How much does it take to feel wealthy?

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The answer is “about double” 🙂

But, that’s not really a tongue in cheek question / answer, it’s actually scientifically researched and verified fact …

… let me explain.

Most people want to become rich (when we strip away the houses, cars, vacations, sex, drugs, rock and roll [AJC: Boy, I must lead a great life!]) simply to feel secure … to stop having to worry about money.

So, the definition of ‘rich’ for most people is related to how much more money that they feel that they would need in order to stop feeling financially insecure. And, that always seems to be about twice what you currently have; take a look at this report by MSN Money (if anybody can find the base source, please send me the link … I hate to quote quotes).

  • Those who earned less than $30,000 thought that a household income of $74,000 would qualify as rich.
  • Those who made $30,000 to $50,000 said an income of $100,000 would be rich.
  • And people in the top half [$50k – $100k+] of earners were more likely to say that an income of $200,000 earns you the right to the R[ich] word.

So, it seems that no matter what income level you are on, you need two (to perhaps three) times that in order to feel ‘rich’.

Perhaps, you feel that it would be different if we weren’t talking penny-ante incomes here, and jumped straight to millionaires and multi-millionaires? Surely, things would be different for them?

Well, not so … according to Robert frank, Author of Richistan, most of America’s Ultra-Wealthy still consider themselves as ‘middle class’ and would need “about twice what they already have in order to feel wealthy”.

So, this is just another reason why picking a random income or net worth $$$$ target and calling that ‘rich’ doesn’t cut the mustard … you’ll never be relaxed with your level of wealth, no matter how much you have.

No, what you need to do is:

1. Understand WHY you need the money: we call this Understanding Your Life’s Purpose

2. Understand HOW MUCH you would need so that you would be free to LIVE your Life’s Purpose: we call this Calculating Your Number

… and, when you finally reach your Number, not worrying about chasing more, because that’s about as sensible as a dog chasing it’s tail!

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10 thoughts on “How much does it take to feel wealthy?”

  1. I would have to say that I agree with this study as it has applied to my own thinking along the way. It seems that at every point in my adult life, i’ve always felt that if I had twice the amount of money or income than I currently had, that I would feel ‘rich’. Very interesting.

  2. I know that I consider my ex-in-laws to be rich (they lived on a canal just off the intercoastal canal in Ft Lauderdale, invested in real estate, ranches, had worked as a surgeon, bought whatever they wanted, etc.,) and my ex-mil said, “Oh we’re not rich! We’ve got friends who are much richer!!” (and she was referring to their knowing Dave Thomas, founder of Wendy’s, plus others who lived in the gated communities around Ft. Lauderdale, Boca, Palm Beach, etc.) I was astounded that she would consider those folks “normal” and not “super” rich.

  3. Diane, how I envy you ex-in-laws.

    But, I know that is going to be my financial issue, as it is now with some of my personal issues… Knowing when to say when. Breaking into a comfort level is going to be harder for me than making it. Well… maybe. 😉

  4. Well, forget about comparing incomes. If I could earn a steady $250K in passive net income (rent minus expenses in the case of renting out property) then I’d be feeling pretty rich. Currently I’m earning only about $12k in passive interest income… still far away from the target. Seems like quite a challenge to get there.

    -Mike

  5. @ Mike – At least you’re on your way …. don’t forget that $250k p.a. today is $375k p.a. (approx.) in 10 years and over $500k p.a. in 20 years … the power of inflation (NOT) working for you 🙂

  6. Adrian,

    Do you think inflation will play out that way in the future like you are saying? The times we are in right now are pretty deflationary… lots of wealth being lost. That makes it very hard to compute payback assumptions for projects and investments, even if you use a high discount rate in the assumptions of future cash flows.

    Example: I have a few hundred K cash to plunk down, and in early 2008 I was looking at New Zealand dollars because I could get a CD or bank rate at 8%. At that time 1 USD would buy 1.40 NZD or so. Today the Bank of New Zealand dropped the rate to 2% and 1 USD buys nearly 2 NZD. It makes it very hard to plan an investment strategy under these conditions.

    So going back in time, what I really did is hold it in Singapore dollars as a hedge against USD. The interest rate was shite but so far the currency has held up, not as well as the US but better than AUD or NZD. A better play would have been Yen but I didn’t consider that at the time. It’s a giant, global casino.

    -Mike

  7. @ Mike – I moved $US to $AUS at .80 cents (i.e. 80 cents US buys $1 Aus) and was getting 8%+ in a ‘top 4′ Aussie bank … but look what happened over the ensuing months: Aussie dollar nearly reaches 1:1 to the US dollar, then plummets to 67 cents (i.e. 67 US cents buy you $1 Aussie dollar). Who can call that anything but gambling (a.k.a. speculating).

    Lots of people lost money a few years back hedging Aus and US currency against the Swiss franc, from memory. So, on the one hand the whole world is a bank and who says you should ONLY have your money in CD’s in the US … on the other hand, you open yourself up to massive interest rate changes caused not by local economics but the currency FOREX (foreign exchange).

    So, I generally look at investments inside one country/economy at a time … I may invest in the US, Aus, NZ, UK – in fact, do – but each is a separate long-term investment that I may hold onto forever, or may sell if the current situation pushes events in my favor … I either win quick or slow, but I still win, or die tryin’ … 🙂

  8. AJC,

    Thanks for the response. I’ve been using multiple currencies for diversification. The last 2 years I was being paid in British Pounds while working in Thailand. I had an arrangement where every month when I got paid my salary would be converted to USD at the interbank rate then transferred to my account in the US. This was from 2006 – 2008. Now that was just dumb luck as I had no exposure to the pound during this massive downturn.

    Following this I decided to spread my currency risk to US & Asia, hence the strategy of holding Singapore Dollars. I also have a bit of Thai baht exposure since I live and work here now. I try to buy low and sell when the time is right, or hold… like your last sentence.

    The one concern I had at the time with AUD & NZD was that with interest rates relatively high in 2008 I didn’t think they would be pushed higher… so when they were to go down the currency would get creamed. I believe the unwinding of the Yen carry trade (and now USD carry trade) helped push down NZD and AUD. Swings and roundabouts as they say.

    -Mike

  9. I loved your blog It relates to what I’ve been searching on the internet for aussie dollar, been searching for a long time, so finally I’ve found it, and I’m thankful! Gosh, it’s already Sunday today, I forgot to do my groceries 😛 I’ll make sure I’ll order some pizza tonight. I know it’s unhealthy but as long as I have something to eat, I don’t mind! Yum! Pizza’s are delicious!

  10. @ Five Aussie Dollar – This is so obviously link-bait spam, but (a) you’re Aussie and (b) I actually like your site, so here’s a free plug for you: http://www.fiveaussiedollar.com.au/

    …. even though, I don’t allow advertising on my site. I’m obviously in a good mood! 🙂

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