Does saving 3 million mean you don't have to work anymore?

I recently saw a trending topic: a 36-year-old woman and her husband lived a minimalist lifestyle for ten years, and with a fully paid-off car and house, they managed to save 3 million RMB. Now, they live a life of leisure, not having to work and enjoying their days with a monthly interest income of around 8,000 to 9,000 RMB.

This hot topic has made the working class envious to tears, envying both the ability to retire so early and having 3 million yuan in savings, and envying even more their relaxed and leisurely daily life.

I have read a similar report before. In Japan, there was a part-time worker who saved 100 million yen (about 4.7 million RMB) and retired early.

The cost behind this achievement was that he had been living a frugal life for 20 years, willing to remain single and not start a family.

In the past two years, there have been frequent discussions on social media about how much money one needs to save in order to quit working or retire early.

For ordinary office workers, instead of discussing the dream-like possibility of saving enough money to not have to work, it might be more practical to think about how to motivate ourselves to continue working in the present circumstances.

01 Resignation savings: 1 million, 4 million, or 10 million?

Many workers have imagined a specific amount of money they would need to save before resigning. Let's calculate these approximate amounts.

If you live in a third or fourth-tier city, your monthly living expenses are around 3,000-4,000 yuan. Based on a 2.65% interest rate for a large five-year time deposit, you would need around 1.5 million yuan in savings. If you live in a first or second-tier city and need 6,000-8,000 yuan in monthly living expenses, you would need around 3 million yuan in savings.

Now let's reverse the calculation: if you currently have 4 million yuan deposited in the bank, based on the current interest rate for large deposits, you would earn approximately 100,000-110,000 yuan in interest per year, which is about 10,000 yuan per month, enough for the average person to spend.

However, these three scenarios are relatively ideal. We have not factored in currency devaluation (inflation), major unexpected illnesses, investment losses (if you plan to invest), saving money for your children's education, or even providing for your parents' retirement expenses.

Therefore, when it comes to the amount needed to resign, whether it's 1 million, 3 million, or 10 million, without considering inflation, unexpected situations, family expenses, and future cash flow, it's all just wishful thinking.

Some people have summarized that, taking inflation into account, a person would need to save a certain amount of money, calculate their monthly expenses, and determine how long this money could support them without having to work. The general situation is as follows:

If you have 1 million in savings and spend 50,000 yuan per year (4,100 yuan per month), you can live without working for 28 years. If you spend 100,000 yuan per year, this amount of money will only allow you to live without working for 11 years.

If you have 5 million in savings and only spend 100,000 yuan per year, you can live without working for a lifetime. However, it is usually difficult for a family with 5 million in assets to spend only 100,000 yuan per year. The normal expenses for living, education for children, etc., add up to 200,000 yuan per year. At this spending level, the money will only be enough for 39 years of living without working.

If you have 10 million in savings and spend 500,000 yuan per year (this amount is not excessive for a family with 10 million in savings), you can live without working for 28 years.

Here, let's define "living without working": without considering significant inflation and unexpected expenses, depositing the savings in the bank to earn interest. When the monthly interest income is higher than the monthly expenses, then you are in a state of "living without working."

For ordinary workers, let's not mention the unattainable 10 million in assets. Let's say having 5 million in pure assets that can allow you to live without working for a slightly longer period of time—cash, no loans or debts, owning more than one property or additional commercial properties, and having sold financial products/stocks. Meeting these conditions is an extremely difficult task, a goal that ordinary people struggle to achieve in their lifetime.

02 "Not working" and "financial freedom" are two different things.

There are relatively authoritative institutions that have conducted statistics on the threshold for financial freedom. The "2021 Hurun Wealth Freedom Threshold" report divides wealth into four stages: entry-level, intermediate, advanced, and international, and further subdivides them into first-tier, second-tier, and third-tier cities in China. The report shows:

First-tier cities: The entry-level threshold for financial freedom is 19 million yuan, intermediate is 65 million yuan, and advanced is 190 million yuan.

Second-tier cities: The entry-level threshold for financial freedom is 12 million yuan, intermediate is 42 million yuan, and advanced is 120 million yuan.

Third-tier cities: The entry-level threshold for financial freedom is 6 million yuan, intermediate is 21 million yuan, and advanced is 60 million yuan.

For the average person, achieving financial freedom of 6 million yuan, even while working in a top-tier city with a decent and relatively stable income, is difficult. Moreover, the human heart is constantly oscillating between feelings of insecurity and greed.

