A person with $1,000,000 in cash should have many more millions in other assets or he is a fool.
Can’t say I totally agree with that. A hard working person who lives their life conservatively, who has a modest house, car, etc. could save a million over their working life. They wouldn’t necessarily have “millions more in other assets” but they would have a mil in cash.
They could, but it wouldn’t be a smart thing to keep a million in a bank account if that’s all you have. Even buying a rental property or two would generate more income than a bank account.
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How about making 100 times the global poverty level. I believe that is $1 a day or $365 a year. So times 100 is $36,500
In accounting you have revenues (inflows), expenses (outflows), assets (things that contribute to revenue) and liabilities (things that contribute to expenses).
The way I look at it, wealthy people control large and diverse amounts of assets that passively (or actively) build their wealth. Owning a business, interest in a corporation, partnership in a law firm, real estate that’s been paid off. Smart people convert their high income into assets so they will continue to generate wealth even if they lose their income or retire. Stupid people live paycheck to paycheck flaunting their lifestyle, which will quickly make them broke if they loose their income.
I make the distinction that a lawyer or banker or consulting bringing in $150k, $200k is certainly making a lot of money, but they aren’t “rich” in that they are likely still only mid-level at their firm and don’t hold an equity stake. If their performance isn’t up to par, they can be fired. The managing partners who own the firm are rich.
The new definition of rich is being able to live comfortably off the interest of the interest of your investments. $200m invested at 5% gives $10m, and another 5% is $500k … that’s fairly comfortable I guess.
Except for the larger amounts due to inflation, and comparatively more expensive lifestyles, what’s new about it? High employment incomes supporting an expensive lifestyle are new, but in the past nothing but investments would reliably maintain the high end of lifestyles. If there’s a new definition to ‘rich’ it would be the people who have nothing but high incomes to live from. That is not substantially different from those who have lived ostentatiously, appearing to be rich, but living in an expensive house with a large mortgage, driving an expensive car that hasn’t been paid for (and won’t be worth much by the time it is).
Rich is relative.
To me, rich would be having screw-it money. That is, a level of wealth and liquidity that would enable SWMBO and me to have a conversation like this:
SWMBO: Hmmm…I think I’d like to see the Grand Canyon before I die.
Me: Screw it. Let’s go.
We don’t have to worry about taking time off a job, or about the cost of the tickets or the hotel room, or the meals. We can just say screw it and go do it.
Now, how much would that be? I would hazard a guess of a sufficient nest egg, wisely invested, that brings us in a minimum of $300k a month.
I just consider rich to mean “don’t really worry about money.” It doesn’t matter if you have to keep working to make that money, as long as you aren’t in any reasonable reason of being fired without being able to find a new job.
So I’d put it pretty low by the standards of this thread, maybe just having a yearly salary of six figures. That’s enough that you can probably find another job with six figures if you need to.
Depends where you live. If you live in San Francisco, LA or New York, $100k a year is not nearly enough to not have to worry about money.
$100k a year is a salary for a relatively junior manager in a large corporation or entry level lawyer at most firms. I suppose even having a corporate job at a Fortune 500 company puts people in a much higher income class, but it’s hard to view that as “rich” when compared to the CEO or some of the senior executives.
I ran some numbers:
For upfront purchases:
$2MM Purchase of home in suitably upscale neighborhood in or around NYC
$1.5MM Second home (East Hampton)
$200k for appropriate cars (Porsche 911 and a BMW M5)
$500k college and grad school for 2 children (it might be more, but it has 16 years to accrue interest)
$1MM just for emergencies, etc
Another $2.2 at 5% return gives me $110k a year. Which I calculated will cover a $50k a year lifestyle (remember home and car is already paid for), $30 for a nanny, plus another $30k for other odd services (housekeeper, whatever).
So after taxes, I estimate around $6 MM to $8 MM is enough to be “starter rich”, even in a city like New York or San Fran.
