I read a great essay by Patrick Rhone; it was called “Enough”. I really think you should read it. He writes super-fantastic stuff. Like, really super fantastic. Not the point though.
I have been meaning to write an article about “having a number” and Patrick’s essay is a much more elegant version than I could ever produce. So I’m going to just give you my two cents on how I see it relating to business, and then stick to what I do best, the numbers.
Whenever I talk with small business owners, I always tell them to “have a number”. What does this mean? Starting a business is a lot of risk. Why do people do it? To make a living. Business is business, and you do it to make a living. Too many business owners get stuck in the cycle of working just for the sake of working and they forget why they are doing it. That’s because they don’t have a number.
Having a number means knowing, ahead of time, when enough is Enough. If you don’t decide ahead of time, you will never have enough. And that is the beginning of the work to death cycle.
So here is how you figure out how much enough is. It actually isn’t that hard. The first step is to make a budget. I know, I sound like a broken record with this, but seriously, it’s important. The purpose of the budget is to figure out what you need for income. This is where the “enough idea” really comes into play. You have to really think about what kind of life you want. And once you decide, you have to be strong enough to learn to be happy with what you have.
Once you have the income number, subtract what you are going to get from other sources. Social Security, pensions, etc. That tells you how much income you need to create from your assets. Just divide that number by your withdrawal rate. In my business, I typically use 4% or 5% as a sustainable withdrawal rate. There are several reasons for this, but they are beyond the scope of this article.
If you want, add to that any other things you want to have paid for at retirement and boom!
That’s your number! Work your ass off until you get there, but once you do, Enough is Enough!
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