What Does It Take to Be Considered “Wealthy” in the U.S.?
Being “Wealthy”
Deciding what does it take to be considered “wealthy” reminds me of something comedian George Carlin said a number of years ago:
“Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?”
Wealth, like speed, or musical talent, or strength, or size, or pretty much anything else is almost always relative. What one person drops in the snow without noticing might make another feel rich beyond their wildest dreams to find. I’m not sure it’s realistically possible to quantify what counts as “wealthy.”
Not that my hesitation stops anyone else. Here’s what U.S. News & World Report has to say in response to the question, “What does it take to be considered wealthy?”
According to a 2019 Modern Wealth Survey from Charles Schwab, Americans reported needing an average of $2.3 million in personal net worth to be identified as wealthy.
Well, there you go, then. It’s $2.3 million. All you slackers with something like $2.1 million can now get down off your high horses, while those of you with $2.5 million or more can stop showing off. It’s been settled.
Or maybe it hasn’t...
The survey results don't surprise Nick Giacoumakis, president and founder of New England Investment & Retirement Group Inc. in North Andover, Massachusetts. However, he isn't sure they actually represent what it means to be rich. "Do I think it's accurate? Absolutely not," he says.
Financial experts say it's hard to quantify what makes someone wealthy. A personal net worth of $2.3 million in New York City is much different than having that net worth in the Great Plains...
Oh, good – it’s all relative again. As someone who falls short of the $2.3 million mark at the moment, I was starting to feel a bit insecure.
It probably shouldn’t surprise anyone that different generations have slightly different answers as to what does it take to be considered wealthy, CNBC.com explains:
Here’s the full breakdown of how each age group responded:
Gen Z: It takes $1.49 million to be considered wealthy
Millennials: It takes $1.94 million to be considered wealthy
Gen X: It takes $2.53 million to be considered wealthy
Boomers: It takes $2.63 million to be considered wealthy
Most Americans don’t have nearly that much money: The average U.S. household has a net worth of $692,100, according to The Federal Reserve’s Survey of Consumer Finances... Since the super-rich can pull up the average, the median net worth, or those at the 50th percentile, may be a better gauge, and that’s $97,300.
Well, I may not qualify as “wealthy,” even on my own generation’s scale, but if we use median net worth, I’m rapidly approaching “average.” I suppose we can count that as a win!
Then again, any scale limited to American net worth is severely distorted in terms of the bigger picture. According to the Global Rich List, an income of around $32,000 puts you safely in the TOP 1% in the entire world. If you’re at that median net worth.
So what does it take to be considered wealthy? You could easily argue that a starting teacher’s salary pretty much earns you that label – as long as it’s in a foreign language.
If you’re really raking it in and manage to gross $79,500 one of these days, you’re in the top one-tenth of one percent on the globe. You are officially ultra-rich in the eyes of the overwhelming majority of everyone alive today and – realistically – most everyone who’s ever lived in the history of mankind.
So, yeah... what does it take to be considered “wealthy” is definitely relative.
Redefining Wealth
Of course, there are more useful ways of thinking about wealth. One definition of “wealthy” on dictionary.com goes something like this:
“rich in character, quality, or amount; abundant or ample”
If we eliminate the ‘y’ and turn it into a noun (“wealth”), we get this:
”an abundance or profusion of anything; plentiful amount”
And, at the bottom, an older definition, now considered ‘obsolete’:
”happiness”
Please understand, I’m happy for you if you know how to make money and find yourself at that $2.3 million mark or whatever. I like having friends better off than me – they tend to pick up the check at dinner and host the nicest get-togethers. And if you do end up in that category, I’ll be working very hard to ensure you consider us the best of friends. But in the meantime, maybe we could find some value in a few of these more general definitions.
Maybe we can remember our relative wealth and opulence compared to much of the rest of the world – not so we feel bad about it, but so we’re better able to take advantage of our resources and our potential to utilize them more effectively. It’s sometimes hard to make the best long-term choices when we’ve convinced ourselves we’re broke, or even that we’re destined to pretty much live paycheck-to-paycheck from here on out unless we win Powerball or something.
