What is Rich?

by Krantcents · 41 comments

Post image for What is Rich?

Have you ever wondered what is rich? This may be the hardest question to answer because everyone defines it differently.  Gallup (from an article on MSN Money) surveyed more than 1,000 adults and found that a person needs to have an annual salary of $150,000 and have a net worth of $1 million to feel wealthy.  Are you surprised?

Where?

Earning $150,000 in New York City or San Francisco is certainly not rich!  Places like Fort Smith, Arkansas, Pueblo, Colorado or Harlingen, Texas are a few of the least expensive cities in the United States.  Earning $150,000 in any of those cities where the median household income is $35-40,000 is rich!  So feeling rich depends on where you live or does it?  In those cities you may be one of the richest people in that city.  Housing is far less expensive compared to New York City or San Francisco.  You certainly will feel rich on much less than $150,000 as well

Other Factors

Housing is not the only cost that will eat up you earnings.  In these cities and others you may never heard of have lower grocery and transportation costs.  State income tax is another factor in making you feel rich because disposable (income after taxes and expenses) income is important!  California and New York may have the highest wages, but they also have the highest taxes.  Texas has no income tax and Colorado and Arkansas have lower taxes than either California or New York.  Sales taxes, property taxes and other taxes will lower your disposable income.  States such as Texas, Louisiana and Florida are some of the lowest tax burden states.

Cost of Living

Smaller cities in states that have lower tax burdens will give you more disposable income.  Lower housing costs provide more disposable income and will make you feel rich.  Imagine a nice house on some land and you only dedicate 10% of your income toward your mortgage, property taxes and home insurance.  Sounds ideal!  If you lower cost of living only stopped there, you would still be a winner, but all your costs are lower.  The more you have in disposable income, the more you will feel rich.

Savings

You have more disposable income what do you with it?  In these smaller cities, it is likely you are a small business person or professional.  You may invest in your business, real estate, or the stock market.  The real feeling of wealth is not just having a $100 in your pocket, but owning assets.  Assets that increased in value!  It may be your business that you could sell tomorrow for millions of dollars, real estate without a mortgage or something more liquid such as stock or mutual funds.  A million dollar net worth in these cities will feel like much more.

Reality

There are rich people who live everywhere!  They do not flaunt their wealth and they may even live next door.  They are the business owners, corporate executives and people who managed to save even on lower incomes.  They may not consider themselves rich, but qualify because they accumulated sufficient assets to be rich.  My journey to success chronicles how I accumulated assets to help me achieve financial freedom.  Many (including myself) do not even realize they are rich!  Don’t misunderstand, there are many more who did not save and struggle just to survive.

Wrap Up

The Gallup survey quantifies the definition of rich or did it?  There are too many factors to consider such as where you live, the cost of living and savings.  I think those factors affect your individual feeling of rich; however the amount of disposable earnings determines how much savings you have.  Those cities make it easier, but it is not necessary!  Over the years, I have read about maids who save millions of dollars on very low earnings.  You can earn less than the $150,000 and save a lot to reach millions of dollars and feel rich.  The message is clear, it does not matter how much you earn, but how much you have left to save or invest!  This is my conclusion of what is rich?

Photo by: stevendepolo

Please make sure to subscribe to our RSS feed to get the latest updates!

{ 38 comments }

101 Centavos December 21, 2011 at 12:36 pm

Many would argue that “rich” is not defined by assets, but by friends and family.

Roshawn @ Watson Inc December 21, 2011 at 1:04 pm

Great alternative way to look at it.

krantcents December 21, 2011 at 3:35 pm

I like to showcase a different point of view, however there are still more viewpoints or definitions out there.

krantcents December 21, 2011 at 3:31 pm

Everyone has a different definition! I think that is why it is interesting to discuss it.

Roshawn @ Watson Inc December 21, 2011 at 1:07 pm

I think many will be writing about this survey. Heck, it even found its way into my post about realizing goals today. Personally, I have a real problem with defining “rich” based off of income, especially that earned income.

krantcents December 21, 2011 at 3:37 pm

I agree! I know people who earned a great deal of money and are deep in debt!

Miss T December 21, 2011 at 4:14 pm

I agree with 101 and you. Everyone defines rich differently or in more than one context. I know for myself I look at being rich in two ways. Am I rich with family and friends and with love? Yes. Am I rich where I can buy whatever I want and do anything I want? Not yet. 

krantcents December 21, 2011 at 6:08 pm

I value my family, personal relationships and my marriage above any definition of rich, successful or wealthy. These things are very dear and important to me all my life. Happiness has very little to do with money, however lack of money can make you very unhappy.

Christa December 21, 2011 at 7:06 pm

Very interesting. I lived in Seattle and in the Midwest, and when I lived in Seattle, I never felt like I was well-off. Now, in the Midwest, I feel much more stable. Certainly not wealty (yet!), but much more stable.  

krantcents December 21, 2011 at 7:20 pm

It is all about disposable income and housing is less expensive too.

Hunter December 21, 2011 at 8:34 pm

‘Rich’ is definitely a moving target as you consider the cost & savings, as you point out. We are actively considering a lower cost of living location to settle when my wife is done with her military service in 8 years. I thinks it’s a smart way to make your resources stretch further.

krantcents December 21, 2011 at 8:42 pm

We live in a high expense area (Los Angeles) and probably never move. We want to be within hours of our children and friends.

retirebyforty December 21, 2011 at 9:02 pm

To me, net worth is much more important than income. If I have 5 million dollars, I would feel pretty rich even with a small income. 
Personally, I don’t think 150k/year and 1 million asset is rich. I guess we live in an expensive city as well. 

krantcents December 21, 2011 at 9:18 pm

I think it the result of learning to live on less. Being a saver all my life, I always live on less. I learned how to make it more effective over the years. To me, net worth guarantees that I will never have to work again.

