whats your life changing money

June 18th, 2008

What’s Your Life-Changing Money?

I’ve been thinking lately about what life-changing money for me would be.  I’ve always thought that I’d have to come into a serious amount of money to have any lasting change on my life – serious amount meaning hundreds of thousands of dollars.

But then I realized – at this point, life changing money for me really means simply getting out of debt and establishing an adequate emergency fund.  Because at that point, money doesn’t have to be on my mind and factored into every decision as much as it does now.  At the point where our debt is eliminated so that our income is a healthy amount above our obligations every month, and we have enough of a cushion in the bank that if something unexpected happened, we could deal with it without risking our overall financial health, that’s the point where our life has changed.

That’s not to say it isn’t changing a little bit every day, and getting closer and closer to that point.  That’s one of the things that is so satisfying about debt reduction – you can see and feel the point of debt freedom come closer and closer, and truly feel your life begin to change.

When I started this blog, our income and obligations each month were almost dead even.  For every penny that came in, it went out just as quickly, and although we were moving forward, it was very very slow and felt like we were barely treading water.  Since last June 19th, I’ve developed three separate sources of income for our family that we didn’t have before (and lost one through no fault of my own in the process), we’ve learned to use the money that comes in more wisely, and we’ve managed to lower our monthly obligations by $200 through eliminating our credit card debt.  That in itself has felt life-changing, and probably has been.  Our income now exceeds our expenses each month enough to make a significant dent in our debt every month and weather the obstacles in our path as well.

My life changing money?  At this point, about $40000 (after taxes) – and shrinking every day.  What’s yours?

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24 Responses to “What’s Your Life-Changing Money?”

  1. I never thought about it that way. Most of us get caught up in building castles in the sky full of What Ifs when we think about Life Changing Money. But, I think you’re exactly correct in your assessment. Just enough is sometimes far better than you could imagine. Great post!

  2. I think life-changing money for me would be the amount it would take to save an emergency fund and a 20% house deposit, and pay for a reliable newer car.
    With a fully funded EF ($35,000 for 6 months – real income, not expenses), house deposit ($90,000) and enough for a car ($15,000), we could probably stop long enough to actually feel the effects. We’d still have to pay off the house, but at least we would feel like our scrounging was actually changing our lifestyle.
    In the absence of that happening anytime soon, we’ll be saving for a looong time – almost like paying off debt really! :)

  3. I received some life changing money quite a few years ago from an inheritance and it changed my life because it saved a life. I was able to use it as part of the tuition for a specialized school that saved the life of my granddaughter. You never know what life will bring. I will always be grateful for that life changing money.

  4. I think life changing money for my husband and I would be about $55,000. That would allow us to pay off debt, student loans, and save for 6 months of expenses in an EF. It would also allow us to start thinking about having children!

  5. For me it would be $70,000 – the balance on our mortgage. As it stands, we have 10 years left on our mortgage and will be COMPLETELY debt-free by the time we’re 40!

  6. For me it would be about $60,000… Thats enough to pay off my student loans and have enough to live on without taking more loans my senior year. That would be amazing!

  7. I’d say 40K into savings + 5K to pay off debt + 50K (seed money) to start my own nonprofit. Round that up to 100K.

  8. @debfretter and R.A.: before stashing 6 mos. cash in an emergency fund (where it likely will be devastated by inflation), see 25 Myths by Jonathan Clements (formerly of the Wall Street Journal).

    Wow. Very modest amounts. For me, “life changing” would be enough money to allow me to replace my current and future income. In other words, retire right now. I am in my early 40s and live in a high cost east coast city. I have 3 young children and a stay-at-home wife. I make around $350K/year, have around $500K invested, and around $400K home equity. I have no debts other than my mortgage and expect to save around $90K this year (but less next year). I expect a private university to cost around $100K/year by the time my oldest child reaches that age.

    My number: at least $5 million. That would be “life changing.” A few hundred thousand would be nice, but it wouldn’t change my life. It wouldn’t pay for college tuition for three children and retirement.

    Oh well, guess my life won’t be changing any time soon.

  9. Well, the minimum to get us back out of debt and fully rebuild our emergency fund is about $25,000. But to truly be life-changing I’d need about another $175,000 in order to be able to put 50% down on land suitable for me to plant lavender and grapes in our chosen retirement area.

    It’s true, that’s a lot less than the $600,000 to $700,000 figure that I carry around in my head.