If we’re able to see ourselves as actually rather fortunate, however – with options, resources, and the ability to make decisions that will impact our future positively or negatively, well then – that gives us what fancy academic types call “efficacy.” Essentially it means that we see ourselves as having a role in determining our own future and responsibility for our own decisions. That precludes you from a career in politics, but otherwise it’s quite empowering!
Defining What Does It Take to Be Considered Wealthy without Using Numbers
I respectfully suggest that we set aside the definition of wealth as a specific dollar amount, whether in the millions or the thousands. If we’re wondering exactly what does it take to be considered wealthy, I suggest we consider a number of other factors which aren’t necessarily the same for everyone, but which might prove more useful for many of us in determining whether or not we’re “wealthy” by our own measure. And isn’t that the one that matters most?
Lest you worry I’m about to talk about love and unicorns and peace on earth, don’t worry – we’re still talking tangible, largely financial stuff. Those other things are very important and I hope the Season finds you warm and fuzzy and everything, but those are topics for another blog. It’s just that when we talk about money stuff, we’re going to try to be a bit more grounded. Maybe even practical.
So what does it take to be considered wealthy by this fancy new set of standards of yours, Blaine? I’m not sure I can give you hard numbers on that, my friend. I hope, however, that you’ll let me offer some general thoughts and you can decide yourself whether or not I’ve lost it altogether or simply been overwhelmed by the rhetoric of the holiday season. Then again, maybe I’m on to something – you’re still reading, right?
What Does It Take To Be Considered Wealthy?
In any case, here are FOUR ways I think we could more usefully measure wealth. You choose the one or the combination more useful to you and do with it as you see fit. Then, if it turns out we can help with any or all of it, just let us know.
1. You Have An Effective Household Budget
I know this isn’t as exciting as if I’d said “yacht” or “third summer home” or even “bathtub full of bullion,” but it’s a big deal and not as common as you’d think. In fact, if the answer to “What does it take to be considered wealthy?” involves being in some way part of the top 5% or 10% of people you know, having an effective household budget will definitely put you there.
What Do I Mean by “Effective”?
I mean a budget that’s relatively accurate in terms of your income and your out-go. I mean a budget that reveals to you for better or worse each month exactly where your money is coming from and – more importantly – where it’s going. Note that I’m not telling you HOW to spend your money; it’s YOUR money. But be honest with yourself about that spending and make conscious choices. If you’re not willing to do that, then something’s wrong. You’ve got some internal conflict mojo, my friend.
An effective budget also means there’s something going into savings or other investments on a regular basis. A budget that doesn’t incorporate planning ahead isn’t really a budget so much as a simple spreadsheet. Tracking expenses is an important start, but managing your finances is active, and in some ways assertive. It may even include looking at ways to pay down your mortgage more quickly, or consolidate your debts, or eliminate credit card debt, etc. Specifics will vary, but if you’re wondering exactly what does it take to be considered wealthy, effective money handling skills is an essential foundation. This is true whether you’re currently worth $2.3 million or $2.30.
2. You Have A Plan For Retirement
Like the concept of “wealth,” having a “plan” for retirement means many different things to different people. We’re going to look at it in terms of “What does it take to be considered wealthy?” – which at least narrows it down a bit.
Basically, having a “plan” means that at some point you’ve sat down and run some actual numbers on how much you’re likely to need to maintain your desired lifestyle after you retire. This will involve a pretty close approximation of when you’re likely to retire, what other income will be available to you at that point, how much you have in savings now, and how much you’re saving on a regular basis now. Ideally we’d figure in the cost of living changes and shifts in the market (assuming you have investments of some sort), but we’ll try to keep it simple for now.
Will your house be paid for? Are there medical conditions of which you’re already aware that require special treatment? How much do your kids really like you, and how close do they live if they do?
