Are We There Yet? How Will You Know When You’re Rich?

Here at Get Rich Slowly, we imbibe many flavors of frugality, smart investing, and money management. Between J.D.'s (and others') posts and the treasure trove of comments, you could build a path to wealth tailored to your individual income, assets, and circumstances.

But how will you know when you're done? Are you there yet? Are you rich? And what will you do once you get there?

When I worked as a lawyer at a Big Bank I conducted an informal poll of my co-workers, asking what their magic number was: What dollar figure would make them feel comfortable retiring? (Or at least leaving their comfortable jobs to pursue their passions?) I guessed that at least some would say $1 million would be enough to let them leave in comfort. After all, we weren't living in a big city, and the cost of living in our town was pretty reasonable.

I was wrong: $1 million wasn't even close to the magic number.

This didn't completely surprise me. Some people have a lifestyle they want to maintain, and they'll have to save a lot of money if they want to maintain that lifestyle. But even those colleagues who lived frugally threw out numbers like “$5-7 Million, minimum,” citing the impact of taxes, inflation, medical care, the desire to travel, etc.

$5-7 Million? Minimum?

I have a friend whose husband makes a six-figure income at his job, plus significant income as a consultant. They have a million-dollar home and a cottage on a lake and one million in a retirement account. One day, I made an off-hand comment about how wealthy they were, and my friend vehemently objected to the description. “We are not wealthy,” she said. “I'm not saying we're poor. We're comfortable, but we're not wealthy.”

On the other end of the spectrum, most of the world would view the readers of this blog as incredibly wealthy. (Check out this “Wealth-o-meter” to see how you compare to the rest of the world.) On a personal note, my job was eliminated by the Big Bank at the beginning of this Great Recession. I got a severance package, which has since run out. Despite the absence of a steady income, I'm not alarmed, hysterical, or panicked. Most days, I feel blessed, perhaps even — dare I say it? — wealthy. Why?

On one level, my husband and I are the poster children for Why You Should Establish an Emergency Fund. We did the things that readers of this blog do, including:

This meant that when I lost my job, we knew we had resources to fall back on. In addition, by viewing our financial situation as just another challenge, we adopted many of the cost-cutting strategies on this and other blogs, which allowed us to substantially reduce our expenses.

For me, the bottom line is this:

    • Wealth is not a magic number. The problem with a magic number is that it's never better than an estimate. It would be a miracle to leave this earth having spent exactly the number you forecast. You're more likely to have some left — or not quite enough. Also, the bigger your magic number, the longer you may stay in an uninspiring job and the longer you may wait to follow your passions.

 

    • So, wealth relates to a state of mind. For me, being wealthy means having the resources to be confident that I can manage the financial ups and downs. But more importantly, being wealthy means I can do what I love — and live comfortably. If you're willing to experiment and take risks, this type of wealth can come a lot sooner than “magic number”-based wealth.

 

  • Wealth does not mean never having to make choices. Some people think that being wealthy means being able to buy whatever they want, whenever they want it. Maybe that's why those magic numbers are so big. If we wait until we're “wealthy” to do what we love, we'll wait too long. For me, being wealthy means being able to make choices that align with my values and my passions, and being happy with those choices.
  • Wealth means being able to say, “I have enough.”

What about you? Do you think of yourself as wealthy? Do you have a magic number? Are you waiting until you're wealthy to do what you love? How will you know when you're rich enough?

You can also see what others think they'll need for for a comfortable retirement in our recent reader poll and post on How Much Retirement Savings Will You Need?

