…

Annually, for the $1.5M house, costs would be…

  • $90k mortgage (approx)
  • $20k taxes (approx)
  • $1k insurance
  • $15k maintenance
  • = $126k / year ($63k per person per year for 30 years …
    $5.25k / month or $10.5k per month for 30 years)
  • Which means, for our $1.5M house, all in 30 years later, it will cost $4.08M. (Is my math right?)

Ok, so, if the numbers above are right, we cannot afford a $1.5M house in 5 years. Which, basically means we cannot afford a house, unless we can put down a much larger down payment.

In 5 years, unless there’s a housing bubble burst, I doubt there will be any real estate around here that’s less than $1.5M. My take home income is $7,000 per month and my husband’s will be about $3,000…. so, even if I keep my job and he keeps his, we can’t pay $10.5k/month when we’re only taking home $10k per month.

Really, the only potential route to wealth for us is to rent. So, maybe I’ll never own a house. Even if that’s one of our financial goals. But, it’s just so much cheaper to rent an apartment than to own a house.

Maybe, one day when we can afford to put down a 50% down payment buying a house will be worth it. But by then, a basic home will cost $2M… so… I don’t think we’ll ever have enough money to own a home.

This is why I feel so hopeless… even if we have so much more than so many people right now… I just don’t know how to have the life I want, or anything close to it. I don’t need a home today, but I want to feel like I’m making progress towards not living in a 1 bedroom apartment (and a condo won’t help much, if we were to buy one since it’s slightly more affordable, because we’d still have shared walls and annoying neighbors… might as well just rent!)

I am hoping my math is wrong…



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9 thoughts on “What amount of money makes you feel free?”

    1. Yes. I just wonder what kind of income I’d be able to get in other areas of the country where housing is cheaper. It still seems like I’d make so much less, it wouldn’t help much. But, it’s the only way to own a house. In any case, I’m thinking in ~5 years we’ll have to move out of the area.

      1. I think you are estimating a bit too high on all three of the following costs: mortgage, taxes, and maintenance. I did a quick online calculator for the mortgage you are proposed–a $1.2M mortgage after buying a $1.5M home w/$300K down. It came to just under $70k/year, not $90k/year. I’m assuming a 30 year mortgage since you mention the 30 year number.

        I also realize that your husband feels a strong tie to stay in the Bay Area for nonfinancial reasons, but I also think you are underestimating the financial boost you would get from leaving. The financial boost would be especially great in your case because you are cash rich even though unable to afford a home in the Bay Area. That cash would go a LONG anywhere else in the country except Manhattan.

        I’ve sometimes found that I make MORE money elsewhere in the country–despite being in tech–than in Silicon Valley. I don’t mean that a lower income goes further elsewhere but rather that I make more in tech in ABSOLUTE terms elsewhere in the country. The lower cost of living then becomes an additional bonus. In the Valley, there is this entrepreneurial Kool Aid that everyone is expected to drink, where you get a lot of your compensation in the form of stock options not base salary. Everyone is supposed to believe that the stock options will make them rich in a couple of years, so the base salary doesn’t have to be competitive. Of course most of the time the stock options are worthless–and occasionally they do make people rich.

        Recently I bought my first home in the Seattle area. The same home in Palo Alto would cost more than four times as much. Other communities in the Valley are by comparison not quite as crazy as Palo Alto but still 2-3 times as expensive as Seattle. I doubt I’d make any more money if I moved to the Bay Area than I do in Seattle–in fact I might even end up making less. I DEFINITELY would not command a salary 2, 3, or 4 times higher or anywhere near that high in the Bay Area.

        The Bay Area in my experience doesn’t compensate people, even in high paid tech position, nearly well enough to overcome the astronomical prices in comparison with Seattle. (And bear in mind that Seattle is rock bottom compared to the Bay Area and yet Seattle is still considered extremely expensive to most of the rest of America.) What keeps people in the Bay Area is the Kool Aid of potentially getting REALLY rich. If you are with a company where you think that possibility is real (more to it than just Kool Aid) then it is wise to stay. If you have reached an age where you are no longer willing to risk everything on the chance of making it REALLY big, then it is IMHO worth considering options in more affordable cities.

