I have no dog in this hunt arguing whether $50 million is or is not the Goldilocks net worth amount for you.
What is the Goldilock’s net worth amount in America?
It’s partly the money. This essay argues two issues: (1) why the optimal net worth amount equals $50 million, and (2) does a definition of an optimal net worth amount exist in America beyond monetary net worth (e.g., authentic admission of your fun, joy, and peace around net worth) including mental and physical health.
The definition of wealth historically makes people consider the dollar size of their net worth. To live requires money to pay for our needs and wants (more on that later). As a human race, we do not consider the costs to acquire that net worth until later in life. The same reason young men are eager to fight wars without considering the potential side effects [side question: why are the politicians who have never fought in a war so keen to start wars?].
Accumulating a Goldilocks net worth amount of $50 million provides the best of all worlds: (a) anonymity, (b) flexibility, (c) multi-generational wealth, and (d) freedom. The exact Goldilocks net worth amount could also be $200,000. It depends on the definition, as lawyers love to say.
What is a net worth definition?
The classical net worth definition: Assets - Liabilities = Net Worth. Those that save more than they spend add to their monetary net worth. Investing those savings wisely, especially early in life, increases the probability of increasing your monetary net worth.
Divorces, etc. Those will kill your future monetary net worth number. And maybe other definitions of net worth.
Investing wisely can be done thru the stock market, real estate, private equity, venture capital, and/or in your own company. The ranking of these investments was from the lowest risk (i.e., stock market) to the highest risk (i.e., your company). The highest risk also offers the highest reward.
The risk you can control (your company) arguably is lower than the risk you can’t control (stock market).
Is net worth only about money?
Yes and no. Yes, for those who have no feelings. No to everyone who has a heartbeat and enjoys giving/getting a hug.
Our optimal net worth includes financial, physical, mental, and joy [side note: better than happiness because it’s not based on any external event]. These other parts of our net worth take work to grow and maintain our monetary net worth.
We have to figure out how to eat balanced and consistent (hat tip to Japanese and European cultures). Our bodies need to remain supple and strong throughout our lives as we get one version.
Why $50 million?
In today’s dollars, it gives anyone the flexibility, anonymity, and freedom to do whatever you want today and make plans for tomorrow (e.g., future generations) as easy as it gets. You can hang with billionaires (e.g., charity giving, vacations, dinners, vacations, etc.) without their stress.
I know a few billionaires (professionally). They are stressed out, just on different stuff than you and I. And those stresses are self-induced, by the way.
If I were writing this essay before the world went off the gold standard (aka 1974), the Goldilocks' net worth would be closer to $5 million (guesstimate using an HP 12C and back of the envelope assumptions).
The value of money has been devalued every year since 1974 [side note: send a message to your favorite Republican or Democratic politician thanking them for this treat] and will continue to be devalued. But.
But what? It takes a ton of work and luck to get to $50 million. What happens if you define your Goldilocks net worth of fun, peace, and joy differently? Then the number will be much, much lower. I know of a man worth around $400,000, retired with a joyful smile and enjoying every day.
If you want to maximize the level of toys and thrills money can buy, around $50 million (liquid) maximizes everything. You can even hang out with billionaires. At $50 million, you are anonymous. You have your privacy. Your kids won’t be messed up with that level of wealth. You can even hide your wealth by your car and home choices to create your kids' solid worth ethic appreciation. AKA a Goldilocks net worth amount.
In general, life gets complicated the farther north of $50 million. Fast.
A few questions to ask yourself:
- Does your annual vacation budget go from $500,000 a year to $2 million, increasing your joy level?
- Does owning one home versus five homes make you and your family feel more content with less complexity?
You should drill down the list of stuff money can buy (e.g., cars, shoes, jewelry, etc.) and arrive at your customized philosophical answer.
Whatever your Goldilocks net worth goal is, evidence shows that bigger doesn’t mean better. We all know this is a complicated topic. I am going for general concepts to get us thinking about our own Goldilocks net worth definition.
Want to be worth $70 billion. Awesome. Just remember your joy above a $50 million lifestyle is unlikely to increase. So make the $70 billion and live like you are worth $50 million.
How do you and your family exist within your net worth definition?
It starts with the self.
If you grew up poor or with financial uncertainty, your focus on net worth definitions would change throughout your life’s successes. It will start all about the money. That will continue to somewhere in your mid-40s or earlier, depending on your number (see below), family, and you—thoughts for consideration.
It doesn’t matter whether we grow up with wealth or not. The Goldilocks question remains the same – what should it be, and how will it change. As we age and our family situation changes (e.g., single, married, partner, kids, or no kids), the questions will evolve.
Growing your net worth can be stressful—the bigger the number, the bigger the stress. There are net worth limits if you are a W2 employee or partner at a consulting/professional firm. How much juice is worth the squeeze? The monetary net worth technical definition includes liabilities, and stress is a liability that should be added to that calculation.
What goes into managing your net worth (hint: more than just investment oversight)?
CPAs. Lawyers (estate and general). Investment people. Property and Casualty insurance. Life Insurance. Therapists. Doctors. Trainers. Property Managers.
All these service providers need to be managed and coordinated. Generally, north of $50 million, everything gets more complicated with more moving parts. People can make it more complex than necessary with a net financial worth of $4 million (typically thru their estate and legacy planning and more entities than necessary).
The larger one’s financial net worth increases, the more time they should have. That would be another component of a Goldilocks net worth definition. Time. Most of us only have 4,420 weeks in our lifetime.
Definition of your Goldilocks net worth amount
Conclusion Body: We agree that a standard, one size fits all Goldilocks net worth definition does not exist. The ridiculousness of this essay’s heading was to stir an interesting internal debate, within each of us, about defining our customized authentic Goldilocks net worth amount.
“What is your number?”
The Goldilocks monetary net worth amount exists somewhere between $200,000 and around $50 million. The amounts below are too little. Amounts higher create more hassles. This editorial observation comes from 25 years of working with HNW and UHNW families. For those uber achievers – you can always just give away your money to charities at some point.
Your total net worth definition should also include your mental and physical health. If you want to go for $70 billion - awesome. Just remember your joy above a $50 million lifestyle is unlikely to increase. So make the $70 billion and live like you are worth $50 million.
If you are an uber achiever, ADD type of person, you are unlikely to read this sentence. You probably dropped off at the end of 3rd sentence in the introduction because the Socratic answer exists there (hint: look for the parenthesis).
To your “handlers” and everyone else for themselves, ask yourselves, regularly does that “number” also make your life joyful for you, and the people around you.
There is no wrong answer.
And fun, joy, and peace are the goals worth striving for as you define them.