More about...Planning

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
104 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Sam
Sam
10 years ago

This is a question we entertain on a pretty regular basis. My husband describes us as the richest poor people we know. Why? Together we make a good salary, we have quite a bit in assets (we hit the million mark for a few weeks last year) but we keep such a small amount of available funds in our accounts that we do have to think about just about every purchase or transaction. We move a big chunk of money each month into retirement savings, other investments, other savings that after we pay bills our day to day spending is… Read more »

Oskar
Oskar
10 years ago

I guess it is about setting a target not a money target but a purpse for that money. In our case it is time with family and friends and right now time with our small kids. They will not be small forever and one day we will be to old to do stuff. In generall we are saving 30-40% of our income, but next year will be a change, then we will both spend 6 months without workning just spending time with our kids and family as well as friends doing the things we love. That is true wealth to… Read more »

Larry Eiss
Larry Eiss
10 years ago

Great post! Thanks very much. It helps validate the choices my wife and I have made. I’m with Oskar (above) with regard to what’s important and how to look at wealth. We have just purchased a second home in preparation for early “retirement”. My wife will retire win a matter of months, and I will follow within a very few years. Our retirement won’t be sitting on the porch in a rocking chair, or swinging clubs on some golf course. Instead, we want to pursue passions and do things we really love. We’ll augment our meager retirement income with these… Read more »

Kent @ The Financial Philosopher
Kent @ The Financial Philosopher
10 years ago

Wealth is not prudently defined by monetary means….

“Contentment is natural wealth, luxury is artificial poverty.” ~ Socrates

“If thou wilt make a man happy, add not unto his riches but take away from his desires.” ~ Epicurus

Kay Montgomery
Kay Montgomery
10 years ago

It is always about what is important in life. If the main goal is to be rich, there will never be enough of it. After the basic needs are met, we have to choose what it is we are going to spend our time, thoughts, and energies on. Money is important, sure, but life is so much more. Often living more simply, even if there is plenty of money, can lead to a more satisfying life. Here’s to a life more full.

Kay

Jan
Jan
10 years ago

In four years we have seen two brothers and one sister die, another two go through cancer and a two others go broke chasing the big buck. One was a wealthy lawyer with a major office- who died of an infection from a simple procedure. We decided we would save all we could until my husband turned 60-that would be in June. We would just go forward from there. Having a big bank account is like being a part of the “beating the Jones” set. To us, we are retiring with “less” than our sibs- but we will be doing… Read more »

Alexandra
Alexandra
10 years ago

Great topic. I think that for me, the magical number is a moving target – one that changes as my dreams and aspirations change, and as my life unfolds. In university, I just wanted a decent-paying jobs, enough money to pay off my student debts, drink a few beers every once in awhile 😉 and live comfortably. Then I met my husband and my dreams changed – fancy dinners, weekends away, and travelling the world became much more important – and therefore so did money. Now I have a daughter, and time is the most important thing now. That too… Read more »

Mike
Mike
10 years ago

Good Post. There is a lot to take from this. I think the idea is to strive for financial independence versus trying to hit a magic number of say $3-5 million. If you can learn how to consistently generate income doing something you love, and have a very healthy emergency fund (that makes you feel secure), you could consider yourself “Wealthy.” I do believe however, that it requires having goals with numbers. In other words, I need to break down these goals into attainable short term targets. For example: “By a certain date, I will have replaced my income doing… Read more »

Sarah
Sarah
10 years ago

I think about this a lot too. For any goal, I have a hard time knowing when I’m there, I always want to do a little more.

I think “wealth” is tricky, because if you’ve spent it it’s not really wealth. If your friend had a smaller house and more in her bank account maybe she would feel wealthy.

Jake @ CareerAde
Jake @ CareerAde
10 years ago

Being rich or wealthy in my eyes is when working for an income is optional and no longer a necessity. You could still be working, but it would be a hobby to keep you out of trouble and occupied, not something that you critically depend on to makes end meet.

Now combine that with different expectations for standard of living and you arrive at a broad range of #s.

ArandomPerson
ArandomPerson
10 years ago

I will consider myself wealthy when I am able to support myself without having to sell my physical/mental labor.

If events keep going as planned (ha ha!) that will occur in ~4 1/2 years (out of a total of 18 years of work).

