What’s Your Number?

Do you know what your number is? I sound like an ad for the Sleep Number mattress, but what I mean is do you know how much you need to accomplish your goals? Retirement, college funding, the flexibility to travel, etc.?

In my experience, many have this number in their head—“I just need $1 million…”—but don’t have the necessary context behind it. Are you sure you need $1 million, or $2 million, or whatever number it is?

Take a couple who own a business, for example, who have the opportunity to sell their business for $5 million. They think, however, with a few more years of work that they can double that price. That’s all well and good and their ambition is admirable, but they’re starting to think in a vacuum. First, their business will likely always have greater value to them than whomever is buying due to the sentimental aspect of building something from scratch. Second, they haven’t thought about what the current $5 million price tag would mean for their goals. Perhaps a windfall like that would allow them to retire today, spend more time with their kids, fund college education, and travel like they have always wanted to. So why hold out for a higher price if the current offer will fulfill all of your goals?

I actually ran into this real world example not long ago of a business owner who had a similar opportunity and passed. Unfortunately, the market changed and his business is worth far less now than the initial offer. He’s not necessarily upset, but he did say that had he known that accepting the offer would have accomplished all of his goals, he would have sold in a heartbeat. He was caught up in the idea of maximizing value in a vacuum instead of quantifying what exactly that would mean to him.

A much more common example is when it comes to selling a home. I heard the story of an older person in their 70’s who wanted to move back closer to their kids and grandchildren, so they listed their home for $650,000. They actually received several offers, but all were below asking price and the best was $625,000. This individual just refused to sell their house for less than $650,000 and so kept holding out. After several months and no better offers, he sat down with his advisor who immediately reframed the question: “I know you think your house is worth $25,000 more than your best offer, so let me ask you this…knowing you are financially set, would you spend $25,000 to be closer to your family as soon as possible?” The answer was very clearly yes. This individual had made the same mistake of not quantifying what the numbers mean to them and focusing solely on the deal itself. They immediately accepted the next offer and couldn’t have been happier for doing so.

So what is your number? I’ve seen people hold out on retiring because they assume they need more than they do. I’ve seen people work much longer hours than they want to because they don’t think they can turn down such a great salary when the reality is that they can. Their lifestyle doesn’t require that much and they’d much rather spend time with their family.

You can’t take each transaction or decision in a vacuum. Don’t think of things strictly in dollar terms, but in how those dollars will help you achieve happiness. And if you’re holding out for a number that won’t make you marginally more happy, then stop holding out.