From time to time someone will comment at ESI Money with something along the lines of “what does it mean to be rich?”
It’s a topic I’ve thought about a lot, have wanted to cover for some time, and will likely write about again even with this post discussing the issue.
Obviously one aspect of being “rich” is monetary.
In fact, if you look up “rich” in the dictionary the first definition is “having a great deal of money or assets; wealthy.”
Let’s dig a bit into that before we head into different territory.
How Much Money Do You Need to be Rich?
To get some top-notch advice on what it takes to be wealthy, I went to Google.
It’s actually kind of ironic given the responses I received, but where else do you go to get information these days? š
I typed “how much money does it takes to be rich” into the search field. Here are the highlights from some of the first results listed.
Let’s begin with this post from Business Insider which gets right to the heart of the issue:
Just how much money do you need to earn to be considered “rich”?
For some Americans, the answer is having an average of $2.4 million to your name ā that’s almost 30 times the actual median net worth of US households, according to the U.S. Census Bureau.
For one thing, I like that they give an actual number.
For another, they are actually quoting net worth versus income. The former defines wealth while the other only defines the potential for wealth (which is often not realized).
Finally, $2.4 million? Really? I would have thought the number would be lower.
Unfortunately the article doe not stay on the straight and narrow:
Ask the government, and they’ll define wealthy as individuals earning at least $500,001 and couples earning at least $600,000 ā the new income thresholds that now pay the top federal marginal income tax rate of 37% in accordance with President Donald Trump’s new tax plan.
We pooled 5-year estimate data from the U.S. Census Bureau’s American Community survey, combining results on median household income from 2013-2017 to determine just how much you need to earn in the most populated city in every state, including Washington DC, to be considered rich (hint: it’s at least twice the median household income).
Ugh. Back to income. But they are not alone…
Check out this post from CNBC who doesn’t disappoint when it comes to showing that journalists are not money experts:
Americans have varying ideas of how much money you need to earn each year to be considered “rich,” but most people say you need to bring in at least $1 million per year.
That comes from a new GOBankingRates survey, which asked participants, “What level of annual income do you think makes you rich?”
While answers ranged from $100,000 to more than $10 million, the most popular response, chosen by 26 percent of respondents, was at least $1 million. An additional 13 percent of respondents said $5 million or more while 12 percent said $10 million or more.
Again with income being used to determine wealth. Ugh. They are killing me.
The Washington Post adds a bit more detail to the study BI quotes above and sticks to new worth:
A recent survey sponsored by Charles Schwab asked 1,000 Americans ages 21 to 75 what level of personal net worth would make them feel āfinancially comfortable.ā The average figure was about $1.4 million. It would take another $1 million — a total of $2.4 million on average — for them to consider themselves wealthy.
I’m interested to hear what you think of these numbers. I personally started feeling “comfortable” in the high hundred thousands.
The smart blogger at Financial Samurai starts talking about income, but since he knows what he’s talking about, he switches to net worth. He provides a chart to answer the question but also offers this guideline:
Hereās a good net worth target to follow. After all, itās not so much how much you make, but how much you keep. To be truly rich, you should aim for a net worth equal to 20X your average annual gross income or more.
Then there’s this reality check! According to Bloomberg, bankers think you need a whole lot more to be rich:
Just how rich is ārich?ā
In rich-tropolises such as New York and London, 1 percenters moan that living on $500,000 a year feels Dickensian. With a pot of $40 millionāand private schools, a Hamptons retreat, a horse and a charity to feedāa hedge funder on the Showtime drama āBillionsā exclaims: āF—! Iām broke!ā
Here, then, is a real answer, courtesy of the hush-hush world of private banking: $25 million.
Twenty-five million dollars in investable wealth. The kind of money you could afford to see dip into the red for a quarter or three, maybe even a year or two, without breaking a sweat. With $25 million, maybe, just maybe, you’re starting to be rich.
Because in this era of hyper-wealth and hyper-inequality, that is simply where rich beginsāa ticket, in truth, to the first, lowly rung of rich. For most of the planet, $25 million represents unfathomable wealth. For elite private bankers, it buys their basic service.
Call it economy-class rich. Business class? That’s $100 million. First class? $200 million. Private-jet rich? Try $1 billion.
Haha! Yeah, right!
