What does it mean to be rich?

I had lunch with my accountant the other day. Sabino is more than a financial advisor to me — foremost, he's a close friend. I told him about my current circumstances, about how I'm now making more as a writer than I did when I worked at the box factory, about how I've been saving money, about how Kris and I are beginning to contemplate paying more on our mortgage.

“How does it feel to be rich?” he asked me. “Has it changed you?”

“What do you mean?” I said. “I'm not rich.”

But then I paused and thought about it. “Oh,” I said. “Maybe I am.”

I've repaid my consumer debt. I've saved $10,000 for emergencies. I'm setting aside money for retirement. I live in an 1800 square foot home on half an acre of land. My wife and I are paying more than the required amount on our mortgage. Though my income is variable (and has dropped significantly in the past month), I make enough to support myself while doing something I love. Kris has a stable job that she loves. We own a lot of Stuff — so much Stuff, in fact, that I sometimes feel oppressed by it. By any objective measure, I am rich.

“Well,” I said. “I guess being rich doesn't feel much different than being poor. I still worry about having enough to pay my bills. Despite the fact that I have a huge cushion in savings, Kris and I strive to be frugal. We're always looking for new ways to save money.”

I thought for a moment. “What about you?” I asked. “Do you feel rich?”

Sabino smiled. “You know how I'm always joking about being a ‘poor migrant worker'? There's some truth to that. When I imagine myself, I'm still the boy who came here from Mexico, still the boy who worked in the fields. I'm not the man who owns an accounting firm. When I think of myself, I think of how poor I was, even though I'm not poor any more.”

I was fascinated. When I considered it, I realized I agreed with him. I, too, was raised in poverty, and now that my economic class has risen, I still have that mindset. On some level, I know I'm wealthy, yet I still think of myself as poor all of the time.

The truth is, I live in a nicer home than my parents ever owned. I've saved more money than they ever saved. I earn more money than most people earn. I have more Stuff than I'll ever need. I am rich.

Later, I told Kris about my conversation with Sabino. “Do you really feel poor all of the time?” she asked.

“I do,” I said. “I know it's irrational. I know I have more than 99% of the world's population, but I still feel poor. It makes me wonder: What does it mean to be rich?”

Exactly,” Kris said, and she told me about a conversation she had with her friend Rhonda today. Kris had mentioned in an offhand way that she and Rhonda were rich.

“I'm not rich,” Rhonda said. “I still have to come to work every day.”

When pressed, Rhonda elaborated, “I have this concept of what it means to be rich. Rich people keep buying Stuff. They don't think about what it means to consume in the way they're consuming. When I think of rich people, there's a negative connotation. That's part of why I don't want to be called rich. Rich people are selfish. The rich don't care about other people.”

Kris and Rhonda tried to decide: Does being rich mean having a large income? Does it mean having a certain net worth? Are the rich selfish? Is being rich only a state of mind? Or is it something else entirely?

Are two people with equal $100,000/year incomes rich? What if one has $100,000 in credit card debt? Is he still rich? What if one has higher expenses because she has four children? Is she still rich?

I think most of us would agree that a person with a $20,000 income and three kids is poor. But what if somebody earns $20,000 a year, lives a frugal lifestyle, and is able to save $5,000 each year in a Roth IRA? If you have a small income but you're a good saver, does that make you rich? Is this a bad thing?

“All this makes me think that money isn't the answer,” I said after Kris told me her story. “It makes me think that being ‘rich' doesn't have anything to do with how much money you have. But what then does it mean to be rich?

Ostensibly, the aim of this blog is to get rich slowly. My goal is to build wealth. But what is wealth? What does it mean to be rich? If becoming rich is a goal, what does that mean to me, and to the people around me? Is it all about money? Or is there something more to the equation, some sort of social capital?

Although I don't write about them often, I ask myself questions like these all the time.

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Katie
Katie
11 years ago

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… Read more »

docs money
docs money
11 years ago

I think being rich is relative, if you live in a rich neighbourhood and don’t have as much money as everyone else then you will feel poor. If you make more money than everyone else then you will feel rich as you will have more possessions. I think that certain people are bought up to believe that they should save and live a sustainable lifestyle.

EscapeVelocity
EscapeVelocity
11 years ago

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… Read more »

Amy Williams
Amy Williams
11 years ago

I think being “rich” and being “wealthy” are two separate things.

You can be “rich” if you have income of $250,000 but have credit card debt of $100k and growing… Think rock stars, athletes…

But the truly “wealthy” are those with savings, retirement investments, etc.

That’s always been my opinion…

Chill Bear
Chill Bear
11 years ago

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.

Tzctlpc
Tzctlpc
11 years ago

Being rich means only one thing: not to have to worry about money.

Can you enter any shop anywhere, buy whatever you fancy in the knowledge that you have enough money to pay? Then you are rich.

If you have to care about savings, pension and a regular income (no matter how high) then you are not rich, you may be well off, wealthy or whatever, but you are not rich.

I fail to see why to agonize so much about this when we all know what it really means to be rich.

April
April
11 years ago

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… Read more »

frank
frank
11 years ago

What does it mean to be rich? Partly, it’s about your relative position in society. I think that many people (myself included) don’t really think of themselves as rich because they know other people that are doing better than they are. It could be that they have a higher income, more stuff, or what have you. Moreover, I remember an article that states that even those people who are making six figures (which is like the top 5-6% of American income) still consider themselves to be “middle class”. So I think a lot of it is relative. That being said,… Read more »

anne
anne
11 years ago

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.

Matt Ranlett
Matt Ranlett
11 years ago

I think this is a really interesting conversation. The heart of the matter isn’t really where is the line between rich and poor. That’s most certainly a grey area. The real conversation is how does your history and perceptions about money shape your perceptions of your current financial state? I didn’t grow up poor, but rather solidly in the middle class. My mother didn’t work for the majority of my life. My parents were always (to my memory) able to own a house, keep plenty of food on the table, pay for the occasional vacation to visit family or even… Read more »

Ashley
Ashley
11 years ago

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

Dally
Dally
11 years ago

Turn this around a little and use the term “wealthy”. I think of being “wealthy” as being financially well, the way being healthy is being physically well. I’m a tax accountant and I’ve been trying to tease out what makes people financially well. I’ve found five factors: 1. They need to have some savings. Life is too bumpy if a speeding ticket constitutes a tragedy. 2. They have to have debt under control. Not necessarily OUT of debt, just have a plan, be working on it, be able to sleep at night knowing the debt is going to work out… Read more »

trb
trb
11 years ago

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.

Paul Williams
Paul Williams
11 years ago

Personally, I don’t think “rich” or “wealthy” should depend on comparing what you have or earn with what other people have or earn. Why does it matter what anyone else makes? Personal finances are personal – it’s about what works for you. If you set the “rich” standard based on your personal situation, then when you have or earn more than you need you’re actually “wealthy”. When it comes to feeling rich or wealthy, I think that depends on your contentment level. If you’re not content or can’t realize that you actually are wealthy, then you’re not going to feel… Read more »

Chris
Chris
11 years ago

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… Read more »

boomie
boomie
11 years ago

Here’s one of your quotes: “Rich people are selfish. The rich don’t care about other people.” Hmmmmm? Who do you think donates time and MONEY to cancer research, the aids epidemic, breast cancer awareness and on and on and on. Poor people? As a side note, do YOU donate any money, Mr. Newly Rich guy to anything? People seem to forget all the wonderful things rich people do in this world. Bill Gates has brought free technology and medical care to millions of South Africans. Angelina Jolie and Oprah Winfrey have helped thousands of poor children. Warren Buffet donates millions… Read more »

guinness416
guinness416
11 years ago

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… Read more »

Steve
Steve
11 years ago

To paraphrase a great philosopher: When you know you have enough, you are rich.

Gunnar Tveiten
Gunnar Tveiten
11 years ago

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.

Dylan
Dylan
11 years ago

Being rich or wealthy is not about *how much more you have.* It’s about *how little more you need.*

Visitor
Visitor
11 years ago

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… Read more »

Mike
Mike
11 years ago

Rich, to me, is having the option NOT to work, and maintain an acceptable lifestyle. Obviously, this is different for everyone, and unfortunately, I’m not there…yet.

April
April
11 years ago

“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… Read more »

Dan
Dan
11 years ago

According to my old college professor, “Rich is being able to fly to Paris for lunch on a whim.” I’m not there yet…

Sharon
Sharon
11 years ago

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… Read more »

J.D.
J.D.
11 years ago

Great discussion so far, everyone. I want to point out that I do not condemn the rich. But many people do have negative feelings about them. (Conversely, many people have negative feels about the poor, too.) I agree with what many have said: wealth and being ‘rich’ are relative. The same is true with poverty. There’s no question that my family was poor when I was a boy, but were we as poor as Sabino’s family? Does such a distinction matter? I know people from all across the economic spectrum. Some are clearly wealthy/rich, but I don’t think even they… Read more »

Andy
Andy
11 years ago

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… Read more »

Craig
Craig
11 years ago

Rich means having options. Make 100k are year, but you have 120k in dept. You make a lot of money, but have few options. If you make 50k a year but have no debt. You have a lot of options. You can take 5k and go on a vacation and not worry about it for example.

That is freedom – the option to do whatever you want, even if you choose not to do it. That is being rich to me.

Kathryn
Kathryn
11 years ago

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.

guinness416
guinness416
11 years ago

Wow, interesting and scary comment, Visitor.

Wes
Wes
11 years ago

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… Read more »

Chris
Chris
11 years ago

To me, being rich is having freedom. I’d count wealth not in $ terms but in the liberty to do the projects that I want to do and have the feeling of security knowing that my family is taken care of. For everyone this will be different, there will always be someone richer than you, and if you wanted to, you could spend your whole life in the pursuit of material items. Wealth is not $, it’s the freedom to live your life as you choose and being content with what you have. Doesn’t mean that I don’t still desire… Read more »

Nick Atnite
Nick Atnite
11 years ago

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.

Betsy
Betsy
11 years ago

One of the most interesting things about your post, J.D., and the comments so far is the sharp difference between the internal sense of wealth, and the external measures of wealth. There aren’t a lot of people who can fly to Paris for lunch on a whim — but there are a lot of people who are able to feel a sense of satisfaction and security without ever having to meet that standard. If we must have an objective measure, I agree with Gunnar Tveiten (post #19), who noted that the truly rich own assets (beyond a traditional paycheck) that… Read more »

Susy
Susy
11 years ago

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.

Scott
Scott
11 years ago

“Rich” is in your head.

If your monetary situation has a large impact on your daily life, then you’re not rich. “Rich” means freedom from monetary oppression. With those two definitions juxtaposed, it’s clear that actually it’s all in your head (well, 86% in your head, because we’re not perfect zen folk and we have to eat). People with lots of money who find that it controls their life are less rich than people with very little money whom are not influenced by that fact. How much control money has over you is very much a head game.

AA
AA
11 years ago

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.

Tom
Tom
11 years ago

J.D. – great post. It’s this kind of post that makes me want to be first in line when you publish your first book.

Jennifer
Jennifer
11 years ago

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… Read more »

Charles
Charles
11 years ago

This discussion is conflating two different words: wealth and prosperity. There are wealthy people who feel like they never have enough, and are driven to insanity by seeking more and more. They are not prosperous, no matter how much money they have. Then there are poor people who always feel like they have enough to meet their needs, and a bit more. They are prosperous. This was a doctrine I first encountered in LA in the 1980s, from New Age televangelist Terry Cole Whittaker. She was very popular in New Age circles, and released a popular bumper sticker that said… Read more »

Julie
Julie
11 years ago

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.

Tyler @ Dividend Money
Tyler @ Dividend Money
11 years ago

I completely agree with the statement:
“Time is the only tangible luxury”

If you can do what “you” want, when “you” want then you are rich.

It has nothing to do with dollar amounts as many folks could be extremely happy on the $42K described above. (Especially if they have no debts).

Sam
Sam
11 years ago

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… Read more »

GHolmes
GHolmes
11 years ago

Ouch JD you are making my head hurt. Good post.

TosaJen
TosaJen
11 years ago

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,… Read more »

Antwan
Antwan
11 years ago

We define rich on many different levels (social, economic, spiritual). I have come to define rich as the point in your life when you are uninhibeted. When your access to the outer world is equal to your inner desires. Example: I am sure you, JD, as a writer have had bursts of creative energy. Yet, your economic needs required you to suppress that and head to the box factory. The day you woke up with a desire to write, and had the freedom to write all day because you were not “required” to go to work for someone else…..That was… Read more »

No Debt Plan
No Debt Plan
11 years ago

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.

ThatGuy
ThatGuy
11 years ago

Being rich is liberty. In theory, the closer you are to wealth the less you have to say to yourself “I have to do this”. @36 ““Rich” means freedom from monetary oppression” One is never free from monetary oppression if you live in an interconnected society. Image the heartache the supposed rich must of felt when their investment accounts dropped 20-30% this year? Further, what about the fact that they HAVE to be aware where there money is because they can’t just put in a bank. As most people gain wealth their networks increase and that result in ever greater… Read more »

Christine Groth
Christine Groth
11 years ago

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

Ally Chan
Ally Chan
11 years ago

Good topic to discuss! Rich can be defining in many ways, it cannot be just judging by how much you earn or how much you have. Different people may have different definitions of rich. But it all comes under a same principle — “Are you complacency with what you have now?” In the Buddhism way of being rich, it is complacency. If you complacence with what you have now, then you will feel that you are rich. In the general view, living with no debt, no mortgage, no financial worries, enough saving plus enjoyable lifestyle can be consider as rich.… Read more »

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