If you don’t have a pretty solid idea of what sort of retirement plan your employer currently offers, and what you have or haven’t signed up for, it’s time to set up a meeting with HR and humbly ask them to go over it with you. There’s no shame in asking for clarification about how your 401(k), 403(b), IRA, state pension plans, or whatever else is in play, actually works. How much are they contributing, and which box did you check for additional contributions, if any?
3. You Have A Variety of Investments
This is in some ways similar to having a retirement plan, but investments aren’t necessarily aimed primarily at cushioning your life post-employment. They may be intended to help you pay for your children’s education, weddings, vacations, or even their inheritance (hey, they’re thinking of it – you might as well, too).
Contrary to what many believe, you don’t have to already be wealthy to invest in the future. Here are only a few of the ways in which anyone of middle class or above in America can begin building their way towards some degree of “wealthy.” Keep in mind that generally speaking, the higher the risk, the higher the potential reward. The safer the investment, the lower the potential profits. And that’s OK.
Incidentally, helping normal folks get more comfortable and become more effective with their investments is the reason we started Wealthry.com – one of our family of sites designed to help you take more control of your financial life. You might want to check it out.
The Stock Market
We all know this one, at least by name. Stocks are high risk and offer high potential gain or loss – although sometimes they can prove surprisingly stable over time. It’s the unpredictability that makes them so attractive to many investors.
When you buy stock, you essentially own a small piece of the company issuing that stock. If the value of that company goes up, the value of your stock goes up in the same proportion. If the value goes down, so does the value of your investment. Those profits and losses are all theoretical until you actually sell the stock, which is another aspect of the game. There are all sorts of complicated ways to play the market, even if you stick to the legal stuff. Personally, I prefer to leave such things to the pros.
CDs (Certificates of Deposit)
These are in many ways the opposite of playing the stock market. CDs are a savings mechanism in which you deposit money for a specific amount of time. The longer you agree to leave your money in the account, the higher the interest rate. They are in some ways like savings bonds in that sense. CDs are insured by the FDIC and one of the safest ways to invest.
Bonds
Bonds are similar to CDs, but they’re issued by corporations looking to raise capital or the government looking to do more of whatever it is they do, rather than financial institutions doing financial things for clients. When you purchase bonds, you’re essentially loaning the issuing company (or the government) a set amount of money for an extended time period. When the bonds mature, you receive your investment back with interest. They’re generally more reliable than stocks and interest rates are decent.
Mutual Funds
Mutual funds are a financial arrangement managed by various professionals which allow investors to combine their funds and invest in pieces of many different companies. This reduces risk and allows relatively low cost of entry, so if you’re new to the whole investment thing, they might prove an attractive place to start.
What does it take to be considered wealthy? One possible answer is, “You’re not just working for money; you have money working for you.”
4. You and Yours Have Food, Shelter, and a Little Fun Sometimes
Build Wealth
Take Care of Your Money and Reach Financial Freedom
OK, I suppose I’m talking about love and unicorns and peace on earth after all – at least a little bit. But it’s easy to overlook, as we talk about millionaires and investments and retirement and the global economy that the main reason we even care about this stuff is that we want to be able to take care of ourselves and our families.
If you’re able to pay the rent, keep food on the table, maybe cable or decent cell phone and the occasional circus, hockey game, or art exhibit, you’re doing more than most people in the history of mankind have been able to do for themselves and their families. Sure, some of that’s luck of the draw – you live in the 21st century United States. But some of it’s because you’re winning at the most important basics there are – family and shelter and food and fun.
Final Thoughts
What does it take to be considered wealthy? At the risk of closing with the cheesiest thing ever, it merely takes recognizing it and appreciating it – because you already are.
If you have any difficulties with budgeting, money management, investing, or any financial matter, Wealthry and the entire Goalry family is here to help you. We unify finance to make it more easier for you. Whatever you think of that is finance related, you can find it here. For example, if you’re interested in opening a savings account and taking the first step towards financial success, you can do it right here. Check out our suggestions below: