What Does it Mean to Be Rich?

What does it mean to be rich? To me it means to have completed all the baby steps… paying off debt, have a fully-funded emergency fund, having invested in a retirement savings vehicle of some sort to have enough money to last me a few years of retirement… and having a home of some sort to call my own… rather that is a rented place or a piece of real estate that I own. But the reason this means being rich to me is because this is when, at least at this point in my life, I feel like I might feel secure. I guess I equate being rich with being financially secure… but then I realize that there is a lot more to that than meets the eye. Feeling secure (even financially) is more of a psychological thing for the most part. I have a feeling that there are a lot of financially wealthy people out there that may not feel the same sense of security that I equate with being rich. They may not even view themselves as rich… One thing I hope is for sure though… when I reach that point for myself I hope I will be able to take a big sigh of relief and relax a little more comfortably… knowing that I’ve done well to take care of myself.

Well, one definition is, if you make more money than you spend, you’re rich, if you spend more money than you make, you’re poor.

I’m a bit financially disoriented at the moment. I consider myself middle class, but I’m single and having two incomes is now the norm, so I live in a working-class neighborhood and have neighbors who are doubling up in tiny rental places, not to mention the people who come to my door looking for work, so by that perspective I’m rich, but then I also know a lot of rich people and am embarrassed to have them over to my house, so then I feel poor.

Escape: I know how that feels. In my late 40s know, taking my life on average, it’s highly unlikely I will achieve my middle class parents standard of living. Ever.

I don’t own a home, but on the other hand I have no debt and years and years of savings.

I think that to me, “rich” is still the mansion and the fancy cars and the jetset lifestyle. Not sure why I think of it that way…maybe I used to watch too much TV.

But none of that is my goal. I’m turned off by too much excess. My goals are to finish funing our emergency fund, get the IRAs maxed out, and to save for the home we’re building. I think when these things are accomplished, and if I can still sock away a bit more for a great vacation every other year to a far-away land, I’ll be perfectly content with my finances. I love being totally out of my element in some foreign country, or in an underwater cavern, or in the middle of the desert…

When I think about what it would take for me to feel “rich”, winning the lottery comes to mind – having more money than I know what to do with. At this point, I still have plenty of ideas for any extra income that comes my way.

You write so often about Kris. What does she do for a living?

For me rich is a premium on security. When I own some land and the house on it, and there are veggies and fruit growing, and solar panels and a well, then I’ll feel rich – and no one will ever be able to make me move.

This is a great post, J.D. I think it hits on something that I struggle with, and that’s “the grass is always greener” syndrome. I find myself always desiring something that I do not have, but then when I achieve it, it’s not usually what I imagined. Then, I find myself wanting something different. So when I read your description of your financial and life situation, then your statement that you still feel poor, it really scared me. From where I am now, I would love to be in your situation. I think that I would feel much more secure financially in that situation than my current one. But when I get there, will I still worry about money? Will I still feel like I need more to feel secure? Will I still feel poor? So, I struggle with trying to just be content with my current situation. Not content in the sense that I don’t desire to better my life, but content in the sense of being happy regardless of life’s circumstances. I think you can still be ambitious while being content and happy in your current circumstance. I have another question for you. In your other endeavor to Get Fit Slowly, do you have the same issues there? I mean, do you still feel fat and unhealthy when you are getting very healthy and thin?

Interesting post today JD. As someone who moved to North America from another country, I have always been surprised by the extent to which middle-class people here will emphasize and play up their roots in poverty. I’ve even seen people claim to be real red-blooded up-by-the-bootstraps americans because their grandparents, long dead, were poor immigrant kids! There’s nothing wrong with this, of course, but it was unusual to me at first, as it doesn’t happen so much at home.

I’ve never been in debt, so rich to me is never having to go into work again if I don’t feel like it. So, able to live off my investments whether that be $100,000 or $10,000,000. I’m sure not there yet!

It’s simple. The main difference between the rich and normal people is that normal people live from their income whereas rich people live from their money.

If your main income-source is work you are doing, you’re not rich.

If your principal source of income isn’t work, but rather gains from stuff you OWN, then you’re rich.

In practice there’s all degrees between offcourse, someone like you make most of your money from writing, but some from interest earned, stock-dividends, value-growth in index-funds whatever.

A good question. Compared to most people, even in America, never mind the rest of the world, we are doing pretty well- $75k household income, $2000 and growing emergency fund, $17,000 going into 401k/IRAs each year, and still investing about $5000 more in a brokerage account, and we took a $4500 vacation this summer (which we diligently saved for over 9 months using ING accounts). We own our condo. Our net worth is 5 figures, but we are young and have good prospects.

I feel blessed for what I have, but I don’t feel rich or wealthy. Why? Mostly because in the USA, even with employer-provided healthcare, this could all be wiped out in a very short period of time. Let me illustrate what I mean.

My father died in 2006, in his late 50s. He lived a nearly completely normal life medically until he had a massive, no warning heart attack that year. He held on for two months, but the damage was too great. As our family sifted through the financial impacts of his loss, my mother noted that his medical bills in the 2 month struggle totaled over $970,000.