YFS December 22, 2011 at 12:10 am

I’m in D.C.   I would be willing to say 150k isn’t rich.  I believe Rich and Poor is a state of mind

krantcents December 22, 2011 at 12:37 am

Almost anywhere near a major city, $150K is not rich! I think the Gallup survey attempted to quantify a term that is difficult to define because of differing opinions. My approach was to point out how geography may have an effect!

Darwin's Money December 22, 2011 at 2:19 am

Wow, I can’t believe anyone considers $150K to be rich.  I think of Rich as being independently wealthy where the person couldn’t care less what kind of “year” they had, because they can just live off their investments, trust fund, whatever it is that sustains them.  I think “rich” is also a state of mind and lifestyle.  Tough to nail it down with a generic survey IMO.

Jon -- Free Money Wisdom December 22, 2011 at 2:46 am

I agree with you, Darwin.  I think it’s relative.  I’m rich…but not because of monetary gain.  I have my family, my fiancee and a roof over my head.  Not to mention the most important person of all, Jesus Christ.  Hope you all have a Merry Christmas!!

krantcents December 22, 2011 at 3:50 am

Separating money from the equation is a whole different matter. Based on that, I am absolutely wealthy with a wonderful marriage (43+ years), 2 great children and a wonderful relationship. I don’t think it could be any better.

krantcents December 22, 2011 at 3:48 am

Very true! I think that is why there can be so many interpretations. For me, I keep a a low profile lifestyle and feel I have more choices than most. Personally, I do not feel $1 million is enough to call oneself rich.

thefrugaltoad December 22, 2011 at 5:51 am

Rich is a perception that you can afford almost anything you want.  Some people create the perception by overextending themselves with debt so that they drive a nice car and wear nice clothes.  Some people would look at them and perceive wealth when in fact they have very little cash in the bank.  As others have stated above, wealth is much more than monetary, it really is a state of mind.

krantcents December 22, 2011 at 4:54 pm

If you have to go into debt to create an image of rich, there is something wrong with that. The key with rich is discretionary income. That is cash you can spend on what you want.

The Single Saver December 22, 2011 at 8:26 am

I live in Ohio, so it doesn’t take as much for me to feel rich as it does for those who live in expensive parts of the country.  But ultimately, “feeling rich” is a state of mine… look how many celebs have to file bankruptcy due to over spending.  The best way, I feel, to feel rich is to live within your means.

krantcents December 22, 2011 at 4:57 pm

I think rich is partially a state of mind, however it is also disposable income. The money leftover after you pay your bills and put aside for savings/investments.

UltimateSmartMoney December 22, 2011 at 7:10 pm

“Rich” has many different meanings depending on the person.  Someone who is making $40,000 could easily categorize people who earns $100,000.  But, I am willing to bet the same people earning $100,000 do not think they are “rich”.  Then again, people who earns $1 million per year do not think they are rich either.  So you make a great point in trying to find out what is rich.

krantcents December 22, 2011 at 7:21 pm

My theory about being rich is it is always someone else. I have known some very rich people who never think of themselves as rich. They always mention others as being rich, maybe they view those other people as their definition of rich.

Barbara Friedberg December 23, 2011 at 4:04 am

I constantly remind myself that time is much more valuable than money. Rich can also be measured in personal control over one’s life. If you’re in jail, no matter how rich you are, your life stinks!

krantcents December 23, 2011 at 4:50 am

Bernie Madoff for one! Money provides freedom to make your own choices except for getting out of jail, although money will buy a better attorney.

Way Rich December 23, 2011 at 2:18 pm

I agree with Miss T.  Like her I am rich in family and friends, but I am working on the financial aspect of my life.  Soon to be debt free… okay…. by the end of the year.

krantcents December 23, 2011 at 4:18 pm

Family and friends was a priority for me my entire life. Financial goals and success is a moving target because I keep changing the definition. Debt free is the start of it, but not all of it. What are you going to do with the new disposable income after paying off the debt?

Way Rich December 26, 2011 at 10:10 am

We will save for retirement, even thought it is just around the corner. Another area we will focus on is to reduce the mortgage, and travel. Try to work some fun in the mix.

krantcents December 26, 2011 at 4:00 pm

Disposable income can make you feel rich! Fun includes travel and whatever you enjoy.

Way Rich December 27, 2011 at 11:36 pm

Exactly! Travel near and far are goals for the future.

My University Money December 23, 2011 at 3:54 pm

Rich is a little to open-definition for me.  I prefer to debate the term “capitalist.”  To me, someone that can live off of the assets they own as opposed to income generated from their labour, is a capitalist.  This is what I aim for.  Not “rich.” 

krantcents December 23, 2011 at 4:20 pm

I like to thin of it as financially independent! You can call it anything you want, it is the position of independence.

MoneyCone December 24, 2011 at 3:57 pm

In my opinion, if you can manage to live within your means and save more than your peer, you are rich in your category.

krantcents December 24, 2011 at 5:28 pm

Living within your means should be the norm vs. the exception. If you do,you are certainly on your way to rich!

krantcents December 28, 2011 at 12:00 am

2012 we are going to Venice, Italy to begin a cruise. I love to travel.

{ 3 trackbacks }

Previous post:

Next post: