When my son was little, he asked my father, “Grandpa, are you rich?”
My father told him, “Yes - I have you, and your grandmother, and all the rest of the family.”
“No, Grandpa,” says my son. “How much money do you have?”
Regards,
Shodan
It really is nebulous, and a lot of it depends on where you live. We live in a fairly poor area, and it looks like our net income is about 3X the median annual household income here.
Are we wealthy? No. I’m sure we appear that way (especially to many of the folks around here on welfare programs) because we have two cars (one of them nice, with a payment, one a beater, but paid off); we tend to eat out about twice a week (once for lunch, once for dinner); when we decide to go away for a weekend, we can.
On the other hand, we have three mortgage payments (none of them high, thank goodness!), a daughter who’s still young enough to be fully dependent on us, and another daughter whose college education we’re paying for.
We’re comfortable. We’re not rich.
I know one guy who only works because he wants to, who made a bunch of money back in the ‘60s singing for a reasonably popular pop group. Unlike his musical counterparts, he didn’t blow most of his money on immediate gratification (probably helped that he came from ‘money’), invested wisely, now owns a house designed by Frank Lloyd Wright, as well as a yacht that he goes sailing on as often as he likes. He works when he feels like it. He’s got all the money he needs to be comfortable (very comfortable) for the rest of his life. He’s ‘wealthy’. I know a couple of other families who can certainly afford to do what they want, when they want, including many international trips, expensive jewelry and cars, etc. But they work for a living, and I think they pretty much need the income. So I’d consider them “upper-middle-class”, even though one husband in one such family freakin’ bought his wife a palace in India, because he was there, and it was on the waterfront, and he thought she’d like it. :eek:
Though I consider us to be fairly comfortable, I just can’t imagine having that kind of income at my disposal!
A person is rich when they can no longer invite a middle class work-every-day hurting for cash type person into their house without at least 10 minutes of an extremely awkward conversation about all the nice things he or she has.
If you can pay three mortgages, I consider you wealthy. Though I do make a distinction between ‘‘wealthy’’ and ‘‘filthy stinking rich.’’ Sr. Olives’ Dad’s side of the family has ridiculous amounts of money. I mean his grandparents have an elevator, a helicopter, and a live-in butler kind of wealthy. One of their homes includes a two-level freshwater swimming pool with locker room/shower stalls, a home theater, an arcade, and a kitchen built exclusively for their caterer. They took us all on a Mediterranean cruise from Spain to Croatia – that’s no less than 32 people – wined us, dined us, let us all stay in five-star hotels and eat in five-star restaurants, and even gave us spending money. We had a private bus to get around town, and a private yacht in Venice. I felt like I’d won a game show. If you can take 32 members of your family on a dream vacation, that’s what I call ‘‘over the top, ridiculously wealthy.’’ (NOT COMPLAINING ;))
There is also something to be said for coming from wealth, and how that shapes future wealth. In addition to being likely to inherent wealth, wealthy kids are generally taught how to get, and keep, more wealth. My husband’s parents were just average middle class, so he was raised without the sense of entitlement that often goes with money. Nevertheless, he had a trust fund established on his behalf, he was taught how to invest and given an initial principal balance, his college education and college living expenses were paid for, and he got a new car on his 16th birthday (which he still drives ten years later, the frugal bastard.) We have been occasional recipients of tremendous moments of generosity on his family’s behalf, and I have no doubt he’s going to inherit money someday. That alone to me indicates the value of wealth vs. mere income. You can share both, but wealth has generational benefits.
I grew up without much money and don’t make much money myself, so lots of people seem rich to me. Average income where I live is $50,000 per family, and it’s a pretty well-off area with nice houses.
$250,000 is an astounding amount of money to make each year. I can’t even imagine $100,000 or $80,000. Multiple homes, multiple cars, and lots of vacations = pretty dang rich to me.