Then everyday is Saturday. 8^)

DavidV
DavidV
10 years ago

Part of being rich, as I see it, is age too. I’m 31 and my net worth is a lot higher than most people my age. I read this article in MoneySense magazine, which talks about the net worth of Canadians. If you’re unattached, the richest 20% of Canadians have a net worth of $270,001 and up. Whereas families of two or more need to have $697,000 and up to be in that top 20%. http://www.canadianbusiness.com/images/article/content/ms/2009/wealth-package/are-you-rich-yet.png Rich is a state of mind, but it is nice to know what the Jonses are up too, and know that if you want… Read more »

Nilendu Bhattacharya
Nilendu Bhattacharya
10 years ago

Great post AMI. I totally agree with the concept of emergency fund though most of do not contribute to that. Also concept of being wealthy is also to some extent related to how what kind of lifestyle is going to satisfy you. Most of the time if we are willing to sacrifice some portion of our spendings we can work in a more convenient jobs and be more peaceful

Ariel
Ariel
10 years ago

If you live in America, you have your health, a roof over your head (any roof) and food in your belly, then I think you are rich. Being wealthy is a state of mind. I am wealthy. I am healthy, I have an awesome family, I have friends, I have a job, I know where my next meal will be. If you look at my financial stats, maybe I’m not “wealthy” by anyone elses standards. I make less than $40k a year. I drive a 5 year old base model civic. Live in a working class neighborhood and I wear… Read more »

trb
trb
10 years ago

We’re wealthy and know it. Not in monetary terms exactly, since we have a mortgage and student loans still to pay, but in time and community.
We’ve chosen not to have kids, so our evenings are filled with community meetings, volunteer events, cooking, dancing, singing, building, making, eating, loving. Living, and living well. And sleeping as much as our bodies need.
Sure, we have to keep our jobs and keep commuting, but it’s well worth it.

emma
emma
10 years ago

My husband and I have been having this conversation a lot lately. How much do we need for retirement? And when we get there will we be able to walk away and trust that it’s enough? We are in our early 50’s and will definitely be retired by 60. I say 5 million put away would make me comfortable. Is that enough? Or too much? We are over halfway there and at the rate we save money we will be there within five years if not sooner. Retiring means being able to move back “home” and being much closer to… Read more »

Michiel
Michiel
10 years ago

I agree with the earlier posters in the definition of wealth as the moment where your passive income equals your required expenses. This can be expressed in a single figure, but you have to have your assumptions clear. The main assumptions I make for the end target: 1) The amount of income required (I based mine on my current actual expenses minus categories I won’t have in the future, being mortgage and saving), and 2) the estimate of the future return on your nest egg, I take 4% as my personal conservative value. The overall figure then is income/4% as… Read more »

Jeff
Jeff
10 years ago

We just reached the milestone of paying off our mortgage. It’s hard for us to say what is enough to retire. Social Security at 62 is not a given with all this government spending of late. We have an A plan and a B plan. The A plan being living in retirement with some fun and the B plan living with no frills. It is comforting to know that as of right now we can support the B plan. So I guess for me the fact that we know we can get by without working makes working much less stressful.

Shari
Shari
10 years ago

I used to think that I would be rich when my husband and I reached an income of $50,000 per year. I used to get so frustrated when I would read financial advice articles that would say “any family making $50,000 per year should be able to accomplish these things” and we were only making half that. Now, though, we’ve passed that mark and funny…I still don’t feel rich! However, I do feel wealthy, because we have enough money to eat, own a home, pay the bills, and set some aside for savings. I will feel much more comfortable when… Read more »

Jersey Mom
Jersey Mom
10 years ago

Being wealthy is when we no longer NEED to work. Work then becomes optional. So, I’ll consider us wealthy when we have enough saved up for the kids’ college tuition, retirement account, and have other money to live comfortably between retiring from work and retirement age of 59.5.

Another Dave
Another Dave
10 years ago

Wow… there are some Fortunate people on this board. I never expected to see posters talking of having $1M to be veiwing a site like this. We’re nowhere near there, and it just seems such a long way off. My wife and I have been working thru alot of goals these last few years. We just started talking about our new goals. One of which is the Retirement “number”. I believe a person should a $ value in mind. I don’t think most people can focus toward a contentment value. That will come from reflecting on what your $ is… Read more »

Kevin M
Kevin M
10 years ago

We live a comfortable, but pretty simple life. We have about 6 months expenses saved, plus other savings for home improvements, retirement, etc. We specifically chose this lifestyle and planned ahead so my wife can stay home and raise our kids. While we don’t have “a number” in mind, our major goal is to pay off our home, which accounts for about 1/2 our monthly cash requirements. After that is gone, we could probably live on about $25k. At that point, I might partially retire, start my own business, wife might go back to work, who knows? I like that… Read more »