When you first start working, you may feel that 10,000 yuan a month is sufficient, but once you achieve that, you may feel that you need 30,000 yuan a month to feel secure. For middle-class families in top-tier cities, 30,000 yuan a month may be enough, while elite families may need 100,000 yuan a month.

When you reach the entry-level financial freedom in a third-tier city, you may then aspire to the mid-level financial freedom in a top-tier city, which requires 20 million yuan.

Therefore, economic freedom is more of a mindset than just a number, because "freedom" does not depend on how much money you actually have.

According to the 4% rule, economic freedom depends on the interaction of three factors: the size of the wealth you have accumulated in the past, the speed at which your money generates more money in the future (i.e., how much principal you have and how efficient it is at generating more money), and the extent of your material desires (your expectations for an ideal lifestyle and how much money is needed to maintain such a lifestyle).

These three factors determine that the number behind economic freedom is different for each person.

However, "not wanting to work" is a state that only a few people are fortunate enough to achieve by doing work they love and are fully committed to. For most wage earners, work is simply a means of making a living. "Making a living" corresponds to survival needs in Maslow's hierarchy of needs, and it is unlikely to be a pleasant experience to toil for survival.

Therefore, for most wage earners, what we really need is to figure out how to escape the state of hating work, which may not necessarily be related to achieving financial freedom, as the latter is too difficult to attain.

Why do financially free people still work?

Although many people fantasize about not working after saving enough money, the subtle reality is that the wealthiest individuals in the world are constantly working. Why do those who have truly achieved financial freedom continue to work, and even go to work punctually every day?

The magazine Forbes once interviewed several CEOs and senior executives who had achieved financial freedom, asking why they continued to work. Alan Meckler, the CEO of Web Media Brands, with a net worth of over 4 billion dollars, stated that he continued to work to "continue the brilliance for his family and future generations." Barry F. Schwartz, the honorary vice chairman of Forbes and a board member of multiple companies with assets worth tens of millions of dollars, continued to work because he "loved the industry." Millionaire Bob Shullman, who returned to the workforce less than a year after retiring, founded his new company, Shullman Research Center, a digital marketing company targeting B2B enterprises, because he "enjoyed taking on challenges."

The reasons why wealthy individuals who have achieved financial freedom choose to remain in the workforce include not wanting to be disconnected from society, continuing the prosperity of future generations, maintaining financial security, pursuing passion, and continuing to learn and grow.

Moreover, these individuals do not approach work with a leisurely or entertainment mindset; they are often workaholics.

An article in The Atlantic reported that since the 1980s, the married men in the top 10% of wealth in the United States have increased their weekly working hours by approximately 5 hours, reaching 250 hours per year, surpassing any other group.

This group could have used their wealth to purchase anything they desired, but they chose to purchase more working hours.

It wasn't until 2022 that a decrease in working hours began to appear for the highest-earning group. The working hours of the top 10% of men decreased by 77 hours, while women decreased by 29 hours. However, there are still many billionaires who work 10-12 hours a day.

This is a contradictory phenomenon: to become financially free, you must first become a workaholic and invest almost all of your life into work. Yet, when you achieve the rewards of work and become financially free, it is difficult to leave work. Whether it is due to inertia, mental state, self-esteem, noble status, or the desire to become a better version of oneself, you cannot give up work.

So, we working-class folks need to be a bit more open-minded. It's true that it's hard for us to imagine the luxury enjoyed by the wealthy, but those mega-rich individuals, just like us, also can't do without work.

It's difficult for ordinary workers to become rich and achieve financial freedom through their jobs, but there are still some ways to overcome the dislike of going to work.

There are many reasons for hating work: career burnout, lack of proportional return on investment, conflicts in interpersonal relationships, a toxic work environment, and bleak prospects, among others.

Some of these reasons, such as a toxic work environment or a bleak outlook for the company or industry, can be addressed by changing jobs. However, there are some reasons that cannot be solved by changing jobs.

For example, career burnout is something that every worker will encounter, and this state will eventually be encountered regardless of changing companies or industries. Therefore, the only way out is to set new goals for oneself, give oneself more self-motivation, and seek new challenges in the workplace. For example, if it's an issue of interpersonal relationships, if it's related to one's own personality or communication skills, there's no other way but to exercise and improve. Furthermore, if the input does not match the output, we can solve this problem by demonstrating solid work performance and negotiating skills. If the current platform doesn't recognize your worth, then of course, it's time to find a new one.

For us ordinary workers, achieving financial freedom is difficult, so it's better to think about how to fall in love with our work time and time again during our long working careers.

References:

Forbes: Why Do The Mega Rich Continue To Work?

The Atlantic: America’s Fever of Workaholism Is Finally Breaking