How do you define rich/wealthy?

[Yuriman]

My wife and I were having a discussion about what wealth is, and I found my ideas (which I think are relatively "normal" for a lower middle class American) challenged. I tend to think about wealth in terms of income brackets with some modification from the time-freedom one has. Someone who makes $150,000 per year will often live very comfortably but I wouldn't consider them wealthy if they have no savings. I'd peg them in the "upper middle class - decent spending power but still likely a slave to the wage".

Her thoughts on the topic are a bit different: Wealth to her is a much more relative measure. The poor are those who are unable to provide for their own basic needs. Those who are wealthy have security such that very few life crises could take away their ability to provide for themselves (notable exceptions being things like debilitating illness, etc.). The middle class are those who can provide for their needs, but don't have great security. Going by this system, someone with an income of $15,000 per year could be wealthy, by having several years' needs covered by savings, by being educated enough to have a good chance of being able to find income again before money became an issue, and living in an area where the cost of living is low. Wealth, to her, has nothing to do with smartphones or cars or vacations.

I asked (paraphrasing), "Don't you think you're setting the bar a bit low for 'wealthy'?" to which she responded, "Why do you say that? What's really different between someone with a hundred thousand dollars in the bank, and someone with a billion? Where they can vacation?" Another area where I disagreed was a lack of terms for someone who is wealthy enough to not need to work, either due to savings, luck, or inheritance. Her response was to point out that the amount of savings to live on, without needing to work, is actually quite low if you avoid lifestyle inflation, and that lifestyle inflation has no real upper bound.

So, Anandtech OT, what are your thoughts?

 

[MagnusTheBrewer]

I think your wife is closer to the truth of it. Pics?

 

[Yuriman]

I think your wife is closer to the truth of it. Pics?

Not without her consent first.

I find it rather interesting to consider approaching someone with a $20,000 per year income and calling them (potentially) wealthy. While it may be strictly true, most people who make $20,000 per year will be making payments on a car they can barely afford, with a large phone bill, and other frivolous expenses. "You've the income to be wealthy, you're only struggling because you're wasting it."

Not to say that I disagree with her now, but I've been thinking about how this applies to our relative perceptions.

 

[lxskllr]

Wealthy is never having to ask what something costs.

 

[manimal]

My wealth is measured in the smiles on my children.

 

[phucheneh]

Having enough money to generally be unaffected by anything. The type of people who will not blink an eye at multiple thousands of dollars to fix their car or house. I would say that draws a clean line on 'wealth,' emphasizing the difference between someone who makes money (and quickly rids themselves of it) and someone who has money.

 

[Kaido]

I used to think it meant being a millionaire, but now that I'm an adult and know several millionaires and know more about the actual cost of living, I know that isn't the case. The cost of living is different based on where you live, such as in D.C. or Manhattan. Also, the number of kids you have takes a big part of your budget. Plus taxes. In Connecticut, if you make $150k, they zap you like $40k for Federal & State (just running off a basic calculator here), so really you get $110k, which sounds like a lot, but it depends on your situation. Houses aren't cheap here. If you have kids in college, Uconn runs $29k a year right now for in-state tuition with housing & food. Lots of (legitimate) things can make a lot of money disappear quickly.

I can't remember what book I read, maybe "Rich Dad, Poor Dad", but it talked about redefining wealth as "how many months into the future you can survive". So if your total fixed & variable monthly expenses is $3,500 (mortgage, food, gas, etc.) and you have $7,000 in savings, then you're 2-months rich. i.e. if you lost your income stream today (ex. injury that prevented you from working or getting laid off & the paychecks stop coming in), you could survive comfortably for two months. I think you should have at least 6 months of savings, or really 12 months given the current economic conditions. But that's really hard, because paychecks are only doled out in weekly or bi-monthly increments, so you have to plan & save, which is difficult for most people because their budgets usually fill their paychecks.