Calliope
Calliope
10 years ago

@anyone with 1 million in the bank: by all means, you’re not poor.or rich poor.You are RICH!And you don’t seem to enjoy it… I earn 12.000 euros a year and so is my husband.Half of our salaries go to a huge house loan. But I consider ourselves rich because: we are young and healthy to enjoy our son and comfortable home. we save with a means to travel.and we actually do it.now, that we are young, we enjoy our trips around Europe more than anything. we save to educate our son. we save for retirement;not much but enough to live… Read more »

ami | 40daystochange
ami | 40daystochange
10 years ago
I’m amazed by these comments – thank you everyone – and glad to see others have thought about this issue as well.

One idea I’d throw out there – some commenters are pointing to that wealthy state as a sort of dividing line between work and retirement, with retirement being the time when fun starts. Why not start the fun now? Find an inexpensive way to pursue the thing you love now. For me, that’s a big part of being wealthy.

SAM
SAM
10 years ago

Respectfully disagree with the couple who said they are not wealthy. They take vacations, they will be able to put their kids through college, they’ll retire in their 60s.

I think a lot of solidly upper-middle class and upper class families suffer from a guilt paradox – not wanting to appear “too rich” to people that don’t have as much money as they do, but also wanting to maintain an outward appearance of comfort.

RMoM
RMoM
10 years ago

The only predetermined number we have is the date itself that we can take early retirement. We don’t have any other kind of magic number per se because we’re going to retire from the rat race early regardless and make it work with the assets we have. There are too many variables in life and life itself flashes by so darn quickly. We are no longer materialists either so that helps. We don’t plan to remain in jobs a minute longer than we need to regardless of how much money is in the bank.

Amy
Amy
10 years ago

$6,650,000 All completely made up & estimates, but here how I figure…At 25 years old, my DH and I live quite comfortably on $50,000/year combined. Less than that and we start to stress over bills, more & we either save or waste the excess. At age 60 say that doubles to $100,000 for healthcare, inflation, whatever else. And assume we live/need that amount til 100. Plus $300,000 for a house. Plus $600,000 college for 3 kids: assume $50,000 per year for 4 years each. It’s all just very rough estimates, but I can see how people get to such high… Read more »

Andrea
Andrea
10 years ago

I live in a developing nation. If you have ever thrown food away, you are wealthy. Its not about comparing up. Compare down and you will see just how wealthy you are.

Sam
Sam
10 years ago

I think these comments are interesting. I think wealth is a moving target and if 10 years ago you told me that I would have 1 million in assets, along with my husband, (that is NOT 1 million in the bank) I would be amazed and would certainly classify that milestone as wealthy. I guess we don’t feel particularly wealthy (except when I update our NetWorthIQ each month) because we have all these systems in place that keep us from spending money each day. I don’t feel any guilt about how much we have saved because it has taken hard… Read more »

Bryan Sr
Bryan Sr
10 years ago

I agree being wealthy is an arbitrary figure for everyone. Wealth for some is vast amounts of money in the bank, for some it is simply being able to cover all the expenses, then have all the time they want with family. From a financial point of view, I believe at least a couple million is the minimum if that is what you will be living off of.

ElysianConfusion
ElysianConfusion
10 years ago

I’m sure this says a lot about where we’re at, but I’d be happy if we just had paid off all debts including mortgage, had a healthy emergency fund, and could contribute to college for the kids. Of course we need money in retirement, and I like the idea of having enough money to pursue something we love, but at this point we both have good jobs with good companies that are flexible enough to let us go to t-ball games and soccer practice. I’ll surely have a number or a goal that I’m aiming for eventually, but right now… Read more »

Michiel
Michiel
10 years ago

@Amy (#27) I think you are being a bit too conservative, since you don’t take into account the time factor. If you need $600,000 for the college for 3 kids, you might need that in 18 years. The amount you need right now for that would be significantly lower. Similarly, the amount of costs for living as an elder person might be higher on a healthcare level, but cost of living is lower in general. By that time you will most probably have a house you can call your own, so don’t add the into the $100,000 per year. Then,… Read more »

Paul
Paul
10 years ago

I’ll be ‘wealthy enough’ when I can stop working if I want, and live the rest of my life on what I’ve got.