Agreed. When my Mom worked as an engineer in the 80s, our household income was maybe $50k (a wild-ass guess; she was paying a lot toward student loans.) I got pretty much any book or toy I asked for, but we lived in a duplex off of a major highway, not exactly the high life. Later, when she quit her job and ran a small business with my stepfather, they pulled in around $25k-30k for a household of 6. My house growing up from age 10 was smaller than our two-car garage. On weekends and summers I shared an 8x9 bedroom with two sisters and a brother. Then, when I moved out on my own at 17, I had jack shit. 25c in my pocket and $600 in the bank. The 25c I promptly spent on a phone call to my nearest relative, the $600 I used to purchase the car being lent to me by my parents so that I could drive to school and graduate.
Shit, last year I thought I was living high on the hog. Saving for retirement, saving toward a new car, paying for medical expenses, and purchasing a new computer in cash. On a household income of $50k. I have a desktop computer, a laptop, and a netbook, a color TV, a DivX player, and hardwood furniture (purchased at a discount from my Mom.) I am REALLY SHITTY at managing money. If I can start growing wealth on $50k and still do whatever I please, then at what point does income become arbitrary?
Another great Chris Rock quote: “You can lose ‘Rich’ in one booze-soaked, cocaine-snortin’ Summer. You can’t get rid of ‘Wealthy’.”
It’s interesting that some of you put Rich above wealthy on the income scale. I think of rich as well-off (even if it’s up to $2M per year) but having to work to earn a living. Wealthy is when your time/life are completely your own.
Whether you choose to pursue a Doctorate of Sciences and do medical research; or starve yourself and make trips to Paris and Milan in the attempt to be the best dressed/sexiest thing in shoe-leather; or chase all over the world in home-engineered contraptions trying to break world records; “Wealthy” doesn’t have 40-100 hours per week plannned for them by somebody else.
And to whoever said $100k is rich, you clearly have never tried to live in Northern Virginia. $100k is still buying clothes at Walmart, and not every year. And that’s not as bad as in New York or San Fransisco!
I have a friend who calls me rich. I make just under $60k/year. I’m a single person with her own house and a paid off car that I bought new. My mortgage is my only debt, and I use my extra cash for disposable income instead of savings.
To him - a person who lives paycheck-to-paycheck and doesn’t have quite the comfortable lifestyle that a 30-year-old could have - I am rich. I make about 2.5x what he does and have assets and can afford to take him out to dinner at decent restaurants.
Now, I know I’m not rich. Especially since I am familiar with the glaring hole in my savings plan. To someone who is my age and lives in my region and makes less than half what I do, I’m rich. If I made $100k/year, I’d probably think I was rich, because I’d compare that to what my dad made when he retired and it’d be more.
Rich is relative.
When my wife and I were at the top of our earnings life, our combined income was right around $250K. While we lived comfortably and could pretty much buy nice things we wanted, the key to that comfort was having zero debt and not buying “toys”. We had one car, no boats, planes, ATVs, snowmachines, cabins, etc. By sticking to that philosophy, we were able to bank enough to retire a few years earlier than 65 and not be facing a continuing mortgage. If you don’t have to count it, you’re rich.
Not making it: Every month you have a little more debt and no real assets to show for it. And a Coach purse is not a real asset. Doesn’t matter if you make $14k a year or $250k, you aren’t making it.
Making ends meet: Month after month you break even, but its a struggle.
Getting ahead: Putting money aside
Financially stable: Can pay all your bills each month and grow your assets. Having enough money set aside that you can be out of work for a bit. You have a positive net work at least equal to a years salary. Adequate insurance in case of a tragedy. Still need to work.
Wealthy: Drop the still need to work part. Your assets generate enough income that you can live the life you want (if that is a rustic cabin with an outhouse in Colorado or a Park Avenue Condo) and generates additional income to keep even with inflation.
Really Wealthy: You can look at the scenario generationally - i.e. your kids aren’t likely to “need” to work.
Does it matter that two of those three mortgages are on investment properties (an apartment building and a trailer park) that a couple of months without enough tenants/tenants who pay their rent would make those payments a net loss for us?
I generally think of anyone making over six figures as wealthy.
As a kid a million was a lot of money. It still is, but it’s much more obtainable today. For instance, in the last hotel I worked in, (major downtown Chicago hotel), the controller and director of sales were pulling in 150K and the GM was pulling in 250K
All of these people were “yuppies” and married to people also pulling in six figures. So it would only take a few years of hard saving to have a million dollars.