Finally, I really enjoyed this post from The Balance. Some of their key thoughts:
Those bemoaning the current state of the middle class are largely displaying their economic ignorance. Yes, it should be better. Yes, healthcare and education costs are rising beyond what is sustainable due, in no small part, to perverse government incentives, inflating a bubble along the way just as was done in housing last decade.
It doesn’t change the fact that there has never been a better time to be alive for a super-majority of the citizens of this country. Still, that’s not what people mean when they ask, “What is rich?”. This is because of two fascinating quirks in human evolution that behavioral finance has given insight into in recent years.
1. People are satisfied by the perceived trajectory of their life, not necessarily the absolute quality of their life once certain minimum needs have been met. That is, a person who goes from making $25,000 a year to $150,000 a year is going to feel more happiness than a person who goes from making $10,000,000 a year to $500,000 a year despite the fact that the latter is still among the highest-earning households in the United States and earns far more than the former.
2. People are satisfied by being materially, but not excessively, richer than their peers, family members, friends, colleagues, and neighbors. It is not an accident that the amount of annual income at which personal happiness tops out ($75,000 according to a study by wealth experts) is about 50 percent higher than the median household income. There is also an element of envy present. To borrow an example put forth by a well-known investor, you see traders ecstatic to get a $1,000,000 bonus on Wall Street until they realize the guy at the next desk got $2,000,000; then they are miserable. In most cases, it’s irrational but people develop grudges, hurt their own reputations, become spiteful, and, in some cases, outright hostile because of a perceived lack of fairness. The money, in other words, has become a proxy for emotional considerationsāhow valued the person is, how intelligent they are perceived to be, how necessary they are to the team.
Then the post goes on to define rich three different ways (though they still focus on income in the first two):
The Absolutely Rich: On a global scale, I think the line probably starts somewhere around $80,000 per annum. A family earning that amount in the United States, and run by someone who is financially intelligent, will enjoy a standard of living that utterly surpasses, in every meaningful way, the experience of a vast majority of people alive on planet Earth, both now and at any time in history. On a country-specific scale, I think it begins somewhere around $400,000 in household income here in the United States.
The Relatively Rich: If forced to draw the line somewhere, I’d probably do so at the top 5 percent to 10 percent of household income, perhaps adjusted by geographic peculiarities, because it means that a family in that situation is out-earning 90 to 95 out of 100 other families.
The Truly Rich: Someone can be considered rich based on a simple relationship between personal desires, control over time, and insulation from financial disaster. That is, a person becomes rich the moment 1. he (or she) can afford the lifestyle he desires solely from a stream of passive income or from a career that does not exist at the mercy of others and therefore cannot be taken away easily, and 2. is able to spend his time doing precisely what he wants, when he wants, how he wants, where he wants. Thus, there are situations in which I may consider someone earning $50,000 a year to be rich while someone earning $2,000,000 a year something else entirely.
Interesting stuff!
You can see that the numbers vary depending on who you’re talking to and whether you’re talking (correctly) about net worth or (incorrectly) about income.
Wealth is Much More than Money
But when most think about the question for some time, many come to the conclusion that what makes them “rich” (or “wealthy” if you prefer) are not financial assets but the things in life that money can’t buy.
Recently on Twitter (you can follow me here if interested) I saw the topic “#ImRichBecause” was trending.
Obviously, this caught my attention. So I clicked on the link to see what people had to say.
As with anything on social media these days, there were a lot of junk responses. But there were some insightful comments as well.
I thought I’d share some with you plus provide my personal list of why I think I’m rich.
The Jokesters
Of course any social media topic would not be complete without the jokesters chiming in, so let’s get the humor out of the way.
Here are some of the funnier responses I saw:
- #ImRichBecause I don’t give into pyramid schemes. I run them.
- #ImRichBecause I measure wealth in carbs.
- #ImRichBecause I use extra virgin olive oil, not the slutty one.
- #ImRichBecause oh wait you said rich.
- #ImRichBecause today is Opposite Day.
- #ImRichBecause Iāve won the Nigerian lottery!!! ???? just sending my bank details now……woohoo
- #ImRichBecause I own Boardwalk and Parkplace, and they have two hotels each.
- #ImRichBecause I have like 4 jobs. No, wait, I’m poor and that’s why I do that.
Yes, there are some cute ones there.
Social media never seems to lack when it comes to humor.
Unfortunately that’s as deep as it gets sometimes.
Money Answers
That said, several people did respond with at least some sort of money related comment. A few of these — along with my comments:
- #ImRichBecause I look after the dollars and let the cents take care of themselves.
Lots of wisdom packed in there. If you simply control the large expenses in your life, most of the rest will sort out.
That said, the small expenses can kill you too, so you can’t ignore them.
- #ImRichBecause I don’t have much money. I live a simple life in tropical #Colombia and have everything I need.
I’m not sure if it’s because this person lives in Columbia (perhaps lower cost of living) or because he/she lives simply, but either can be a solid way to grow your wealth.
- #ImRichBecause of all the money I saved by not having kids.
Ok, kids can be expensive, right?
- #ImRichBecause I save money on haircuts.
I can just see the book now: “How I Became a Millionaire by Cutting My Own Hair.” LOL!
I cut my own hair BTW (actually my wife cuts it), so I get this, but I’m not sure it would make the top 10 of why I’m wealthy.
- #ImRichBecause I work my ?? off for it running my business
Someone understands the power of earning!
- #ImRichBecause I worked hard to get where I am today.
Ditto for this person!
- #ImRichBecause I save all my money.
Someone understands the power of saving!
- The first step in becoming unconstrained is to be able to measure your constraints. For most of us, this is money. If you don’t have a budget, you can’t have peace. Man up, and do a financial budget now. #ImRichBecause
Haha! This person is scolding anyone who doesn’t have a budget. Love this!
- #ImRichBecause I donāt go out to eat or buy Starbucks.
Oh no! Someone had to bring up the Latte Factor! Ha!
- #ImRichBecause tax return baby!!
I’m not sure if this was meant to be funny or not, but unfortunately I think many people believe this.
- #ImRichBecause of my endless supply of common cents.
I’m not sure whether this belongs in this section on money advice or not. I would guess that he meant common “sense”, but if you have enough common “cents” (whatever those are) I guess you would eventually be wealthy. š
People Get Serious
But the joking and money-focused responses were simply mixed in. The vast majority were about how people felt rich because of some non-monetary thing in their lives.
By far the largest group of responses were around relationships with others. Some examples:
- #ImRichBecause my kids make me feel like a million bucks.
- #ImRichBecause I am surrounded by friends and family who are priceless
- #ImRichBecause Iām surrounded by people who love me.
- #ImRichBecause of these 2 precious gems my grandkids
- #ImRichBecause these 3 people, love, and depend on me.
- #ImRichBecause I am fortunate enough to have 3 beautiful, happy, healthy kids.
- #ImRichBecause Iām surrounded by friends who love me
- #ImRichBecause I have two wonderful children
- #ImRichBecause I have friends
- #ImRichBecause I have love & support from friends & family
- #ImRichBecause I have the best family
- #ImRichBecause I have some good friends.
- #ImRichBecause of the kindness many have shown me…
- #ImRichBecause I have unconditional love
- #ImRichBecause I have two amazing children and I’m starting to like myself ! , just a little … but it’s a start
- #ImRichBecause I have the best wife
- #ImRichBecause I have my family
- #ImRichBecause Iām covered in love.
Lots of great stuff here, IMO.
Then there were the more philosophical responses (still non-monetary) to the question. Here are some that stood out to me:
- #ImRichBecause I understood, it’s not about money in life!
- #ImRichBecause I know my own self worth.
- #ImRichBecause I know that money can’t buy happiness.
- #ImRichBecause well, I’m rich with health, wisdom and experience.
- #ImRichBecause it’s not measured by money.
- #ImRichBecause I have a roof over my head & food in my belly
- #ImRichBecause I have no worries.
- #ImRichBecause: I know how to laugh and have fun!!
Overall some pretty insightful stuff packed in very few words.
Non-Monetary Wealth by the Numbers
A different Bloomberg post highlights the fact that many answer the “rich” question with non-monetary answers.