I also think a turning point is where you stop worrying about money, which for me was not long after I eliminated all of my debt. It’s cool to have net wealth milestones (being a millionaire is cool, but it isn’t enough to stop working), with an idea of where you need to be by a certain date.

CF
CF
10 years ago

We’re sort of like the people described above, except we realize how lucky we are — we have a little over a million in assets and are still in our 30s. We are accumulating about 200K per year in savings. Yes, we’re rich. But we won’t feel like we’ve hit our number until we are at 4 or 5 million. That’s why I read this blog, and follow a lot of the advice given here. We live a good, but not exorbitant, lifestyle — we’re driving mid-aged Hondas, not luxury cars, I shop at Banana Republic, not Neiman Marcus, etc.… Read more »

Michiel
Michiel
10 years ago

@ami (#24) Thanks for the interesting article in the first place. Regarding waiting for the point of potential retirement or enjoying wealth right now, I do not see the two as options that exclude each other. I have a personal number for “potential retirement” as ultimate wealth target, but that does not mean everything else have to wait until then. I’d say that the time required getting to that moment is determined by the amount of fun you want to have in between. I’ll never sacrifice family, seeing my son grow up or sports for “retiring” a year early. I… Read more »

Shara
Shara
10 years ago

Another thing to take into account is your age. I am 27. If I live to a statistical average for people who die today I have a long way to go. If the statistical life span continues to move out then I need to support myself for longer. There are also wild fluctuations when one looks at inflation and rate of return. If inflation is 2% and my return 8% that’s one thing. If inflation is 4% and my return 6%, that’s another entirely. How conservative do you want to be? Amy @ 27 If you are 25 now you… Read more »

TosaJen
TosaJen
10 years ago

We’re solidly in the “Your Money or Your Life” camp — when we can passively make enough money to support ourselves on an ongoing basis, then we will be “rich”. We will be able to choose how we want to live and work without worrying about getting by. That isn’t about retirement, per se — after all, Joe Dominguez gave YMOYL seminars for decades after retiring from a Wall Street job, before dying of cancer at 58. We have scaled back our lifestyles a lot from trying to keep up with anyone else or live by anyone else’s expectations. That… Read more »

John Paul Aguiar
John Paul Aguiar
10 years ago

I’ll know when I’m rich when I can take time off whenever and not stress it, and I can buy something without ever asking or carign the price..lol

Lizbeeth
Lizbeeth
10 years ago

I do not consider myself wealthy. Even though we have substantial assets, I feel like they may not be enough when we retire. My husband has $2 million in retirement funds, and another $2 million in outside investments. I do not consider that wealthy. I consider that comfortable. I believe I’d need at least $10 million before I even thought of myself as wealthy.

Krista
Krista
10 years ago

I definitely consider us wealthy now. But we still have a goal. Like many other comments, it’s not a fixed number, but the number that would let us take a dream opportunity. We’re only 30, but already we have plans for a second (or retirement) career. We want to walk away from 9-5 to open our own business. We’ll still need to make money from that business, but not so much that we can’t close the doors for a few extra weeks a year if we feel like it. When we have the startup money to open the business and… Read more »

ebyt
ebyt
10 years ago

I’m in my 20s and just starting out in my career. I’m almost out of debt. I make a good income, but I’m on a contract and definitely get concerned that I will not be renewed. I won’t feel truly comfortable (let alone wealthy) until I am out of debt, have some savings, and have a permanent job. I always think of wealthy as having substantial savings and a high-paying job (so like a lawyer or doctor or director etc.). I think of rich as having enough money to not have to work. I don’t really have a magic number.… Read more »