Having been a union worker with a good pension and coverage program, my parents paid $150 total for his care. One hundred and fifty bucks! My mother, while heartbroken, has not had to face the additional challenge of financial destitution.

My employer’s health policy indicates I never have to pay more than $4,000 in deductibles for care in any given year. But it also has a $1,000,000 lifetime MAXIMUM payout benefit.

As I think about this, and imagine if my father had lived a few weeks longer and had my health plan, my mother might be wiped out, or at least would be facing $300-400,000 in bills on top of losing her husband.

Until I have enough assets to mitigate this type of risk, I don’t think I will be able to consider myself truly wealthy, because I associate that term with a level of psychological peace of mind that allows me to wholly remove certain types of risk from my life. Will I consider myself blessed, well-off, and look to give to others and worthy causes along the way? Yes! I do so now.

“In your other endeavor to Get Fit Slowly, do you have the same issues there? I mean, do you still feel fat and unhealthy when you are getting very healthy and thin?”

Can’t speak for JD, but I know this is true of me. A couple of years ago, I lost about 20 pounds. Now I’m a size four, but I still feel heavier. I take clothes into the dressing room that are two sizes too big, only to realize that I’m smaller than I think. When people say I’m thin, it seems like they’re talking about someone else. I told my husband I wanted abs like the girl on the cover of Women’s Health, and he just looked at me funny and said I DID have abs like that. It’s not that I’m horribly unhappy with myself, but I definitely don’t always see what others see.

As far as finances, growing up, we always had a house, one and then two cars, clothes, food, and I got a lot of extras not all kids had, but my mom would always say she was “tired of being poor.” I grew up thinking we were poor, and while we weren’t fantastically rich, we were by no means poor. As I grew older and learned how wealthy most Americans are in comparision to the rest of the world, I had a big mindshift that has made me very content with what I have, and actually more motivated to let go of consumerism and Stuff.

I’m sure compared to the world, I’m rich. We live in a single-family house on almost 3 acres, we have all the food and ingredients we need, we have clothes and two cars, we have a 401K and our Roths and bank accounts. The house is the only thing not paid off.

On the other hand, I don’t feel rich per se because of my mindset. I don’t feel financially secure. In truth, I’m not better off than my parents, but also in truth, that’s because both my parents worked pretty high powered jobs and I quit to stay home with my children.

There’s probably not much rational explanation, I just don’t feel secure…but I am working to get there.

An excerpt from a post at http://www.ViolentAcres.com says it all for me:

“How would I define rich? Let’s look at two examples:

A friend of mine spent 8 years investing his money. His portfolio yields him around 42 grand a year. In some areas that’s chump change; but in his area that’s comfortable. He works maybe 3 or 4 hours a week balancing his numbers, making bank deposits, phone calls, (that’s sort of thing) poolside with a corona in his hand. If he wants to go skiing in Colorado for a few months, he goes. If he wants a newer car, he pays cash. If he wants to spend his morning loafing around his house in a pair of slippers, he does. He lives his life with minimal time constraints, almost zero stress, and he works as often or as little as he wants. He’s happy, calm, and comfortable. He’s rich.

Another friend of mine has a combined household income with her husband of over 450 thousand a year. They are in debt up to their eyeballs after blowing all their money on obnoxious status symbols. Between their mortgage, private school tuition for the kids, country club memberships, and other living expenses, they are just barely keeping their heads above water. It is not uncommon for them to be dead broke by the end of the month and they’ve even had to borrow money from their parents a couple of times when things got really bad. My friend has to work 60 hours and week and barely ever sees her children. She is being treated for depression and sometimes complains that the stress is so bad that she often has panic attacks. She’s poor.

Do you see where I’m going with this? It’s not the dollar amount that makes you wealthy. It’s the time you have to put forth to make yourself personally comfortable. Personal comfort varies for everyone, but I would say that a person who spends 1 hour a week to be comfortable is richer than the person who spends 70. Whether takes you 25K a year to be comfortable or 200K is moot. Time is the only tangible luxury.”

The full post is here: http://www.violentacres.com/archives/48/four-rookie-mistakes-people-make-that-keep-them-poor

Thanks for this timely post. I think it’s easy to forget, given the bad news on the economy day after day, that being “rich” is to some extent a state of mind. That’s not to diminish the very real suffering of a family who has just lost their home.

But a friend of mine who just came back from a visit to Rwanda recently reminded me how relative wealth is. She took gifts to the family that was hosting her there. The gifts? Hair scrunchies and a vegetable peeler, both of which they considered luxuries.

Tzctlpc, I’m going to have to disagree. What you’ve defined in your comment is wealthy: having so much money that it doesn’t matter how one spends it, because it’d be almost impossible to run out. Rich, on the other hand, is different and much more intangible, but I think Dally is on the right track.