All these people however were living in houses or condos running over half a million dollars so the “wealth” is really relative to their expenses.
Okay, this is the best definition I’ve seen so far. nori, by this definition you’d probably be financially stable? I think the equity you have in the properties is relevant to the question of whether or not you are wealthy. I certainly hope you are turning a profit! I can’t tell you how many people I saw in debt counseling during the housing collapse because their tenants couldn’t afford rent!
Mortgages are making payments on something you will eventually own (or at least own some of). As investments they have different characteristics than stocks or CDs, but essentially that means you have $X to put into savings every month. How they affect your cash flow month to month is pretty immaterial, IMHO. Someone with a huge stock portfolio will have months when it declines, after all.
But assuming these aren’t bad investments on a long-term basis, investing in property can be a good way to build wealth.
If you have the cash flow to pay your own mortgage plus put what I would imagine is a couple of extra thousand into “savings” (investment property) each month, your income must be fairly high.
I think in **Dangerosa’s **framework, which I agree is pretty good, we should all be trying to move from financially stable to wealthy as we age. Maybe it’s getting to wealthy before retirement age that makes you Wealthy.
A person who makes more than twice what I make is wealthy.
Rich = more money / freedom to piss away money than I have. Let’s face it, it is all personal. Happiness, for example, comes from being the richest person in your personal comparison group (typically your neighborhood, but that is shifting.) Owning the cheapest house on the block can be detrimental to happiness.
Now, some numbers (from the 2007 tax returns in the US, using Adjusted Gross Income):
http://www.taxfoundation.org/research/show/250.html
Top 1% of returns started at $410,096
Top 5% of returns started at $160,041 - where I fall, btw
Top 10% of returns started at $113,018
Top 25% of the nation in 2007 had an AGI of $66,532 and above.
You broke the midpoint at $32,879
Now, this is income (adjusted gross - so after all deductions like charity, mortgage interest, health care, child care, etc.). It is NOT wealth, nor is it net wealth (assets minus debt like my mortgage that I am doing a refi on right now, or my debt from business school that has a rate less than inflation).
I know that when my housekeeper comes by, to her I am rich. However, when my son goes to a friend’s house in a gated community, THEY are rich. It is all about perspective.
Well, this might sound weird, but. . .one of the advantages of owning rental properties in areas that were already economically depressed is that most of the people here aren’t appreciably worse off than they were five years ago. A lot of our tenants are on welfare, and have been for years. So while most of them are living “first of the month to first of the month”, their financial situation hasn’t changed nearly as much as the situations of people who had at least decent-paying jobs, lost them, and can’t find another one.
Things are rough this month, particularly. I’ve had one tenant tell me straight-up they cannot pay their rent this month (but they’ve been good tenants, I’ll work with them) and two more tell me they don’t know how much of their rent they’ll be able to pay or exactly when (one of these tenants is skating on very thin ice already; I’ve been looking for one push over the edge to evict; if he doesn’t cough up some money soon, this’ll probably be all the push I’ll need).
But I certainly should take in enough rent for both rental properties to cover the mortgages on them, plus the various bills. Thankfully!
The perspective discussion feels more in line with the OPs query, so here’s how I fall on that:
Rich = >4x my income in yearly income.
Wealthy = >30x my income in assets.
It is definitely a ladder where you should be working towards wealthy as you age. Otherwise, retirement is your social security check… and its one where you might move down a rung under certain circumstances for a while.
But it has very little to do with how much you make. Granted, its easier to save money when you make a good income. But the ladder has far more to do with the relationship between income and spending than it does on income - because it isn’t hard to make $250,000 a year and spend $275,000. And that person isn’t wealthy.
Oprah Wealthy: You could have your own continent and people it with your own customized race of people if you wanted to and never have to check your account balance.
Warren Buffett Wealthy: You can give away 99.9% of your estate and the remaining 0.1% leaves your kids and grandkids in the top 1% of 1% of Americans in terms of net worth. (Buffett famously lives in a upper middle-class ranch style house- one that could be afforded by any general practitioner and probably most high school principals if their spouse worked at a similar paying job- and remarkable only for its tenant.)