Tyler Karaszewski
Tyler Karaszewski
10 years ago

If you ask people what it means to be wealthy, most of them aren’t going to tell you that it means having enough to retire. People watch shows like MTV Cribs (or Lifestyles of the Rich and Famous), and associate wealth with the ability to buy a mansion in Beverly Hills and park a Bentley for each day of the week out front. Equating “wealthy” and “comfortable with retiring” gives definitions to these words that aren’t what others mean when they use them. As far as I can tell, everyone’s view of “wealthy” is always pretty much “twice as much… Read more »

Be Debt Free America
Be Debt Free America
10 years ago

Thanks for your input, Andrea #28. That really puts things in perspective for us rich folk in the United States. From what I’ve noticed, when we tie “rich” directly to money alone, the danger can be that we may never feel like we’ve made it. You know how it goes. “If only I had a paper route, I could buy that bike I want”. Then I get a paper route. “If only I could get that job at the grocery store, I could get my first car”. Then I get the job at the grocery store. “I can’t wait until… Read more »

Des
Des
10 years ago

One thing nobody seems to consider when figuring their “magical number” is requests from others for help. My family doesn’t know exactly how much I make, but they know it is more than they do. We have literally been asked by every immediate family member on both sides for financial help in the last 18 months. It’s easy to say no to ridiculous requests (like my brother wanting funds to start a porn website). But it is hard when someone just needs a bit more to make their down payment on their first home, or when my dad needed a… Read more »

Lisa
Lisa
10 years ago

I’m in my mid-twenties. My partner and I take home a combined income of around $35,000, and we consider ourselves wealthy. We also have over $25,000 debt in student loans. He’s a nurse and I work in a homeless shelter, and we both love our jobs. We share a car that’s completely paid off, buy almost anything we like (used), have no consumer debt, and plan to take 2 months this summer to camp and travel across Canada. We’ve started an emergency fund ($1000) and have begun saving for retirement (although it’s only $100/month). We budget money every month to… Read more »

Nicole
Nicole
10 years ago

It literally isn’t healthy to define your well-being based on how well you are doing compared to others, at least if you’re comparing against people who are doing better, which is what most of us think of when we think “wealthy.” I’m pretty happy where we are now, on the path we’re on now. If I had 10 million dollars we would be on a different path, but that path wouldn’t make us happier enough to make the trade-offs needed to save up 10 million dollars. Somewhere between what we have now and 10 million dollars I might be willing… Read more »

partgypsy
partgypsy
10 years ago

Des – you are totally right. For me if I had a million I would feel rich, it’s that big number that makes me see zeros and I believe I could live off the interest and not touch the principle – but my husband corrects me, says that’s not realistic because everyone (friends, people on my side of the family) would be asking for money, and I would not be able to say no. So I’d have to double whatever I truly could retire on, to actually do it. Or move with no forwarding address to some island, but that… Read more »

chacha1
chacha1
10 years ago

I feel pretty wealthy despite the facts that we don’t own a home, our cars are 10 and 15 years old, and we both expect to continue working for another 15/25 years (DH/me).

We’re healthy, we’re happy, we have leisure time, we like where we live, we can afford our hobbies, we’re paying off debt, we’re saving … . We’ll probably never be millionaires and I won’t feel “rich” until we do own a home, but we have a great life!

Elle
Elle
10 years ago

I have been thinking about this topic a lot over the past few months. I’m a late 30’s mom of two young kids. My husband and I currently have well paying jobs (household income ~$270K). We’re within a year of paying off our mortgage and have a reasonable amount saved in retirement savings plans and for kids education, so our net worth is approaching $1 Million. While we don’t live or spend like the “rich”, we do feel wealthy. We made conscious choice to live in a nice neighbourhood in a good school district, but we realize that our income… Read more »

Pirate Jo
Pirate Jo
10 years ago

I consider myself wealthy because I am doing just what I want to do, right now. I don’t plan to retire, so I couldn’t care less about saving a million dollars, or whatever ungodly sum people think they need in order to spend their last two decades loafing. If we have a currency crisis it won’t matter anyway. What a huge load THAT was off my shoulders! No more worrying, fretting, or stewing about whether I’m saving “enough for retirement.” I’m not living my life that way anymore. Instead, I have paid off all debts (including the mortgage), have two… Read more »

shares