        1. We’ve definitely talked about moving to Seattle, and have even looked at real estate up there. I’m not a huge fan of Seattle (city too small for me, architecture too bland, and I need sun.) But, it’s an option, at least if I stay in tech and want to leave the area. At the moment our desire to own property is not as high as our desire to live in the Bay Area. That may change if/when we have kids. I don’t know if I’d make as much in Seattle, though. I am very fortunate that in my new job I get RSUs, not stock options, which is lovely since those RSUs are actually worth something that I can sell immediately when they vest (right now are valued at ~$30k a year *after tax* – but that all depends on what they are worth when they vest.) I’m so done with the stock option BS. The only reason I’d go back to a startup is either if I really believe in the team (and I have a serious leadership role with respect) or I’m rich enough that I don’t care what I make. I didn’t exercise all of my vested shares at my last company even if maybe they’ll be worth something one day because who the hell knows… I put in about $500 for good measure, just to know how things turn out. Could have put down $14k for the options but no way. RSUs are so much better, even if my salary dropped $25k to go to the public co and take a slightly more junior job. Plus with bonus and such it may end up I make a lot more than my other job, since stock options are worth negative money usually.

          My strategy since I moved here has always been to live as reasonably cheaply as possible and try to earn as much as possible. So far, that strategy is working, other than making it possible to own a house. It would make more sense to stay if my husband also worked in tech but since he doesn’t, it would be better to live somewhere else. When I have kids (if I do) we’re definitely going to have to consider leaving. It may be possible after a few good years at my current job to stay with them and work remotely, which would be ideal.

  1. Your math is wrong. In the $14m example, if you own your house outright and have pots of money taking care of the home maintenance, taxes, eating, travel and shopping, then what is that $4m per married couple doing? Sitting in a bank account collecting dust?
    On the other hand, using the 4% rule, that $4m would produce $160k of income, enough to cover the home maintenance, taxes, eating, etc. every year. So you wouldn’t need the $7.5 million for those costs.
    Also, $100k for eating, travel and shopping? Holy shit.

    1. Good point. I’m still figuring this long-term wealth math out. But, I also am not going to trust the 4% rule because that’s an unknown based on potential market growth. Given the current political situation, who knows what will happen. My $14M number is also not a realistic one – it’s basically a semblance of a # that would be “wealth” where one doesn’t have to worry about the stock market crashing or spending a bit more on a vacation (or paying for friends to take a trip to Hawaii.) I don’t NEED that much money (obviously), but it’s good to have goals. 🙂 The $7M is a bit more realistic as a goal (even though not something that I can probably get to) … I figure $4M-$7M in retirement is really ideal, with $2M being the minimum. The $100k in eating/travel/shopping is reasonable, especially with kids! Do I need that much? Of course not. But this was, again, coming up with a number that is “wealthy” – not “what we need to be happy.” But I can pretty easily spend $100k a year on this stuff… if I had the $ to spend.

  2. Another big concern of mine is unexpected health care costs and long-term care. That can suck up millions easily. It seems hard to ever have enough that it can cover every scenario. Part of it is just getting to a “reasonable” number. As for what that is, I’m still trying to figure that out!

  3. You have the home repair Way too high.

    I did a quick look at San fran, there are 3/2’s well under 1.5M. But even if you go that direction, those houses are give or take like 300K homes in other parts of the country, the land is what is costing you.

    I think your cost of repairs would order of magnitude be 3,000-4,000/year on a mid sized house.

    I honestly would recommend that you take a look at moving, I have read all of your blogs to this one, and it just seems to me that you fear not having money. And the biggest thing keeping you from it seems to be living expenses, more specifically living expenses in an expensive zip code.

    As an example, we just bought a house in Peoria Illinois. Its a move in ready 4 bedroom, 2100sqft Victorian home with no referred maintenance. And we got it for $130K.

    Even in Dallas you could get a historic home for 300-350K.

    I think your retirement numbers would look a lot differently with a different paradigm, the biggest one being the housing costs.

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