Again, 5% is not a realistic expected return accounting for today’s very low bond yields and high stock valuations, the need to earn a certain after tax return just for the principal to stand still relative to inflation, and taxes on the returns (including that portion needed just to stand still v inflation). Unless the person is going to have a very risky portfolio, in which case it calls into question the concept of ‘not worrying about money’. 2%, after expenses, inflation and taxes on returns, is more like it for a moderately risky portfolio like the classic 60/40 stock/bond, not particularly conservative estimate actually, though of course nobody knows future returns (if you want to strictly know your return, that would be govt inflation indexed bonds, which for the 30yr US one is inflation+0.65% before tax, so assuming expected inflation is 1.8%, 2.45%, or 1.8% assuming 25% tax, IOW the highest long term return you can ‘absolutely count on’ assuming ‘absolutely’ doesn’t include a US govt default, is 0% after inflation and taxes, with a fair though not excessive amount of risk taking you can get it up to around 2%, perhaps).
That said your final answer is in the general ballpark as I see it. Per the most recent Fed estimate, 99%-tile net worth in the US is $8.4mil and it stretches credulity IMO to say households worth more than 99% of other households in one of the world’s richest countries still aren’t rich. Nor does it make sense IMO to speak of particular net worth levels being rich in one part of the US but not in another. That makes some sense when it comes to income from jobs, as certain high paying jobs are much more numerous in say NY; but you can take your net worth anywhere. Many super rich people move their residences to FL from NY or NJ, doesn’t mean they aren’t rich if they stay.
Rich.
There are “Certain Large Mansions”. Places where I’m not supposed to drive, unless I’m lost. Places where Car Service Limos, Sleek and Black like a turd you’d drop the morning after a heavy meal, pick up Hemorrhoids each morning and bring them to work.
Workplaces where, when they are done, a phone call brings that same Car Service to bring them home again.
Shitty places with shitty people; people who would never ring each others doorbells or say hello over a backyard fence. “Bedroom Communities” where you don’t know if that means they just sleep there or if it means all involved are Well-And-Truly-Fucked.
Driving by, you might even admire the beautiful architecture.
Driving by, you’d never remember that 'The Bigger The Outhouse, The More Shoveling Is Involved"…
What kind of rich person doesn’t know a way to get a 5% return?
This article describes why that number might be a bit misleading
But even still. $8 million is a lot of money. But it also stretches credulity to say that a local millionaire worth $8 million and billionaires like Warren Buffet or Elon Musk are both “rich”.
Only if you are rich enough that cost of living differences are of minimal concern.
Of course location matters. On the one hand, just being able to afford to live in Manhattan or San Francisco implies a certain level of wealth. OTOH, your standard of living may be the same, or actually much worse than someone living pretty much anywhere else.
I don’t think so. “Rich” has a minimum entry point, the fact that there are even richer people doesn’t make the person with only $8 million dollars not rich, just as not as rich as possible. A person with total assets and income of $100 a year is still financially poor even if there is someone else worth only $1.
General categories;
Affluent - An investor with $100k to $1 million in assets
High Net Worth Individual - an investor with assets > $1 million
Ultra High Net Worth Individual - an investor with assets > $30 million
“At the end of 2015, there were just over 13 million HNWIs in the world. The United States of America had the highest number of HNWIs (4,180,000) of any country, whilst London had the most HNWIs (370,000) among cities as based on data from the Knight Frank Wealth Report”
“Billionaires are a special category of UHNW individuals, having net worth in excess of US$1 billion. At last count there were 2,325 billionaires in the world, with a combined net worth of US$7.3 trillion. These individuals represent just over 1% of the world’s UHNW population and 24% of the world’s UHNW total wealth.”
For myself, there’s still that tendency to think of minor millionaires as “rich” even though that isn’t as true anymore due to inflation. So its kinda hard to say.
I’d agree with that categorization if it is per individual rather than per household. A medium-sized household at 100K in assets only has a year or so savings set aside considering some of the assets are non-liquid real estate. And 800K post-house isn’t enough for me to consider them a High Net Worth household when you divide it up four ways.