It does seem like a lot of people in this thread think “rich” is the same thing as “independently wealthy” – you have enough money that you don’t actually need outside income anymore. I guess that’s one way to think about things, but it isn’t really what the word “rich” means. Being rich just means you have a lot of money.
What counts as “a lot” is somewhat open to debate, but I don’t think it’s reasonable to name some figure that would place someone in the top 1% or higher in terms of income. I can see disagreeing about whether the cutoff for “rich” should be at say the 75th or 90th percentile, but surely someone who makes more money than 90% of the other people in their region is rich. And by “region” I don’t necessarily mean their whole country since cost of living can vary a lot from place to place, but I don’t mean their neighborhood either.
I don’t live in a big city because I can’t afford it (well, that’s one reason anyway). If I made $250,000 a year all of a sudden, I’d consider myself rich. If I then chose to move somewhere with a much higher cost of living, I wouldn’t become poor again, I would just be choosing to spend my wealth to live in a place where only rich people can afford to live! Manhattan is expensive because so many people want to live there, and are willing to pay for the privilege.
To put it on a smaller scale, if a person buys a home at the edge of his means, does that automatically make him poor because so much of his resources are devoted to his home? No, because he gets a nice house to live in.
Again, the problem is always whether it’s a relative measure or absolute. If relative, the question is what is the appropriate basis of comparison.
Myself, I prefer a functional and social-class analysis. By this measure, “rich” is the social niche inhabited by those of a social class higher than “upper middle class” professionals.
Someone once told me you were rich (at least the working rich) when you bought whatever you wanted to eat (either eating out or stuff for home) without thinking twice about what it costs.
Obviously folks who are just extremely poor at money management or people who buy into the idea that 10,000 dollar a bottle wine is actually 500 times better than 20 dollar a bottle wine wreck havoc with that definition. But, still, I’ve always kinda liked that as a lifestyle definition.
I don’t think the scenario you describe is what BlackKnight was talking about. Sure, if someone gets a big promotion and then chooses to move to a ritzier neighborhood then that doesn’t suddenly make them poor. But in an area with a high cost of living like New York City, there are jobs that pay more than an equivalent position elsewhere because otherwise they couldn’t get anyone to take the jobs. It’s a kind of localized inflation.
Just to make up an example, maybe a cop in NYC makes $50,000 a year while a cop in Mobile, AL makes $25,000 a year. That’s twice as much money coming in for the NYC cop, but rent, utilities, and other essentials like groceries are far more expensive in NYC than they are in Mobile. It’s possible that the NYC cop is not actually coming out ahead because his basic living expenses are so much higher. (This cost of living calculator indicates that $50,000 in NYC only goes as far as $23,844 in Mobile, mostly because of the high rents in NYC.) The NYC cop might reduce his expenses by commuting into the city from a cheaper suburb, but there’s only so far one can reasonably travel to work every day. If our NYC cop could keep his current salary but live in Mobile then he’d be much better off than the local cops, but that isn’t possible. He can either make a high NYC salary but pay high NYC expenses, or make a lower Mobile salary and pay lower Mobile expenses.
Or to put it another way, if a Mobile cop got a job offer in NYC then he couldn’t accept the higher salary without moving to the New York area. It wouldn’t be possible to choose to take the new job but choose not to move somewhere with a higher cost of living. He wouldn’t be forced to move to the swankiest part of Manhattan, but earning that higher salary would be dependent upon moving to within some reasonable distance of his new police station and dealing with the higher cost of living that goes along with that.
The “relative” analysis is based on number-crunching. One is “rich” if one has more money than some agreed percentage of the comparator group, whatever that may be - say, richer than 4/5ths of the individuals in the country.
Problem with that is defining the appropriate comparator. The analysis makes some folks living in high-cost, high-income areas “rich” even though they don’t appear to differ from folks who are not “rich” but live elsewhere. For example, my brother in law is a mechanic, he earns a lot more than the $85,000 a year or so defined as “rich” on this method upthread; yet he doesn’t consider himself “rich” and is not so considered by others.
The “class-based” analysis looks, not strictly to the amounts of money in issue alone, but to the place the individual inhabits on the social spectrum in their locale: is this person considered “rich” compared with local upper professionals like doctors and lawyers?
The CEO of my company is rich. He has more money than he could ever spend if he lived a relatively normal middle-class lifestyle. And by that, I mean living in a house that he could pay off with his normal salary in 20 years, take 2 maybe 3 fabulous vacations a year , pay for his kids’ college and braces, eat well, dress well, have access to health care, etc. If he can do all that AND have tons left over, we’ll that’s rich.
People making $250k-$1M per year are “well off” but not “rich” IMO.
It kind of cracks me up when people say that they’d quit their job if they won the lottery. Because even a million bucks AFTER taxes is only going to last a few years for the average American, unless you make magnificent investments.
Similar to the above, I think the term most of you are describing is “financially independent.” To me meaning - does not have to work for a living if one does not choose to do so.
And you can be financially independent and have a very “small” standard of living. Buy a small house in a low cost of living area. Live a very frugal lifestyle. You don’t need to work, but jetting off to the South of France - even once - isn’t an option unless you want to return to work. You’d quite a bit in assets to support this - enough that asset wise most people would look at you and say “rich” on assets alone - but your standard of living would not be “rich” at all.
Likewise, you can have a pretty darn rich lifestyle - two vacations a year, luxury cars, designer clothes - off of a high income - but have nothing in real assets. It would be arguable if they were really rich or just appearing rich.
You’d be surprised at how little money you can make and still be considered rich by some private universities. And then they send letters asking you to donate on top of the tuition. :rolleyes:
My definition extends this - you basically do not have to look at the price of nearly anything you buy. You might choose to, but you don’t have to.
I’m hardly rich, but we don’t have to worry about the price of food. We shop for specials and use coupons because we are both children of people brought up during the Depression. A rich person flies first class, flies based on schedule not on price, and gets hotels based on amenities not price. They may choose not to, but they can. I know I’m not rich because I can’t afford to go First Class.
And then they send letters asking you to donate on top of the tuition. :rolleyes: