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What Does It Mean To Be Wealthy?

With the recent election, we heard a lot of talk about the wealthy. Before we can say someone is wealthy, we first have to define what it means to be wealthy.

With the recent election, we heard a lot of talk about the wealthy. How much money would it take for you to feel wealthy? According to research studies, the answer is consistent – we think another person is wealthy if they have more than we currently have. Very few people actually feel they are wealthy. Before we can say someone is wealthy, we first have to define what it means to be wealthy.

Which of the following people would you consider to be wealthy?
Person 1:  Makes $400,000 per year as a corporate executive. They recently brought a new car, boat and RV. They haven’t saved much for retirement, and have a net worth of about $50,000.

Person 2: Makes $40,000 as a butcher at the local grocery store, and has never made more than this. They have diligently saved their entire life, and have about $500,000 saved for retirement.

So which person would you consider wealthy? It is the person with a high income but nothing in savings, or is it the person with average income and a lot in savings?

The common thread for most of my clients is that they have been diligent savers. They spent less than they made each year, and have done so their entire lives. Although some have higher than average incomes, many are more like Person 2.

What does it take for you to feel wealthy? What makes you think another person is wealthy? It is the flashy new car, huge home, or big screen TV? Or is it the person who always buys used cars, has lived in the same home for many years, and has built a good sized nest egg for retirement? The truth is, it is really hard to identify the latter group of people. They really are The Millionaire Next Door.

For most, we consider someone wealthy if they have more than us… whether it be income or assets. There really is no definition of wealthy… it is “I can’t define it, but I will know it when I see it.” Just keep in mind that this means you are wealthy to those that have less than you.

Remember, even though most would consider Mitt Romney wealthy, he has only 1% of the net worth of Bill Gates… To Bill Gates, Mitt Romney is poor. It’s all relative!

Between high income earners and high net worth individuals, which represents wealthy? Which do you aspire to be? I would love to hear your feedback in the comments section!

Alan Moore is a fee-only financial planner and founder of Serenity Financial Consulting in Shorewood WI. Follow him on Twitter @R_Alan_Moore. You can contact him at alan@serenityfc.com, 414-455-5313, or visit his website at www.SerenityFC.com. Want more education? Download your free guide to the “10 Easy Steps To Securing Your Financial Future Today.”

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Kari pope November 13, 2012 at 08:51 AM
Wealthy to me is your health. Money can't by you love or health.Believe in God that is also wealthy to me. Amen'
Dave Koven November 13, 2012 at 05:32 PM
Wealthy to me is having a lot of discretionary income...money not needed for bills and/or retirement. This would be cash available for fun things like vacation homes, sports cars, jewelry, fashion clothes, yachts. The earlier in your life that you have these "toys", the wealthier you are.
Alan Moore, MS, CFP® November 13, 2012 at 06:10 PM
Kari, your point is certainly well taken... For many, wealth may have nothing to do with actual money. But typically, it takes a certain level of income/wealth to achieve the goals of spending time with family, good health, and such. Dave, so if I understand, you are saying wealth is having a high income because it allows for discretionary money to buy "toys." Do you consider someone with high savings, but no income, to be wealthy as well?
Dave Koven November 13, 2012 at 06:36 PM
Alan Moore...It would depend on how they had to get the savings. If they had to spend most of their life slaving away to have the savings, I don't think they are rich. Rich is when you don't have to work, but you have all the perks and benefits. Inheriting at a young age is best.
North Shore Newbie November 13, 2012 at 09:03 PM
This is really a great question and one that no two people would probably answer the same. I guess my answer is somewhat nebulous, but it would be something like "if you can pay for major life events without taking out a loan and it doesn't take most of your savings, then you're wealthy". I know that's vague, but it's partly based on the blog you wrote a while back pointing out that 50% of Americans couldn't come up with $1000 in an emergency. I think wealth is being able to pay for things like weddings, a new roof, a new car, etc. without having to exhaust your nest egg and without having to borrow the money. If major life expenditures are not a source of stress and worry, then, in my opinion, you're wealthy.

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