Here’s a summary of their findings:
While 18 percent defined wealth as being able to afford anything they desired, 17 percent said it was āloving relationships with family and friends.ā That jibes with how Joe Duran, chief executive officer of money manager United Capital, said he likes to think of āwealth.ā After building and selling his first company, āI realized that money is nothing more than fuel,ā he said. āIt is a resource that lets you have choices, but if you donāt think about what you are working for, you will die rich but not live rich.ā
They then highlight the question “What is wealth to you?” with the following responses:
- 28% Living stress free/peace of mind
- 18% Being able to afford anything I want
- 17% Loving relationships with family and friends
- 14% Enjoying life’s experiences
- 11% Having lots of money
- 7% Having good health
- 2% Being charitable
And stated a different way (“What makes a rich daily life?”), here’s what they found:
- 62% Spending time with family
- 55% Taking time for myself
- 49% Owning a home
- 41% Meals out/meals delivered
- 33% Subscription service like Netflix/Spotify
- 29% Grooming/pampering
- 27% Having the latest tech gadgets
- 22% Shopping at specialty grocery stores
- 21% Having a busy social life
- 21% Driving a luxury car
- 17% Gym membership/personal trainer
- 12% Using a home cleaning service
- 10% Using a car service, not public transport
Some interesting responses.
In the latter group, I can identify with the first two, but not really the others.
And as I went farther down the list I was left wondering, “Really?”
For instance, having Netflix and/or Spotify makes people feel rich in daily life?
All I have to say is that’s a marketer’s dream for those two companies!
Why I’m Rich
There are a wide variety of opinions on what it means to be rich, that’s for sure.
But here’s my list. I won’t share every one or else this post would be a book (it’s already pretty long), but I will highlight the major ones.
And BTW, only one of them has to do with money — and it’s not because of a net worth number. š
Why I’m rich:
- My health. If you don’t have your health, you can’t enjoy much else in life. That’s why this one comes first. For me the foundation of feeling rich is being healthy. I think I would still feel rich if I got sick, but not as rich. BTW, this includes both physical health and mental health (the lack of stress in my life these days.)
- My family. This consists of my immediate family (wife, son, daughter) as well as my parents. It’s a small circle but a great group I am very thankful for.
- My situation/lifestyle. Financial independence makes me feel wealthy in a way that simply a large net worth does not. I’ll go back to what The Balance had to say about this: “That is, a person becomes rich the moment 1. he (or she) can afford the lifestyle he desires solely from a stream of passive income or from a career that does not exist at the mercy of others and therefore cannot be taken away easily, and 2. is able to spend his time doing precisely what he wants, when he wants, how he wants, where he wants.” Sums me up perfectly.
- Where I live. The United States and Colorado. Both are awesome places and being able to live in them makes me feel wealthy. The freedom of the U.S. is a great wealth in itself. And the natural beauty of Colorado far surpasses every other place I’ve lived and almost all the places I’ve ever visited (Grand Cayman might be a close rival, but it’s a different kind of beauty.) After 3.5 years here my photo stream still has more pictures of the mountains than anything else.
As I said, there’s more, but these four certainly lead the pack.
But now let’s turn to you.
First of all, what do you think about the question “what does it mean to be rich?” Is it monetary, non-monetary, or a bit of both?
Second, what makes your list of why you feel rich (if you do)? If you don’t feel rich, why not?
I’ve traveled to a lot of countries in this world, so to me this is simple, “I’m rich because I was born in America”.
That’s my kind of answer, Dave. I tire of all the complainers here in the U.S. If you were born here, under just about any circumstance, you won the birth lottery. At least you didn’t have to survive a boat ride to cross the ocean to get here — and even then it’s not guaranteed you’ll get in.
In 1953 I had that boat ride. It was pleasant. What’s tough is that Americans are sent to fight wars to keep the USA as rich and free as it is.
Impressive and impactful post. I agree a lot on the behavioral psychology of feeling rich. The oil baron Getty was the richest man on earth but never felt he had enough so he was not rich in my mind.
I also agree that income does not automatically equate to wealth. I do think a net worth of over 2 million should put you in consideration for being rich. 8 figure and above should put you in the ultra high net worth category
I’m rich because….
(1) Like Dave, I was born in America (in this modern era)
(2) I was born with certain gifts, the raw materials for success: health, intelligence, energy, drive, ambition, grit & determination, confidence
(3) I had the great fortune to be born to a great, loving mom and extraordinary person herself, who taught me both humility and respect, and also taught me that I could be whomever and whatever I wanted to be
(4) I have a wonderful and wise wife, and a loving, stable supportive marriage
(5) I have strong, reliable relationships with good people
(6) I can afford to live in vibrant, safe communities (I can afford to live anywhere I choose)
(7) I have enjoyed my vocation(s), have enjoyed success in multiple careers, and am well-compensated by relative norms
(8) I have had the good fortune and opportunity to build significant wealth and become financially independent – to achieve “the American Dream” of transcending the economic ladder from near the bottom to near the top
Well said! I could say the same for every single one of those! Lucky us!