  10. I think $150k after tax would make everything smashing. No more debt. And if we put the rest in a retirement savings now, we’d have 40 years for it to compound for retirement. :)

  11. I am debt free, though I would absolutely love to all the sudden have enough money to buy a house without a mortgage — it’s such a buyer’s market right now. But in all reality, I daydream of having a windfall where I have enough money to work part-time or on a freelance basis and spend a ton of time traveling the world. I’d also like to have enough where I can contribute a hefty amount to retirement. Between inflation, gas prices, and the health care problems, I really want to make sure I am comfortable in old age.

  12. My Life-Changing Money is Not Money at all – but Paid Health insurance. I don’t want to be without it.

    That’s the piece of the pie I don’t have – and why I am still working 32 hrs/wk…If I could have my health insurance all paid, I’d retire right now (age 54) and live off the interest income from my savings, and my $400 PERS retirement I’m eligible for at 55 (early retirement) (or at 59 regular). My house, car, etc, are paid for. Property tax and insurance on house are about $1500/year. I’d have about $1000/month coming in, and that’s more than enough for me to live comfortably on.

  13. 80k, which is approximately the balance of my student loans. Beyond that we owe around 90k on our house and maybe 3k on anything else (credit cards, car payments, etc). Just knowing the students loans were gone would be life-changing from my mental point of view. We actually are handling the payments just fine (around $400/mth) but it does impact our ability to do other things we’d like to do.

    J…if you could only figure out a way for your wife to work in an academic setting, you might be able to swing free tuition for your children one day. Some private schools still offer that benefit for dependents. That right there could be worth over a million to you.

  14. How interesting–this very thought came into my own mind not long ago. Predictably, I was thinking “oh, if only I had XX gerjillion bucks.” But your perspective is much saner.

    Seen from that point of view, my life-changing money came when I got out of teaching and took a quasi-administrative 12-month contract that paid about $12,000 more than I earned teaching. With raises, I’m now earning almost $20,000 more than I did four and a half years ago.

    Just having enough to make ends meet reliably–even when the plumbing breaks or the car has to be repaired–makes a HUGE difference in my peace of mind. “Life-changing” is exactly the word for it.

    At this point, if I could add $100,000 to my savings, I would feel confident that I could retire safely, free of month-to-month financial worries. If I work until I’m 66 or 70, that just might happen. Maybe.

  15. Hi J – I know what you are saying about inflation but for me, right now in my life, it is important to me to have money easily available for `security’.
    Where I live (Australia) the returns on an online account are around 8% right now – not so bad. If and when that drops, I might consider an alternative way to profit on any cash I have.
    In my 40s I expect to be on similar earnings to yours ($350-$450K) if/when I move into the private sector. At that time, my $35K e-fund would represent 10% of my annual income, and if I didn’t have that much easily available, I think I’d have to liquidate potentially good investments to handle an emergency.
    Also, two high earners in my extended family recently found themselves overstretched – in one case, with all his money tied up in a recent investment, he couldn’t help his 21yo and 22yo sons pay for a final-year college elective overseas. Don’t know If I’d like to be in a similar position, so I think it’s worth it to have some `cash at hand’.

  16. For me I think that being able to pay off my student loans will be life changing. I hate having a loan out there which only real purpose is to allow me to work. I am glad that I went to school, but boy I wouldn’t go to such an expensive school again.

  17. For me, $15k to get out of credit card debt would be huge. Another $15k to get rid of the student loans would be nice, and then another 32k to get rid of car payments would make me set to do really well… so $70k would be life changing, but the first $15k would start me down that path a lot faster than the rest of it…

  18. Getting out of debt has been life changing for me, but now I have new money goals. Now I need to catch up my retirement that is woefully under funded, I have schooling I need to pay for, and of course sometime I would like to consider a house but in Southern California where the mean average house price is over $500,000 it is a tall order. But I would put life changing amount at $7000 (finish emergency fund) + $5000 up grade car + $10,000 education fund = $22,000.

  19. @J – I think that’s kind of the point, if I was in your position it would take a lot more $ to be truly life changing. But where I am now, being out of debt and having an emergency fund would be incredibly life changing.

    But once I accomplish those – the ante goes up as to what might be life changing again. :)

  20. For me, I think it was the money we received last year that enabled us to have a $12,000 emergency fund. I just *feel* so much better knowing we have that safety net in place.


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