Her post gets at something fairly intrinsic about being rich: it’s more about a state of mind than the number of digits on a statement (though yes, excess money is required to be rich). Rich people have the will power to save up cash for short-term emergencies and long-term goals. They have the will power to get out and stay out of debt, rather than let it run their lives. Rich people have the discipline to save up so that they can change jobs if they want to or need to. And finally, rich people recognize that they in fact are rich, and are generous with their money, sharing it with their friends/family and with charities.

I think of the divide between wealthy and rich in the context of the novella A Christmas Carol. Literally overnight, Scrooge goes from wealthy – having enough money that he should have no earthly concerns – to being rich – recognizing the value of his wealth both to him and to his community. Cheesy, I know, but I think it’s a good distinction between the two.

I read somewhere that being rich is when small efforts yield large rewards, and being poor is when large efforts yield small rewards.

I like that definition. It serves me well. As I go forward in my financial journey I am mindful of my balance of effort and reward and try to improve on it whenever I can.

I think that only in this country someone can have money in the bank, a home and food on the table and not feel rich. Interesting.

I agree with Andy’s post. There isn’t a specific amount of money that makes someone rich, it is their ability to use their income for the best possible outcome.

In perhaps an unintentional way, Tzctlpc hit upon something important: “Can you … buy whatever you fancy …?”
That’s just it. I feel so rich, in part because, for the most part, yes, I can buy whatever I fancy. However, when I walk into a store, there’s not that much that I fancy in the first place. I’m quite content with what we have. We also have enough to give to others. My husband has a job he likes, and makes enough that I can stay home with our son. We have no debt. We are renting a decent little place for dirt cheap, and spend very little on gas because it’s so conveniently located. Yeah, I’d say that, for our current stage in life, we’re rich.
On the other hand, there’s that part of me that feels poor because we don’t own a house yet. There’s also some nameless thing in me that just doesn’t, and maybe won’t ever, feel rich no matter what. As another commenter described, I too grew up with a mom who talked about being poor when we had a house, two cars, etc. But my mom grew up under Japanese-occupied Korea, then was a Korean war refugee, so what JD said in the article makes a lot of sense. I don’t think she ever got over that haunting feeling of being poor, or the fear of being poor, even though my parents now live a very upper-middle class lifestyle.
What’s odd to me, though, is that my dad grew up in Korea at the same time, under similar circumstances (though he doesn’t talk about it much), and he’s quite different. He’s very content. He wouldn’t say he’s rich, either, but neither does he seem to have “poor” as such an ingrained part of his identity like my mom does.

I can totally relate to this. My husband and I were both raised in poverty, and even though we’re successful and “comfortable” now, I don’t feel rich. I guess everyone’s standards are different. I’m sure many people would consider us rich based on our net worth and our possessions. But I think of rich as in the “independently wealthy” category with diamonds and yachts and a butler or something.

Good question and one that we struggle with. We’ve spent the last two years so focused on our personal finances that we’ve trained ourselves to think we are poor.

Mr. Sam regularly states that he’s the richest poor person he knows. Why does he feel poor when we have no debt besides our mortgage, when we have $20,000 in emergency fund, when we are maxing out our 401ks abd IRAs and saving for other goals, when we also receive rental income from our investment properties?

I think because he and I both have to stop and think before we make any purchase, we have to discuss and agree to any purchase over $300, we don’t keep much money in our checking account, we don’t use credit cards, etc. Because each purchase, each bill paid, each financial move is discussed and debated and planned for we spend more time engaged in our finances and restricting our spending it feels like we have no money (more so for Mr. Sam because I manage our money and move most of it to ING or Fidelity). Because he can’t see our savings and can only see what is in his checking our our joint checking he feels like he has no money (this is part of my plan).

I’ve come to recognize that I need to loosen up a bit so that Mr. Sam doesn’t feel so poor. He needs to have more money in his account so he has a bit more comfort and freedom.

I agree with a lot of what’s been said here. I don’t feel rich, because we do worry about money, how we make it, and how we spend it. I feel safe, and we are able to make a lot of conscious choices about how we live without money being the most important factor.

On the other hand, I logically know that even after the recent stock free-fall, we’re in the top 15% of Americans in terms of net worth and income. And that puts us in something like the top 1% of the world’s population. If we aren’t rich, we’re very, very comfortable. Hunger and homelessness are not worries for us. We have more choices and freedom, because we have savings and no debt.

Maybe someday we will be rich beyond our conceivable needs, but it isn’t an active goal. DH and I have long joked about having the “our-combined-last-names” Foundation when we get older, and making enormous contributions to our favorite causes.

To me, being rich is being able to do what you want — what you love — without much thought as to the costs involved.

That is, if you can make enough money blogging to live the life you want to live, and not worry much about money, then you are rich.

If you have to get up every morning and go to a job you hate, even if you make a ton of money, you are not rich… in my opinion.

You can be rich financially but poor in many other areas. Money can be in your wallet but you can be lacking in many other areas- which in turn make the money in your wallet seem unimportant. Harmony in Spirtual, Relational, Financial, Mental are all important or that money you seemly have will either not matter or will be taken away.
http://www.101WaystoMagnetizeMoney.com

Christine Groth