“2. is able to spend his time doing precisely what he wants, when he wants, how he wants, where he wants.ā
precisely what he wants (check)
when he wants (working on it, but not quite yet)
how he wants (check)
where he wants (working on it, getting closer)
Being financially rich to me is not having to worry about money for the immediate and conceivable future. It is the balance of income with lifestyle. As long as you have enough, then you are rich.
The conceptual structure of being rich is a man made illusion, hand crafted by the individual, and that person’s environment. Having health, and the resources to maintain a comfortable, and sustainable lifestyle can surpass having any sizable income or monetary value. IMO. Money, in of itself can not buy happiness.
I feel wealthy because I have achieved a level of resources that allow me to sleep better at night – to know that I have the capability to address most of life’s challenges. I also feel wealthy because I have a wealth of choices – to work or not to work, to work at what I choose, to live where I want, to wear, eat, drive, travel, where I want, etc. Maybe I can’t have everything, and I certainly cannot have everything at once, materially speaking, but I can have most things of the things I prioritize.
On the darker side, I feel wealthy because I feel the envy and resentment that comes from being more fortunate than most others, and I feel the need to hide that wealth at times, or at least be slightly uneasy with it at times. It can cause rifts. That’s just reality. It’s a trade-off I’m willing to make.
I think the reason there is such a wide spread in the answers people give to the question about how much you need to be rich is because, I believe, people in general have a difficult time understanding anything drastically different from wherever they are now. Specifically, I believe people can only really understand how things are one ālevelā above or below where they are. You can define level however you like.
So take income. Youāre making $100k a year. You have a neighbor making $75k a year. Iād call that a level below you. You have another neighbor making $200k a year. Iād call that a level above you. One below is more limited in what they can afford to do in their leisure time, the amount they eat out, the car they drive. The one above has a vacation home, takes their kids to Europe on vacation, and drives nice cars less than two years old. You get this. You want this. You may even attain it one day. Thatās what one level looks like.
After that, though, you donāt really have a clue. You meet a single parent working three jobs, making $38k a year. Do you really understand their reality? Not a chance. How about the one making $19k a year? Nope. No way. Different level again. Different planet.
Or how about the family bringing in $500k a year? Youāve seen them sometimes passing through while youāre on vacation. Maybe at a restaurant. What they were doing that day, though, is very different from what you were doing. And then thereās the mythical $1m a year family. You might not ever come across them on your vacations. And the $10m a year household? Fuggetaboutit. For all you know they own a spaceship and take vacations on Venus.
This is not based on anything scientific – just my take on how peopleās minds work. The point is, we understand others in part based on what we know about from our own existence. Our understanding is somewhat limited by our own experience. When the experience of others is vastly different from our own, it becomes difficult if not impossible for us to truly understand what that must be like. Hence, the wide spread of answers to questions like how much one needs to be wealthy; or how much one needs to be rich.
I agree with you about not being able to understand the levels above, but I think most people had to work their way up to their current level, so they understand the lower income/wealth levels fairly well. It’s true in my case, and all I have to do is remember those hard times when my wife and I scrimped to pay rent and buy food, and it makes me appreciate what we have now so much more.
Tom, all good points. For me personally- I sometimes get annoyed at myself when I find myself almost obsessing about increasing my NW… because I DID come from that family where my mom was raising me and my brother alone. I remember food stamps, welfare, etc.
It’s important to reflect on this things.. and realize that many of us, albeit maybe not SUPER wealthy, are doing REAL well. So important to remain grounded.
And yes… I can’t fathom making $10m a year!
@Mike W and @117 both raise good points. If you started out in difficult circumstances, or otherwise had to work your up to where you are now once you went off on your own, then you probably have a good idea of what life is like at the some of the levels below wherever you are now.
OTOH, I have nieces and nephews who were raised in very upper middle class households in nice suburbs, went to good colleges paid for by their parents, and landed good paying corporate jobs upon graduation. They will never fully appreciate what itās like to live from paycheck to paycheck; or to wonder where theyāll live if the landlord raises their rent. In other words, theyāll never know what two levels below them is really like.
Tom, sometimes I wonder if there is a good way to fix that. I will say this about how we raised our kids… and I’m sure I’ve made a ton of mistakes along the way. Dealing with the kids in this regard is a major challenge.
