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How Much Money Do You Need to Feel Wealthy?

This article was written by in Wealth and Affluence. 34 comments.


Last week, I wrote about a study that evaluates the most important issues for wealthy people, and a new study released recently, sponsored by Fidelity, also takes a look at the attitudes of the super-rich.

If I were to have $1 million in investible assets — the value of what I have available to invest in stocks, businesses, etc., not including retirement savings or what’s needed to cover my expenses — I don’t believe I’d feel wealthy. To me, wealthy means not having to work. While I could take $50,000 a year out of this pot for 20 years, and if that “income” were to be combined with that of a working spouse, I could live a middle-class life where I do now. Of course, after 20 years, I would have nothing of this left. The real power of having $1 million in investible assets is the income that this value of investments can generate. Playing it very safe, taking only 2% of the investment to allow years of great returns to offset years of negative returns, I would be working with an “income” of only $20,000. The good news about this approach is that 20 years later, I’d still have wealth; the bad news is that’s not a living wage in most areas of the United States.

If my investments could generate over $100,000 each year, I would feel wealthy. At that conservative rate of 2%, I’m looking for an initial investible net worth of $5 million. That’s the point that I’d feel wealthy. 42% of Fidelity’s survey 1,000 respondents with an investible net worth of over $1 million don’t feel wealthy. They need, on average, $7.5 million to consider themselves among the wealthy elite. 58% of the respondents do consider themselves wealthy. This set of individuals pointed to $1.75 million in investible assets as the point at which they began feeling wealthy.

There’s quite a difference between those who do not consider themselves wealthy, who estimate they’ll cross that threshold at $7.5 million, and those who do consider themselves wealthy, who claim to have come to that realization at $1.75 million.

Although we could point to the Global Rich List again to gain a greater perspective on our place among the community of the world, but that has little bearing on our day-to-day experiences. Much of this comes down to the meaning and sense of the word, “wealthy.” This is a word that can mean different things to different people. For the purposes of the Fidelity study, this may not have been defined, leaving the respondents to come up with their own interpretation of the questions based on their understanding of the word.

I would love to hear comments from readers on the issue of wealth.

What does it mean to be wealthy? If you consider yourself wealthy, at what point (and level of net investible assets) do you believe you crossed that threshold? If you don’t consider yourself wealthy, how much do you need to feel wealthy?

Wall Street Journal
Photo: david_shankbone

Published or updated March 15, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 34 comments… read them below or add one }

avatar faithfueledbennetts ♦264 (Nickel)

I believe wealth is absolutely subjective, hence the phrase, ‘I feel like a million bucks’ and it’s positive connotation. Do I consider myself wealthy? Well, to the standard’s of the world looking in on me from a monetary value, I am far far from wealthy. But, as for my own standards, I have wealth in many areas that are not monetary that I would never trade for any amount of money. I am wealthy in Love and in Spirit. I know that is not what your article is about, but wealth does not have to correlate to money. Yes, money makes living in this world much easier than having a shortage of it, but it does not make my world go ’round. I would love to make more money to be able to treat my family to vacations and fun splurges like ice cream cones and trips to the zoo whenever I’d like. But for now, I am thankful for what I do have in abundance in my life-which is definitely not money.

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avatar killdare77

Money can’t buy happiness, but poor certainly reaps stress.

“Wealthy” sits a the interesection of financial assets and personal prefereneces. I would consier myself wealthy when I can “do what I want.” That means taking last-minute vacations, making donations to charities or causes I support, and not worrying too much about day-to-day spending. I’m not there yet.

But just as I felt myself sliding down a steepening slope into debt during college, I now feel myself taking bigger and more frequent steps to build up what I have. I’m not sure if the numbers would really prove that out, but the feeling of personal accomplishment and little bit of security that tomorrow will be OK contribute more to my feeling “potentially wealthy” than the numbers on the bottom line.

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avatar Evan

Flexo,

I think the feeling wealthy issue has a lot to do with who you surround yourself with. If I had to guess the 42%ers were on the coasts with high net worth friends, while the 48%ers probably surrounded themselves with those of a lower net worth. Even when you get into the upper 1-2% of the country keeping up with the Jones’ still exists.

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avatar Ceecee ♦53 (Newbie)

Wow, Flexo, wealth is so relative. If I were in the first scenario that you laid out, I would consider myself over the top wealthy. But I am an extreme bargain hunter—it’s a bit of a hobby. I agree with killdare77—-when you can do what you want to do without doing mental arithmetic—-that is wealthy for you.

