Country singer Kenny Rogers had these great lines in his song “The
Gambler”:
You got to know when to hold ‘em,
Know when to fold ‘em.
Know when to walk away,
Know when to run.
The line that speaks loudest to me is the one about knowing when to
walk away. An associate of mine used to say, “If you’re sitting at
the table, you must be playing!” Walking away is the hardest thing to
do because it means you’re done and the game is over.
How will you know when to walk away from the acquiring business? Of
course, there are lots of factors involved in that decision – health,
responsibilities, outlook, industry conditions, etc. But, there’s one
you can quantify and make real with a little forethought – your walk
away number. How much money do you need to walk away from this
business and do whatever you want for the rest of your life?
It’s easy to blurt out a number like $10 million or $100 million.
Sure, who wouldn’t take that kind of money? But I am too old for a
knee-jerk answer like that I need a number that is achievable,
realistic and that will work for me and my family.
Here are my basics: I am 46 years old, in apparently good health,
married with two kids, ages 10 and 8. I like what I do, and can’t
really think of anything else I would rather be doing right now
anyway, so I guess I’ll tough out the rest of my working life in
merchant acquiring. Working for at least the next 5 years, and
probably 10 (maybe beyond, who knows?) at this job sounds fine to me.
Besides, I need the paycheck to pay the bills and so the whole thing
fits together fine.
For now. What about in 10 years when my youngest child leaves home?
Will I want to be in the office every day taking merchant complaint
calls? Will I want to be tied to the office and business operations
daily? Maybe, but I don’t think so. I am also sure my wife will want
to hit the road and have some fun, and I would like to be with her!
So, in about 10 years, or sooner, I want to walk away. What does that
mean in real, hard numbers? Well, I don’t want to live less well than
I do now. My kids will be gone, but we’ll travel more, so I figure
it’ll all even out. I think if I can preserve my current income and
standard of living, that would be great. To do that, I can work
backwards by making some simple assumptions.
Let’s assume that any assets I have will yield 5% in cash to live on
and still grow at a modest rate or at least not lose value. That
seems pretty reasonable. If I want to preserve my current income,
then I should take that number (before tax) and divide it by 5% to
get the amount of principal I’ll need to have. That amount is 20
times my annual salary in the bank after tax in cash or other
equivalent investments.
If I have that much cash stashed away, I can reasonable expect it to
produce about 5% of its value each year – which would be equivalent
to my current salary. Assuming our cost of housing remains the same
as it is now (doesn’t matter if we own or rent, I am a just talking
about the cash cost of living) and we have the kids college education
financed one way or another, then all this should work out OK. Under
those circumstances, I don’t have to go in the office every day, and
I can hit the road with my wife.
Is more money better? Maybe, but not necessarily. I think this line
of thinking is a trap. If I had 20x my annual salary in the bank,
would 21x provide a noticeably better quality of life? And would it
be worth the extra year or two of my life required to create that
much more money? The answer is “No” on both counts for me. Sure, it’s
fun to fantasize about a larger walk away number. But there’s a point
at which the money, or the desire for it, owns you. That’s backwards.
You should own the money and it should work for you, not the other
way around. Getting realistic about how much money is enough is the
key to getting it done.
There has to be an answer to the question, “How much is enough?” Not
all of us are going to be Bill Gates or Warren Buffet, that is for
sure. (I don’t want to be! There actually is such a thing as too
much money.) There’s a number out there for each of us. Think of it
as your Goldilocks number – not too big and not too small, but just
right for you. Start working on that number today. 
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