I also think wealth really depends on the person. I'm not a high-maintenance person...I'm pretty happy with my Kia & I have a Chromebook & Netflix at home. Some people feel the need to live in a big house, drive a fancy car, etc. which is absolutely fine if that's what they want. I know people who blow through $100k a year and are constantly broke, and I know people who have paid off their debts and live comfortably on under $20k a year. It all depends on the lifestyle you want to pursue. I think ultimately, wealth is being able to afford the lifestyle you want & having say a year of savings to cover any hiccups in the income stream so that you can stay comfortable at your desired level.

 

[shortylickens]

When you can buy your way out of trouble.

 

[SlitheryDee]

I would say if you could receive no further income from now on and you still don't have to sacrifice your quality of life at all, then you're wealthy.

 

[MongGrel]

s

My wife and I were having a discussion about what wealth is, and I found my ideas (which I think are relatively "normal" for a lower middle class American) challenged. I tend to think about wealth in terms of income brackets with some modification from the time-freedom one has. Someone who makes $150,000 per year will often live very comfortably but I wouldn't consider them wealthy if they have no savings. I'd peg them in the "upper middle class - decent spending power but still likely a slave to the wage".

Her thoughts on the topic are a bit different: Wealth to her is a much more relative measure. The poor are those who are unable to provide for their own basic needs. Those who are wealthy have security such that very few life crises could take away their ability to provide for themselves (notable exceptions being things like debilitating illness, etc.). The middle class are those who can provide for their needs, but don't have great security. Going by this system, someone with an income of $15,000 per year could be wealthy, by having several years' needs covered by savings, by being educated enough to have a good chance of being able to find income again before money became an issue, and living in an area where the cost of living is low. Wealth, to her, has nothing to do with smartphones or cars or vacations.

I asked (paraphrasing), "Don't you think you're setting the bar a bit low for 'wealthy'?" to which she responded, "Why do you say that? What's really different between someone with a hundred thousand dollars in the bank, and someone with a billion? Where they can vacation?" Another area where I disagreed was a lack of terms for someone who is wealthy enough to not need to work, either due to savings, luck, or inheritance. Her response was to point out that the amount of savings to live on, without needing to work, is actually quite low if you avoid lifestyle inflation, and that lifestyle inflation has no real upper bound.

So, Anandtech OT, what are your thoughts?

My thoughts are your wife is a pretty wise person.

 

[smakme7757]

My wife and I are currently earning good wages. We can buy nice modern luxuries, we own a home, we can travel once a year without busting a budget. I would say compared to a large proportion of the world we are wealthy, extremely wealthy. Compared to a very small proportion of the world we are working middle class.

It all depends who you guage your self up against and what you consider "worth something". Some people only look at wealth as money in the bank, other people feel family, children, love and so on is worth more than than. Living happily, growing old and having happy children are for many people as weathly as they need to be.

Wealth is really in the eyes of the beholder.

 

[Shlong]

$150k/year will probably make you wealthy in a sunbelt city (Phoenix, Vegas, Dallas, Atlanta) where the cost of living is pretty low. However, in manhattan or San Francisco it probably won't be the case.

I would say you're wealthy, when you don't have to worry about bills and can purchase the things you want in cash.

 

[MagnusTheBrewer]

Not without her consent first.

I find it rather interesting to consider approaching someone with a $20,000 per year income and calling them (potentially) wealthy. While it may be strictly true, most people who make $20,000 per year will be making payments on a car they can barely afford, with a large phone bill, and other frivolous expenses. "You've the income to be wealthy, you're only struggling because you're wasting it."

Not to say that I disagree with her, but I've been thinking about how this applies to our relative perceptions.

There are always trade offs. The biggest challenge is not only determining what they are but, that they exist. One of the most common stereotypes of the wealthy as determined by net wealth in the bank, is the inability to use their wealth to improve their lives. Financial security (whatever that means to them) becomes the single greatest motivator. This perspective builds nothing but barriers to competition and innovation.