My kids did get most of their college funded by us although we made them have some skin in the game. However they only had second hand cars once they could drive, or shared ours. They didn’t get an allowance… and if I needed them to help me in the yard I’d sometimes offer them some cash but if they refused I had them do if for free. They got phones but nothing fancy. They went on some amazing trips and had a good childhood I think… but they weren’t spoiled IMO.
My kids are on their own now… my oldest doesn’t make much money. I want so bad to just help him out with a decent car but I’m torn about it. So he drives an old beat up Ford Escape even though I could buy him a new car. I do help out financially on occasion (like when he needed a new mattress) but I want them to feel the hunger to figure it out on their own…
It’s just not easy… but your point is worth thinking about. It’s just so hard to see your kids struggle even when you believe it’s the best thing for them.
117, we all make mistakes. And every child is different. They really are. Where one might respond great to being cut out of “Dad’s money”, others might go off the deep end and give up. You have to do what’s best for your child. I’m speaking from experience where I’ve had to walk a very difficult line between helping my son get into something he could thrive in or making him “figure it out”… I went with the first option. I think the most important thing is that your kids know “you’ve got their back” if they fall. My father did not have money, but I knew he’d do anything possible to help me when I was in my 20’s.
True. I think my kids know that we’ve always had their back. And they never take advantage of things.
ESI I think your version makes the most sense honestly. It’s super important to have health and a great family. I think we’d also agree that having enough money to help others makes one feel super great/’rich’ too.
But wrt money it’s always going to be a moving target IMO… because the more you make, the more your lifestyle may change. This doesn’t happen to everyone but it’s real. And of course it’s very age dependent.
My ‘NW’ probably doubled in the last few years but I don’t feel richer… maybe a tad better off to be perfectly honest. I did buy a fancy car but that’s all I’ve done. We’ve always lived a modest life but now my wife really wants to upgrade our house… not that we want a bigger house necessarily… but now we have more money to update everything, go on more trips. I know, I know… don’t fall into that trap… It’s not easy. And after all you can’t take money with you when you die!
My VERY wealthy friend once told me… “The problem is when you have a lot money, you always worry that it’s not enough!” I know most people that follow this blog might not believe that but I know it’s true for many.
Lastly- I think being ‘rich’ wrt money is not just about NW… but about income as well…. combined. Unless you have MEGA NW. Lol.
I consider “rich” different from being “wealthy.” I relate monetary measurement to being rich and wealthy as a healthy combination of financial independence and life balance. I always think of the lack of money or resources when “poor” is mentioned and I consider rich the opposite of poor. I’m not sure why I make this distinction, but I do.
As for the concept of being wealthy, your summary is very close to my own.
Assuming a person is not born into wealth, being born in the US or any other prosperous nation certainly impacts a persons potential of becoming rich or wealthy. The more you travel, the more this is obvious.
Although I am not all the way there yet, your comments under Personal Situation/Lifestyle definitely hits home. For me, I think of it as Freedom. The definition I like is “the absence of necessity, coercion, or constraint in choice or action.” We will always have to make compromises/accommodations in life, but I would still like to get as closer to that state of being.
BJ
I have to take it back to Rich Dad, youāre wealthy when your passive income is more than your expenses. š
I am going to go a different route – Maslow’s Hierarchy of Needs. This is a global perspective as in the US almost everyone is Comfortable at birth (which is why everyone wants to come here).
You are Rich if you don’t have to fight daily for your: Food, Water, Warmth, Rest, Security, and Safety
You are Content if you don’t have to fight daily for your: Intimate Relationships, Friends, Prestige, and Feeling of Accomplishment
You are Wealthy if you don’t have to fight daily for your: Ability to Achieve One’s Full Potential, Including Creative Activities
You will notice none of this really has to do with money in terms of absolute dollars. Each place you live has different amounts. You can live for $200 USD in Thailand a the first level, but at $4000 a month in San Francisco.
Sorry – I meant that everyone is Rich at birth in the US … screwed up my editing.
a person becomes rich the moment 1. he (or she) can afford the lifestyle he desires solely from a stream of passive income or from a career that does not exist at the mercy of others and therefore cannot be taken away easily, and 2. is able to spend his time doing precisely what he wants, when he wants, how he wants, where he wants.
That sums it up for me. When I decided I could afford to retire, that was a pivotal moment. It was what I had worked for all my life, and reaching that point set me apart from all my coworkers and bosses who couldn’t do the same. To me, being rich is having that freedom, which allows you to do all the rest — spend all your time with family, etc.
