I'm Wealthy And I Didn't Even Know It

[novaman]

I've never considered myself wealthy- financially comfortable? Yes- But not wealthy. To me the wealthy people are those with a NW of $7.5 million or more, which happened to be the threshold number that a Fidelity Investments survey came up with, or maybe at minimum a NW of $5 million if I want to set the bar low.

So I was reading Jean Chatzky's "The Difference", Where she analyzes data mined from a Merrill Lynch detailed survey of 5000 people from 2008. And Lo and Behold, she defined "Wealthy", as those with a NW of $1 million or more if age 55+ , $750,000 or more if 45-54, $500,000 or more for ages 35-44, and $250,000 or more if under age 35.

Surpisingly (to me at least), even with this seemingly low definition of wealthy, only 3% of those surveyed were in this category. 27% of those surveyed were classified as "Financially Comfortable", which is what I thought I was. Shockingly, a full 69% of those surveyed were either living paycheck to paycheck or worse.

Then yesterday I read an article about how the wealthy are not ponying up for their children's college education...and find that their definition of wealthy is a household income of $250,000 per year.

....So I guess I really am wealthy. I just never knew it.

 

[Lisa99]

We have to keep in mind that 20% of the US population can't come up with $2k in emergency cash if given a short period of time (1 -2 months IIRC).

Given this apalling statistic I can see how people think one is wealthy with $1,000,000. I very much disagree with the definition, but I guess 'wealth' is in the eye of the beholder.

 

[Chuckanut]

I am constantly amazed at the number of people I meet who are 55+ and are stretched for money. Many still rent, often with a roommate, and work dead-end jobs with no career potential. Many others own their own home but borrow against it for any bill much over $1000. Yet these same people happily spend 3-8 dollars a day on their latte or happy hour glass of wine.

 

[ChadR]

We have to keep in mind that 20% of the US population can't come up with $2k in emergency cash if given a short period of time (1 -2 months IIRC).

Given this apalling statistic I can see how people think one is wealthy with $1,000,000. I very much disagree with the definition, but I guess 'wealth' is in the eye of the beholder.

I vaugley remember the thread in which that article was linked. Sitting here today reading that I really have to wonder how much of that is economy/cultural and how much of that is human nature. It doesn't suprise me that a group as large as 20% would consistently live above their means...

 

[W2R]

I've never considered myself wealthy- financially comfortable? Yes- But not wealthy. To me the wealthy people are those with a NW of $7.5 million or more, which happened to be the threshold number that a Fidelity Investments survey came up with, or maybe at minimum a NW of $5 million if I want to set the bar low.

So I was reading Jean Chatzky's "The Difference", Where she analyzes data mined from a Merrill Lynch detailed survey of 5000 people from 2008. And Lo and Behold, she defined "Wealthy", as those with a NW of $1 million or more if age 55+ , $750,000 or more if 45-54, $500,000 or more for ages 35-44, and $250,000 or more if under age 35.

Surpisingly (to me at least), even with this seemingly low definition of wealthy, only 3% of those surveyed were in this category. 27% of those surveyed were classified as "Financially Comfortable", which is what I thought I was. Shockingly, a full 69% of those surveyed were either living paycheck to paycheck or worse.

Then yesterday I read an article about how the wealthy are not ponying up for their children's college education...and find that their definition of wealthy is a household income of $250,000 per year.

....So I guess I really am wealthy. I just never knew it.

That definition of wealth does not seem correct, to me, even here in the South where cost of living is low. Your lower estimate of $5,000,000 is better IMO.

But, it is a "feel-good" definition in that some who read the book will be happy to learn that they are wealthy when they really aren't. No harm in that, I guess, unless they start spending as though they were wealthy.

Looks like an interesting book.

 

[Lisa99]

No harm in that, I guess, unless they start spending as though they were wealthy.

For me that your quote is the definition of wealth and the number is different for everyone. "Being able to spend without worrying about the consequences".

 

[MasterBlaster]

The definition of wealthy changes depending on where you stand.

If your a sxcrapping by on $15k per year then $1MM seems like an enormous unacheivable sum.

But if you are pulling down $500k per year then $1MM is just a good start.

< quoted from Office Space>
Peter Gibbons: What would you do if you had a million dollars?
Lawrence: I'll tell you what I'd do, man: two chicks at the same time, man.
Peter Gibbons: [laughs] That's it? If you had a million dollars, you'd do two chicks at the same time?
Lawrence: Damn straight. I always wanted to do that, man. And I think if I had a million dollars I could hook that up, 'cause chicks dig a dude with money.
Peter Gibbons: Well, not all chicks.
Lawrence: Well the kind of chicks that'd double up on a dude like me do.
Peter Gibbons: Good point.Lawrence: Well what about you now? what would you do?Peter Gibbons: Besides two chicks at the same time?
Lawrence: Well yeah.
Peter Gibbons: Nothing.
Lawrence: Nothing, huh?
Peter Gibbons: I'd relax, I would sit on my ass all day, I would do nothing.
Lawrence: Well you don't need a million dollars to do nothing, man. Just take a look at my cousin, he's broke, don't do ****.

 

[W2R]

For me that your quote is the definition of wealth and the number is different for everyone. "Being able to spend without worrying about the consequences".

Oops, I am so ignorant! For some reason I always thought that even the outrageously wealthy (on the level of Donald Trump, Warren Buffet, or Bill Gates) had to think of consequences when they spend but just pulled in the reins on spending later than the rest of us. Like, "Gee, I really want that Lamborghini but I think I should cut back and only buy a Mercedes this year", or "Wow, if I had that yacht I would feel like I died and went to heaven, but I guess my old one will have to do until next summer". I never really thought about it I guess.

 

[FIREd]

To Jean Chatzky's defense, she does recognize that wealth is relative. I quote:

It's also important to note that many of the truly wealthy individuals - the millionaires- in our study didn't describe themselves as wealthy. Instead they describe themselves as "financially comfortable". Wealth, it still seems, is relative. You're less likely to see yourself as wealthy, even if you live in a huge home on a big plot of land with millions of dollars in the bank, if the neighbors to the left and the right of you have tens of millions in the bank. Likewise, you're less likely to see yourself as wealthy if you run a successful small business, when the other members of your social set run successful midsize ones. Of course, the rest of America - and most of the world - indeed views you as wealthy.

I saw on CNBC today that 64% of Americans don't even have $1,000 in savings (link: Two-thirds of Americans financially shaky- MSN Money). Is it surprising to anyone that they see millionaires as wealthy?

 

[East Texas]

My idea of being wealthy is being debt free and having money left over at the end of the month. So I guess this means I've been wealthy for a pretty long time.

 

[Nobulife]

My idea of being wealthy is being debt free and having money left over at the end of the month. So I guess this means I've been wealthy for a pretty long time.

Well said. Whether you live on 30k or 30m per annum being debt free is what gives you freedom.

 

[JOHNNIE36]

My idea of being wealthy is being debt free and having money left over at the end of the month. So I guess this means I've been wealthy for a pretty long time.

Amen brother! Being debt free and having some cash left over at the end of the month allows you to sleep good. What a great feeling.

 

[photoguy]

I saw on CNBC today that 64% of Americans don't even have $1,000 in savings (link: Two-thirds of Americans financially shaky- MSN Money). Is it surprising to anyone that they see millionaires as wealthy?

If you track down the source of the survey, it would be more accurate to say that that 64% of people who responded to an online poll on the homepage of DebtAdvice.org can't raise $1000 from savings. Obviously this is a very different population than what we think of as all Americans.

To me this seems like gross misrepresentation by the journalists who wrote the article.

 

[bikeknit]

To take this discussion and flip it, my Mom and Dad used to have "discussions" about if they were poor. Dad thought we were poor because we couldn't afford the kinds of middle class luxuries that those around us could. My Mom thought we weren't poor because we had a roof over our heads, food on the table, and some savings in the bank. Even though we ate home made macaroni and cheese for dinner and rarely had packaged cereal because it was too expensive we were immensely wealthier than the vast majority of people in the world. It is often how you look at it.

 

[HFWR]

I’ve got clothes on my back and shoes on my feet
A roof over my head and something to eat
My kids are all healthy and my folks are alive
You know, it’s amazing but sometimes I think I’ll survive

I’ve got all of my fingers and all of my toes
I’m pretty well off I guess, I suppose
So how come I feel bad so much of the time?
A man ain’t an island—John Dunn wasn’t lying

Loudin Wainwright III, from Hard Day On The Planet

 

[FIREd]

If you track down the source of the survey, it would be more accurate to say that that 64% of people who responded to an online poll on the homepage of DebtAdvice.org can't raise $1000 from savings. Obviously this is a very different population than what we think of as all Americans.

