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?
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
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.
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.
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.
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