Good stuff here, ESI ā
Most of ALL that has been mentioned fits in to my world in one way or another, but Iām going to add a category that has meant so much to me ā-
āLife Leadersā. Leaving a meaningful ālegacyā.
Having recently lost both of my ālife leadersā (my parents – both 85 when they died), I feel more than RICH to have had them in my life for over 63 yrs.
Both helped lead me in ways that will always be hard to measure, but ways that Iāll be able to continue to pass on to my children and their children and on to their children ā- ex: love of God, being honest, integrity, etc…… leaving a legacy for my family and others really helps to make me feel rich.
I have always strongly disliked the work “Rich”. Maybe going back to my early comic book days of Richie Rich and his butler? Rich to me implies next level insanity, people waiting on you hand and foot, drinking champagne from Magnums on a Yacht. You can spend excessively and never worry about running out.
Rich is a hard word, I am not Rich, but probably am by most definitions. If you want to classify it by monetary terms I think it would be something based solely on assets not income, I also think it would be geographically defined. You can live really well in most of the country and just be getting by in the big coastal markets.
I have an awesome life, full of family and amazing children. I don’t stress about having enough money to live. I do stress about having enough to stop working.
I have a great home with a very low LTV, I have lots of toilet paper, soap, supplies from Costco. That always makes me happy.
I could go on and on but it doesn’t seem like it would add much value to the discussion.
I try to be happy and need to focus a bit more on healthy, money is just a means to an end.
In my experience, it’s incredibly common to hear people confuse/conflate/fail to distinguish between income and wealth. It’s a symptom of widespread financial illiteracy, and yes, that includesmany financial journalists, financial planners, and politicians. I’m willing to bet that those people in the GOBankingRates survey (referenced in the post) who thought that an income of $1M – $10M was necessary to be “rich” actually had income in mind.
The major reason for this confusion, I think, is that the U.S., and many other countries, have an income tax. Thus, when we propose to “tax the rich”, contemplate a “millionaire tax”, or want to give a “tax credit to the poor” (all of which reference wealth), the tax system forces us to define these categories by income.
Sorry, I meant “income of $1M ā $10M was necessary to be ārichā actually had WEALTH in mind”.
We should not leave out the most important form of wealth: Jesus Christ said: “For what shall it profit a man, if he shall gain the whole world, and lose his own soul?”
Yes! I have a brother here!
Billions without eternal purpose = absolute worthless poverty. So many so focused on accumulating that which is dust to dust, with zero effort accumulating real treasure. Plan passionately for eternity, plan casually for retirement and you’ll find treasure, joy and satisfaction nowhere matched by bank accounts, vacations, possessions, cars, real estate, homes, fine wine, market returns, and planned retirements all of which are sure to disappoint at some point – so I sought that hidden treasure that never disappoints, the Kingdom of Heaven. “Where your treasure is, there will your heart be also”.
I’m rich because…I have eyes and I have seen this, I have ears and I have heard this. Hoping to open some hearts and minds to share this unlimited wealth.
I think that it is best to define “rich” in terms of relative income and/or wealth. For example, I think that a person is rich if he or she can buy luxury goods (fancy cars, homes, clothes, vacations, etc.) without significantly sacrificing current or future expenditures. A rich person doesn’t have to own those luxuries and might in fact choose a frugal lifestyle. The luxuries can be purchased with savings from wealth or from an income high enough to buy them without pinching expenditures. Many of the above definitions that involve health, relationships or not needing to work are all desirable things but are better covered by terms like “contentedness,” “happy” or “financially independent.” When Steve Jobs was dying of cancer, he was clearly still rich, and when Jeff Bezos’ family life was breaking up, he was still rich. Outside of the expensive cities, I would think that a combination of $3m net worth and $300k annual income would fit the bill, with increases in one of those measures allowing the other to be smaller.
PWilliam, I like the way you’ve defined “rich”, though like GT, I really kinda hate the word “rich”.
When wife and I talk amongst ourselves, we use the term “well off” which for us captures how we feel, if not necessarily how we are perceived by others.
For me, “well off” means pretty much what you described… a nice lifestyle, money in the bank, good income, and high confidence in ability to maintain it all for many years to come. I also like how you balanced income vs wealth – they are both important parts of the equation. The FIRE community focuses on wealth because, well, the idea is to give up reliance on income ASAP.