To me this seems like gross misrepresentation by the journalists who wrote the article.

What about that one from NBER (the results from this study have been posted numerous times on this site):

Got $2 000 in a pinch?- MSN Money

About 50% of Americans don't have $2,000 is savings and would be unable or would struggle to come up with that sum in a month's time.

In addition, according to the Federal Reserve, the median net worth (including home equity) of US households was $96,000 in 2009. There are roughly 2.6 persons per household on average in the US, so the median net worth (including home equity) for an individual was roughly $37K. I think that such an individual would consider someone with $1M in investable assets* wealthy.

*The numbers in the OP are investable assets (excluding home equity) per individual.

 

[PaddyMac]

I think you'll find that with a $1M net worth, you are probably in the lower end of the top 1%. I read a good article a few weeks back and was surprised how the so-called "top 1%" start at a fairly low rate. Most of the true wealth is found around the top end of the top 1%. The lower end are more like upper middle class really.

 

[FIREd]

I think you'll find that with a $1M net worth, you are probably in the lower end of the top 1%. I read a good article a few weeks back and was surprised how the so-called "top 1%" start at a fairly low rate. Most of the true wealth is found around the top end of the top 1%. The lower end are more like upper middle class really.

I think the lower end of the top 1% would suit 99% of people just fine.

Wealth is relative.

 

[obgyn65]

Hello Novaman - as you may know, some wealth calculators include the NPV of pensions, SS, etc. in the total NW. In those cases, I can see NW numbers going up very quickly...

To me the wealthy people are those with a NW of $7.5 million or more, which happened to be the threshold number that a Fidelity Investments survey came up with, or maybe at minimum a NW of $5 million if I want to set the bar low.

 

[photoguy]

What about that one from NBER (the results from this study have been posted numerous times on this site):

Got $2 000 in a pinch?- MSN Money

About 50% of Americans don't have $2,000 is savings and would be unable or would struggle to come up with that sum in a month's time.

In addition, according to the Federal Reserve, the median net worth (including home equity) of US households was $96,000 in 2009. There are roughly 2.6 persons per household on average in the US, so the median net worth (including home equity) for an individual was roughly $37K. I think that such an individual would consider someone with $1M in investable assets* wealthy.

*The numbers in the OP are investable assets (excluding home equity) per individual.

I took a look through the NBER study but they didn't actually publish their sampling methodology and it's not clear how they selected individuals. However, it does look like they tried to match with broader US demographics although they do note where they fell short.

My read on the survey results is that it is as much about perceived ability to raise $2k for an emergency as it is about actual ability. While I don't doubt that many in the US cannot find $2k or so, if you look through their tables you see all sorts results that lead me to think many people just have an exceeding negative view that colored their responses. For example, in Table 1 they show that nearly 20% of people with "wealth" more than $250K felt that they would "probably not" or "certainly not" be able to cope with a $2k expense. Of folks making $100k-$150k a year, 24% also felt they could not cope.

 

[rescueme]

To me this seems like gross misrepresentation by the journalists who wrote the article.

What else is new?

 

[glippy]

My high woodpile, tall garden, health, youth, and remaining 60-70 years to do with as I wish makes me feel wealthy.

Even if a guy had 10,000 times as much money as me, but still has to put in 40 hours a week, I'd consider myself wealthier.

Not even in a wishy-washy feel good way, but in a very real, financial sense. I have all the money I need. He doesn't. So who's the wealthy one?

 

[e86s54]

It seems wealthy is as much of a state of mind than a number. About ten years ago, I figured $4mil would allow me to do pretty much anything I wanted without having to worry about money.

Now looking at the 10 year anniversary of 9/11, I find myself thinking "Man, where the hell did the last 10 years go?!!!!!!" more so than my net worth tabulation.

 

[novaman]

Great posts!!

So naturally the follow up question will be, "What is your definition of 'Wealthy'?"

Like I already said my definition of wealthy is a having a NW of $7.5 million.

 

[photoguy]

Great posts!!

So naturally the follow up question will be, "What is your definition of 'Wealthy'?"

Like I already said my definition of wealthy is a having a NW of $7.5 million.

For me, the beginning of being "wealthy" is when the SWR is about equivalent to the median household income for that area.

So for los altos,ca (median income 185k) you need like $6M to be considered wealthy. For Des Moines, IA (median 38k) you'd need $1.2M.