When enough is enough - life is for living

Personal Finance 101 starts with the simple question: what are your goals? Unless you know what you want to achieve, all the investing in the world won't get you there.

But defining your goals isn't about numbers. It's easy to say I want to be a multimillionaire, but why? What will those millions give you that a more modest sum won't?

Money is simply a means to an end. It should give you the freedom to live the life that you want.

For some, that might be never having to worry about how they'll pay unexpected bills it may be the freedom of international travel after a lifetime of working.

For many, it is the ability to set up the children for a secure and successful future. For others, it is the freedom to work because they want to, not because they have to - to build what's politely known as "to hell with you money".

For a limited few, it's about ego. It's about wanting to die with more money, not to mention Learjets, than the next person. Presumably so they can boast about it in the afterlife. But for most of us, there is a limit to how much money we need and understanding our goals is the first step to quantifying that.

Since I first began writing about personal finance, the amount of information on managing your money has exploded. Perhaps not coincidentally, this has been accompanied by an explosion in how much money we think we need.

Part of this has been due to the growth of superannuation and the recognition that the new generation of retirees are healthier and more active than generations past. We can expect to live longer and at 65 are more likely to be looking at taking up new activities than comparing funeral plans. Am I the only one who shudders in horror at those ads for the over-50s featuring old people?

It's odd. When only the privileged few had access to super, no one talked about the nation's retirement savings shortfall. Now this fear of a poverty-stricken retirement is fed by frequent estimates of how big the gap is between what we want and what we can afford.

That's not all scare-mongering. The age pension is now a princely $712 a fortnight for singles or $536.70 each for couples, so you don't need to be a financial genius to realise that government support alone won't come close to providing the retirement that you want - even if the pension is supplemented by all those discounts that come with the Pensioner Concession Card.

Yes, we have compulsory super, but the average account balance is still well under $100,000 and even for those nearing retirement, aged 60-64, it is about $155,000, according to the Australian Bureau of Statistics. MoneySmart's handy retirement calculator shows a super account of $200,000 would boost your retirement income to about $28,000 (or about $1075 a fortnight) if you're a single home-owner, while a combined super benefit of $300,000 would boost a couple's income to about $42,000 (a bit more than $1600 a fortnight) if they owned their own home. Both estimates include their age pension entitlement.

It certainly isn't the life of Reilly.

Because the age pension is means-tested, we also get less retirement income for our super buck as our savings increase. On the above estimates you'd reckon that if someone with $200,000 could get a retirement income of about $28,000, if you had $1 million invested in super you'd be rolling in it.

But MoneySmart estimates you'd still only get an annual income of about $51,000 if you're single and $62,000 if you're a couple.

So yes, we do need to plan and save for retirement.

But financial planning isn't just about retirement. It's about looking at both shorter- and longer-term goals and setting priorities so that you can work towards achieving what's important without stressing about what is not.

An AMP.NATSEM report into the cost of living earlier this year found average income growth for Australian households more than covered cost of living increases since 1984.

And yet many of us are feeling worse, rather than better off.

At the time, the managing director of AMP Financial Services, Craig Meller, put this down to a greater focus on lifestyle and aspirations. Essentially, he said, we seem to be leading "bigger lifestyles" with cost-of-living pressures being "more related to increased expectations ... from a modern society than the prices we pay for petrol or electricity".

A bigger, more fulfilling lifestyle is every bit as valid a goal as security in retirement. Who knows, there's always that proverbial bus around the corner. But if financing that lifestyle is causing stress, it all seems rather self-defeating.

Sacrilegious talk from someone who has spent the past 25 years writing about making money? Maybe. But unlike the get-rich-quick merchants who promise that you can have it all, I've come to realise that good financial management includes asking yourself when enough is enough.

Twitter: @annette_sampson