Yesterday, I was with one of my school friends and the topic eventually moved to how I achieved financial independence. I told him that I knew what’s ‘enough’ for me. For which he replied, he would need about $50mn. I quizzed him that had I asked him the same question during my last visit (about three years back), it would’ve been about $10mn and he nodded in affirmative.

Knowing the enough level in any aspect of life is important, it’s critical in personal finance. Unfortunately, the pursuit of ‘more’ or maximising is often construed as default goal. I’ve seen some unrealistic and ambitious numbers thrown, particularly, when discussing about retirement. It’s also partly due to misunderstanding of what retirement is. But one of the most underrated skills in financial planning is knowing what ‘enough’ looks like. Without this clarity, people struggle to set meaningful goals, leading to anxiety, poor decisions, and even financial burnout.

Many, thus grapple with questions like how much risk should I take, what’s a reasonable return to expect, how much wealth truly do I need and what should be my retirement corpus be, etc. Without clear answers, they either set arbitrary targets (often influenced by social comparisons) or keep chasing an ever-moving finish line. This uncertainty manifests in:

Over-saving at the cost of present well-being: Sacrificing too much today for an unknown future that may not require such extremes.

Underestimating retirement needs: Assuming minimal expenses, only to face shortfalls later.

Disproportionate (excessive or insufficient) risk: Either chasing high returns recklessly or staying too conservative, missing growth.

So, how should one define “enough” in personal finance? While this is personal it could be systematically approached.

Instead of vague aspirations, quantify what financial independence means for you. Ask questions like how much would sustain a desired lifestyle and thus what’s a realistic corpus be? Also, what are the discretionary vs non-discretionary spending be and what’s a realistic additional buffer to all this?

For instance, if one requires Rs10 lakh/year in retirement, a 4 per cent withdrawal rate suggests a corpus of Rs2.5 crore. Adjust this number for inflation and personal circumstances.

Another critical factor is to consider the risk tolerance i.e. how much volatility can one digest? Many confuse risk tolerance to risk appetite. Tolerance is the phycological threshold while the appetite is the technical threshold i.e., capacity to take risk. So, “Enough” risk isn’t about maximising returns but balancing growth with peace of mind.

Aggressive investors may chase high returns but risk panic-selling in downturns.

Overly conservative investors may fall short of long-term goals.

Knowing one’s sleeping point in investing is important. If market swings keeps one awake, then dial back risk.

Lifestyle creep is another dynamic to be considered when arriving at ‘enough’. This is a phenomenon where the standard of living rises alongside the discretionary income where soon the former luxuries become necessities, without us realising. The best way to counter is to regularly assess needs vs wants and recognize that beyond a point, more wealth has diminishing happiness returns. Also avoid the psychological trap of comparison.

Many underestimate longevity, inflation and healthcare costs while overestimate costs towards travel, luxury, etc. during retirement.

A retirement spending realism helps a lot. While the hardest question in finance isn’t “How do I get rich?” but “How much is enough for me?” Defining “enough” isn’t about limiting ambition, it’s about freeing yourself from endless striving. Knowing it helps one to stop overworking beyond what’s necessary, enjoy presence without guilt or scarcity mindset and make smarter trade-offs.

Would you rather chase an infinite goal or define your “enough” and live freely? The choice is yours.

(The author is a partner with “Wealocity Analytics”, a SEBI registered Research Analyst and could be reached at [email protected])