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avatar SteveDH

There is a huge difference between “feeling wealthy” and being financially secure. Feeling wealthy implies a comparison to others and a focus on assets that are real and can be “booked” on account. As killdare77 says there are personal preferences involved and not all things can be put in accounting terms. I feel financially secure: I have a fixed income (pensions), earnings (int/divds) and foundation accounts that I can rely on, but most importantly I still live within the means that I have while doing the things I want to do. I feel wealthy because I’m financially secure and have a host of other assets, like family, hobbies, and freedom. I don’t feel wealthy if I only compare my balance sheet with trends, charts and “studies”.

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avatar shellye ♦107 (Cent)

With wealth comes choices, and it’s always good to have choices in things like neighborhoods to live in, schools for our children, what kind of car to drive (vs. having to rely on public transportation). My personal balance sheet may not be as impressive as Warren Buffet’s, but I do feel like I have a significant number of choices available to me in how I live my life, and that makes me feel wealthy. Contrary to what many people say, money does buy a limited amount of happiness and convenience.

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avatar OrchidGirl ♦16 (Newbie)

I think people feel wealthy when they don’t have to think about money – they know they’ll have enough for their lifestyle and then some. Of course with lifestyle inflation, many people need more as they move on up.

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avatar Pat S.

It comes down to wealth versus income. How much you need to live, and how much your investments will yield to you with no additional work. The ability to quit working and live indefinitely off of your investments and other sources of residual income is the key.

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avatar 4hendricks ♦248 (Cent)

There are a lot of things that come to mind when I read this – Money doesn’t buy happiness – it can do just the opposite – and coming from someone who constantly worries about money, focus on what is important – God will provide the rest.

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avatar 4hendricks ♦248 (Cent)

Hit enter to quick – It is better to give than to receive, the more you make the more you spend – there are so many reasons why we have enough.

I read recently, that you have enough money, if you can afford to buy groceries to feed your family for the week. There are many that can’t.

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avatar JT McGee

It’s hard to put a dollar price on wealth, as wealth is simply income priced into the future, in many regards. However, that said I prefer to see comfort in terms of 1) cash flow and 2) liquidity, and I suppose that $1-2 million (pending I don’t have to draw down right away) would make me feel very wealthy.

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avatar Investor Junkie

Compared to the rest of the world and most of the USA, you are “wealthy”. Most people live paycheck to paycheck. You aren’t “rich” is what I think you are referring to.

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avatar tbork84 ♦1,867 (Half-Dollar)

I think there is more room to the definition of wealthy that simple living paycheck to paycheck. What you are referring to was said best a long time ago.

“Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” — Charles Dickens in David Copperfield

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avatar 4hendricks ♦248 (Cent)

I just read this quote in Chris Farrell’s new book -

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avatar DonnaFreedman ♦75 (Newbie)

Right now I am paying my bills in full, saving for retirement, paying my own health insurance, helping a couple of family members, and putting money away each month for emergencies. I do this by living frugally on my freelancer’s salary so that I don’t have to work a 9-to-5.
Am I wealthy? Only compared to a bunch of other people, as Investor Junkie points out. But I feel “rich” in that I can live the way I want.
One thing I wish I did have right now is a home of my own. But I am not sure whether I will stay in Seattle, so renting is the best course for me right now.
If I could make more money working the same level as I do now (i.e., with time and flexibility to travel), then I’d do it. If it required 60-hour work weeks, I wouldn’t do it. If I were just starting out I’d burn the midnight oil. But I’m in my early 50s and time is more important to me than money.
I feel very fortunate to be able to live this way.

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avatar Investor Junkie

FYI Flexo,

If you have over $1 million in net worth you are considered a high net worth individual (HNWI).

http://en.wikipedia.org/wiki/High_net_worth_individual

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avatar dawgette ♦199 (Cent)

The word wealth is defined differently for each in individual because it does not always have to be dollars and cents.

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avatar Flexman

Your article is worthless crap! You should really know your stuff. Like, how much does the top 5 percent make? And how much taxes do they pay? Something worthwhile to read!

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avatar Luke Landes ♦127,480 (Platinum)

How are either of those statistics relevant to the question posed by the article? If you don’t have an opinion on that, no need to comment.

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avatar Phil

Multi millionaire Felix Dennis came up with his own classifications of rich levels if one wants to be technical. Wealthy to me is one that has the means in their own environment to never have to worry about bills, necessities, retirement, estate planning, vacations or the occasional luxury if desired. Perhaps it can be defined by circumstances as well as money accumulation.

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avatar Kathryn C

I think I will always be worried about making money, no matter how much I have. It’s a problem, a real problem, I know.

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avatar Marc S Kessler

I feel wealthy because I have no debt and enough for a reasonably comfortable retirement.