The other reason I prefer “well off” is that we live around, work with, and know a lot of people far “richer” than we are. So, while we might be viewed as members of the 1% by family and society in general, we realize that we are really just anchoring the very bottom of the percentile… I like to call us the hard-working 2% – better off than much of the population, but vastly overshadowed by the tippy top folks with +8 digits to their name.
This is not a complaint per se. That would be very bad form considering how fortunate we are. But, I do get annoyed at being lumped in with the real 1% crowd (especially when it comes to taxes).
Perspective is everything. I don’t think money necessarily makes one happy – have seen lots of examples of wealth creating huge problems in families and friendships. But, having experienced poverty in my early life, I can say with great certainty that I much prefer wealth!
P.S. My figure for comfortable expensive big city “well off” would be a minimum of $5mm NW and $500K income (vs your $3mm/$300K for non-expensive city).
I agree that rich is a loaded term, and you are also right that it is a term that includes a range of prosperity, rather than being a binary on/off.
When I think of my own situation in purely financial terms, I don’t like to apply the words “rich” or “wealthy.” I consider myself “well off” which I basically define under similar terms as previously expressed.
To summarize, my definition is enough passive income to maintain the same lifestyle in retirement my family and I became used to when we worked. I also want to maintain that lifestyle only from income generated through our pensions, SS and interest/dividends from our investments. I’d like to keep the principal intact for our daughter so that when my wife and I move on from this world, our daughter has a nice nest egg to weather future storms in her life.
My feelings on this are that my generation will leave a huge debt that our government has run up on our behalf and this debt will have to be addressed at some point in the future and will fall largely on the shoulders of our children and grandchildren. Who knows how that will ultimately manifest itself and what the repercussions will be that will go along with it. Hence, I’d like our daughter to have a cushion she can fall back on when these inevitable outcomes start to become reality.
“First of all, what do you think about the question āwhat does it mean to be rich?ā Is it monetary, non-monetary, or a bit of both?”
From a purely income perspective I’ve found that for most people it generally turns out someone making half what they are making is struggling, someone making twice what they make is well off, and someone make three times or more what they make is wealthy.
Rich for me has always been more about quality and enjoyment of life. I’ve always figured assuming you earn enough to have food, shelter, and clothing covered, you can be rich in multiple areas of life and if you are rich in most of them you are rich in life. So a wealthy person could have lots of financial assets, but still have a pretty crappy life. While a less well off person could have a rich life but few assets. Now to be practical, the wealthy person may have a greater probability of making their lives richer in many areas because of their assets, versus a less wealthy person making their life richer. But it’s also about attitude, expectations, health, happiness and to be real, some amount of reasonable income.
“Second, what makes your list of why you feel rich (if you do)? If you donāt feel rich, why not?”
What makes my list? On good days I recognized my family has good health and that is a true blessing. I recognize my income and assets are way above those of the majority of my extended family and are more than I ever really considered having. I recognize that if I quit today, I have enough to generate an income greater than all but one of my siblings or sibling in-laws and more, even inflation adjusted, that my parents or in-laws ever earned in a year. Therefore if they can, and could, get by on that and still enjoy much of life, so can me and mine.
On the bad days I feel I will never have enough to retire because I can see, and have seen, a variety of ways that it can all crash in a year or two. Those worries shouldn’t be there, the practical side of me says I’m over reacting, but it’s there.
All that said, by my own definition, I’m rich in many areas of my life, and therefore consider myself rich.
#ImRichBecause my life is full of endless opportunities and possibilities.
There are many factors for this but it starts with health, family, and country.
Purely on the financial front:
If you believe in that survey which states personal happiness tops out at around $75,000 a year, then being able to have $75,000 a year in perpetuity without work would make one rich. So 25x of $75,000 ($1.875 million) will be a good starting point of being rich.
I don’t find my own personal happiness topping out at $75,000 but I guess that number is for the general population.
I loved reading the comical #ImRichBecause lines!
I’m rich because:
1. I don’t owe anyone $
2. I save a big chunk of my income
3. I have my health
4. I love my family and they love me
5. I have a group of friends who like to go deep with me
6. My faith saves me every day
7. I get to live on purpose
I answered in a crescendo š
“if you want to make a man rich, add not to his wealth, but take away from his desires”
Epicurus 341ā270 BC