 

[MongGrel]

When you can buy your way out of trouble.

And yes, I'd say that would be the real definition of it.

 

[Yuriman]

Having enough money to generally be unaffected by anything. The type of people who will not blink an eye at multiple thousands of dollars to fix their car or house. I would say that draws a clean line on 'wealth,' emphasizing the difference between someone who makes money (and quickly rids themselves of it) and someone who has money.

As a renter with roommates, and having a 20 year old car which I can work on myself, I might be rich then. A few months ago my timing belt broke, so I bought an $80 belt + water pump and put it on myself in the parking lot. The cost of keeping it running is practically nil. I stay 6 months ahead of my rent, and can afford to eat out several nights a week. I'm accruing debt through the cost of my tuition (parents aren't obligated to give their offspring cars or pay for their college) but from a certain perspective, that's a very safe investment of the money.

 

[Kaido]

I find it rather interesting to consider approaching someone with a $20,000 per year income and calling them (potentially) wealthy. While it may be strictly true, most people who make $20,000 per year will be making payments on a car they can barely afford, with a large phone bill, and other frivolous expenses. "You've the income to be wealthy, you're only struggling because you're wasting it."

Not to say that I disagree with her now, but I've been thinking about how this applies to our relative perceptions.

I worked for a guy who was a millionaire, had everything he owned paid off (house, cars, etc.), and lived on $12,000 a year (house taxes, food, gas, etc.). You typically stay rich by not spending all your money, so it was a neat approach because he could have bought an airplane, a sports car, a mansion, etc., but just chose to live a low-key life. His hobby was running and I think they cooked all of their meals at home. The company paid for his laptop & phone.

The difficulty is that most people don't have that level of discipline. As soon as their income gets larger, so does their monthly operating budget. It's like how 90%+ of lottery winners go back to the same level of income after a year or so - they don't know how to live within the new budget, so it all disappears. Just check out the Michael Carroll story for some interesting reading: (won $14 million, now works in a cookie factory on the assembly line)

http://www.huffingtonpost.com/2013/07/09/michael-carroll-lottery-works-cookie-factory_n_3568198.html

 

[lxskllr]

I worked for a guy who was a millionaire, had everything he owned paid off (house, cars, etc.), and lived on $12,000 a year (house taxes, food, gas, etc.). You typically stay rich by not spending all your money, so it was a neat approach because he could have bought an airplane, a sports car, a mansion, etc., but just chose to live a low-key life. His hobby was running and I think they cooked all of their meals at home. The company paid for his laptop & phone.

The difficulty is that most people don't have that level of discipline. As soon as their income gets larger, so does their monthly operating budget. It's like how 90%+ of lottery winners go back to the same level of income after a year or so - they don't know how to live within the new budget, so it all disappears. Just check out the Michael Carroll story for some interesting reading: (won $14 million, now works in a cookie factory on the assembly line)

http://www.huffingtonpost.com/2013/07/09/michael-carroll-lottery-works-cookie-factory_n_3568198.html

Seems like there's a better middle ground in there. Money's worthless if you don't spend it. Maybe he had grander plans for the future, but I don't see much point in hoarding money. If I were in that position, and completely happy, I'd give the money away.

 

[brianmanahan]

the official atot definition of wealthy is "anyone who makes more money than me"

 

[MongGrel]

Seems like there's a better middle ground in there. Money's worthless if you don't spend it. Maybe he had grander plans for the future, but I don't see much point in hoarding money. If I were in that position, and completely happy, I'd give the money away.

I'm sure a lot was invested.

And I'd bet he gave a lot to charities.

 

[Tweak155]

Wealthy is subjective. I think a lot of people would consider $50k/yr wealthy - it will cover all your NEEDS and get you some of your wants.

In the end, the money game cannot be won. Those with billions want more billions although it effectively nets them nothing tangible. Focus on your family and true friends, food & shelter, the rest is just fluff.