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avatar Shaun @ Money Cactus

Hey Flexo,

Personally I feel that wealth is a lot more than just money, but it certainly plays an important role. Wealth to me is having the choice to work or not and being able to do what I love (less time at work, more time with the family). In order to do that I need to get to a point where the return on my investments is more than I spend as I don’t want to errode my capital. There’s also the issue of inflation, but that is a whole other story!

I really liked the article, plenty of food for thought :)

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avatar rewards ♦31 (Newbie)

I will feel wealthy when I hit my retirement savings goal. I like the rule of thumb of having annual income x 25 (50k x 25 = 1.25m) as it allows me to withdraw a conservative 4% each year while keeping the principal intact.

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avatar MR ♦295 (Nickel)

I think 2 or 3 million would make me feel wealthy in the city I currently live in, but if I lived in New York, it would take at least 10 million to even be close to feeling wealthy.

If your neighborhood “Joneses” make 20 million, then you’d want to keep up… That’s human nature.

I have simple taste though so for me 2 million will do currently. If I have more, then that would be great too :)

I think you are right though, get 5 million and taking out about 2% each year for living, leave the rest of your potential gains in so it continues to grow for inflation purposes.

Boy, getting rich is hard!!!

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avatar Cejay ♦1,521 (Half-Dollar)

To be wealthy is something more than money. I feel wealthy is some sense right now. I have my health, we have a wonderful family and lots of love and laughter in our life But in the sense of money I would feel wealthy when both myself and my husband no longer have to work. When we can take time to do all those things we have wanted to such as travel, volunteer and work on our house. I would think that 5 million would do us fine and we could live the life I described. But remember that money does not buy happiness.

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avatar Edwin @ Save The Bills

Being wealthy is when you don’t care what something costs. Being financially stable and wealthy are completely different things. Being wealthy is when you’re not worried about money either now or in the future.

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avatar skylog ♦368 (Nickel)

this is a tough question, as i think many factors come in to play. upbringing, lifestyle, location…etc..all can alter a person’s perception. given all of those factors, in my case, i suppose i would feel wealthy with $1 million, perhaps even less. i do not make a great deal of money, but i make enough to be happy and take care of my future. if i suddenly had $1 million, i would feel very secure and have the freedom in my life to be happy.

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avatar Paula @ AffordAnything.org

I absolutely agree — if both my partner and I were earning a combined $80,000 – $100,000 a year ($40,000 – $50,000 each) in passive income, I’d feel set for life. (Okay, as long as that figure is inflation-adjusted. I’m a numbers dork.)

To earn that much in passive income, I need a “boatload” of rental properties (one of my personal preferred methods of investing) plus dividend-yielding index funds.

Fortunately, having even $1 million will help me generate income that I can re-invest to create more … but it will take a long, long time before I say “mission accomplished.”

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avatar Jonathan

I already feel wealthy today. This is because my wife and I, at 26, have a 6-figure combined income of which we save half, both have very stable jobs, we have several supplemental income sources, and are always looking for ways to increase cash flow through investments. We’ll start to feel FREEDOM when our supplemental income (which we consider “passive” even though it sometimes takes time and effort to maintain) matches our current W-2 income.

The key to feeling wealthy today, when our net worth is not too much higher than our annual incomes, is by living far below our means and not inflating our lifestyle as our income rises.

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avatar tigernicole86 ♦55 (Newbie)

For me, I’m feeling pretty good about where I’m at. I took a new job where I’ll only be making $5000 more/year but I’m not stressing out anymore because I now have more than $6 in the bank until the next payday(and I was paid weekly). I was barely able to pay my bills and I was only going out once a week to eat and getting the cheapest thing on the menu(chips and salsa @$2.50). Now I’m feeling good because I’ve been able to save and splurge a little bit(like a new phone because my old one would shut itself off every 4 minutes).

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avatar gotr31 ♦224 (Cent)

I have to disagree with one point. I think that the global rich list IS relevant to MY daily life. It helps remind me that I am incredibly wealthly. As you pointed out we are each able to define that word for ourselves. My neighbors may have a different view of wealth and that is their right. I have tried to live by the saying, It’s not having what you want but wanting what you have. That being said I certainly wouldn’t turn down a higher income but until then I am going to count my blessings!

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avatar Jenna

I think you can feel wealthy and still fall into financial averages. It’s all about how you feel about life, your ability / freedom to do what you love and be successful at it. You can still feel wealthy and live within your means.

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avatar lynn ♦155 (Cent)

I agree with posters who describe wealth as an all encompassing entity. Money in the bank is only a part of it. Living below your means, great family and friends, wanting what you have, good health, being able to make choices, and more creates a stability that is comforting.

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