 

[Kaido]

My wife and I are currently earning good wages. We can buy nice modern luxuries, we own a home, we can travel once a year without busting a budget. I would say compared to a large proportion of the world we are wealthy, extremely wealthy. Compared to a very small proportion of the world we are working middle class.

It all depends who you guage your self up against and what you consider "worth something". Some people only look at wealth as money in the bank, other people feel family, children, love and so on is worth more than than. Living happily, growing old and having happy children are for many people as weathly as they need to be.

Wealth is really in the eyes of the beholder.

It's all about perspective. Even the homeless in America live better than a big part of the world - there's soup kitchens, shelters, etc. available if you're willing to use them. That isn't to say you should just stop progressing in your financial life. Becoming rich is a great way to help others, because once you're financially stable, you can create opportunities for other people to have jobs by say starting a business. But you can do that even if you're not financially independent too, so that argument is kind of moot.

In college I worked at various odd jobs; one of them was in high-end window shutter assembly & installation. One guy ordered $20k worth of shutters to install in his home. I had no idea how someone could afford to drop so much money on something so seemingly pointless - that was like a whole year of college on window coverings! But from an economic perspective, he was creating jobs for myself & the other people working with me, so that was nice because it gave me a great summer job to help pay for school.

 

[ImpulsE69]

Wealthy is never having to ask what something costs.

That's not wealthy. That's top .02% Even the richest people are normally concerned with cost. Just while less income people are deciding to buy a new or used car, they are deciding which private jet to buy.

We consider ourselves wealthy at least in terms of where we live compared to those around us. We are by no means rich, and I see them as two different things. If we'd made this much money 10 years ago, I'd say we were rich, but prices of everything have gone up considerably since 2001.

EDIT: and what Tweak said. No matter how much money you have you want more because the level you are at gets you what you want, but there's always going to be something you see that is out of your current reach.

 

[Kaido]

Seems like there's a better middle ground in there. Money's worthless if you don't spend it. Maybe he had grander plans for the future, but I don't see much point in hoarding money. If I were in that position, and completely happy, I'd give the money away.

Yeah, I dunno. Even if you plan on paying for your kid's college, that's what, a max of $250k per kid for a good degree? So $500k for two kids? Although if you wanted to retire early & live off $50k a year, being a millionaire would give you 20 years of that lifestyle...so even if you quit your job at 50, you had better plan on being dead at 70 or the money will run out. That's what's funny about being a millionaire...it's really not a lot of money if you plan on actually living on it...

 

[Tweak155]

I worked for a guy who was a millionaire, had everything he owned paid off (house, cars, etc.), and lived on $12,000 a year (house taxes, food, gas, etc.). You typically stay rich by not spending all your money, so it was a neat approach because he could have bought an airplane, a sports car, a mansion, etc., but just chose to live a low-key life. His hobby was running and I think they cooked all of their meals at home. The company paid for his laptop & phone.

The difficulty is that most people don't have that level of discipline. As soon as their income gets larger, so does their monthly operating budget. It's like how 90%+ of lottery winners go back to the same level of income after a year or so - they don't know how to live within the new budget, so it all disappears. Just check out the Michael Carroll story for some interesting reading: (won $14 million, now works in a cookie factory on the assembly line)

http://www.huffingtonpost.com/2013/07/09/michael-carroll-lottery-works-cookie-factory_n_3568198.html

Yeah this is one thing I cannot explain. I used to be able to live on a few hundred a week. Now that would not be possible.

Although, I always believe if you can't figure out how to live on $30k/yr, you can't figure it out at $130k either. I personally have not had any problems managing finances, but I still wonder how I manage to spend so much sometimes.

 

[lxskllr]

That's not wealthy. That's top .02% Even the richest people are normally concerned with cost. Just while less income people are deciding to buy a new or used car, they are deciding which private jet to buy.

They're concerned with cost because they aren't foolish. Fools don't usually get rich. If you have the bank account for any jet you want, you're wealthy.