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Who Is Rich?
 

Edmundo Braverman's picture
ST
(Human, 14,704
 
Points)
 on 7/14/12 at 7:30am
filthy-rich.jpg

Andy note: "Blast from the past - Best of Eddie" - This one is originally from Sep. 2010 . If there's an old post from Eddie you'd like to see up again shoot me a message.

Who is rich? This is the perennial question in any progressive tax scheme. Where you draw the line makes a big difference to a lot of people. With the sun about to set on the Bush tax cuts, the debate is raging online, and I wanted to find out what you guys think. First, the preliminaries:

Those people making $250,000 a year or more seem to be the targeted income level to be considered "rich" in America. But they'd be the first to tell you that they're not. Two recent news pieces have the debate raging. The first was written by a Chicago law professor. I guess it was so incendiary that the original piece was taken down, but you get the gist from the above link. Even at $455,000, the good prof is barely making ends meet.

Next was a letter to the Wall Street Journal from Glen Esnard, a Southern California real estate executive. He tells a similar tale of woe about how $250,000 ain't what it used to be, and then finishes up with the not-so-veiled threat that he and his quarter-millionaire buddies might just take their ball and go home:

Apparently our president thinks that living in America is so wonderful that we will never leave, despite being directly attacked and held responsible for the political class's inability to constrain its desire to buy votes with our money. He should think again.

Esnard was then pilloried by Felix Salmon as the "sob story of the day". The law professor was taken apart by none other than Tyler Cowen. Not a lot of sympathy in those circles.

I don't mean to make light of the above situations, because both men have good points. And you know I'm not the type to vilify someone for their success. But the question of who really is rich has always fascinated me. As a kid growing up in a blue collar neighborhood, I figured anyone with a million bucks was rich. A couple decades later when I was swinging the bat, P&L might swing a million bucks in a day. It's all relative.



I FOUND THE ANSWER

It wasn't until recently that I found the answer to my question, and it came from someone eminently more qualified to answer it than I. I can't remember how I came to buy his book (because I normally wouldn't buy a book with a title as simplistic as How To Get Rich), but Maxim Magazine founder Felix Dennis answered the question of who is rich for me once and for all. According to Dennis (who says he's worth anywhere from $400 million to $900 million and that any legitimately rich person who can narrow their actual worth down more than that is lying), here is how it breaks down by overall net worth:

  • $2-4 million: The comfortable poor
  • $4-10 million: The comfortably off
  • $10-30 million: The comfortably wealthy
  • $30-80 million: The lesser rich
  • $80-150 million: The comfortably rich
  • $150-200 million: The rich
  • $200-400 million: The seriously rich
  • $400-800 million: The truly rich
  • $800 million - $1.998 billion: The filthy rich
  • $1.998 billion and Above: The super rich

So by his definition, one isn't "rich" until one is worth a minimum of $30 million. He also published a chart I would call "liquid" net worth (cash on hand or readily available), and the bare minimum liquid to be considered "rich" by Dennis was $2 million.

I think those are pretty accurate figures, actually. $30 million overall and $2 million liquid sounds about right. The guys making a quarter mil a year and struggling to keep the lights on would probably agree.

Incidentally, the book is great fun to read. Dennis started off with nothing and created an empire worth almost a billion in spite of himself. He's a dyed-in-the-wool party animal, and the book is wildly entertaining (if you're into hookers, cocaine benders, and Legionnaires Disease like I am). On top of that, he gave the best and most unvarnished advice about getting rich I've ever read, summed up in two sentences:

  1. Don't try to get rich because you won't make it, and
  2. You'll ruin your life in the attempt

Apart from all that, I'd like to hear what you guys think about what it means to be rich. Does $250,000 a year in income make you rich? Is $30 mil overall and $2 mil liquid closer to the real definition? Somewhere in between? Or does it take more than $30 mil to be rich in your book?

The number changed a lot for me over the years, I'm interested to hear what it is for you.

Comments

derivstrading's picture

500,000 GBP of cash flow per

ST
(King Kong, 1,370
 
Points)
 on 9/21/10 at 5:58am

500,000 GBP of cash flow per year in London is imo F*** you money.

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speeddemon's picture

$250,000 in income is the

O
(Monkey, 47
 
Points)
 on 9/21/10 at 6:04am

$250,000 in income is the Obama standard for being "rich".

If you have 10 million dollars, you should be able to earn 2.5% per year on that amount and thus earn 250k in income per year. Therefore, I think 10 million is the minimum needed to actually be considered rich.

LikeToKnow's picture

k, this site is a bit bias in

O
(Baboon, 167
 
Points)
 on 9/21/10 at 6:03am

k, this site is a bit bias in the answer, but tell you what.... i know quite a few people who would be happy with 250K a year! Those who claim they are struggling to pay the bills needs a reality check.

I know family who pays for everything with 65K a year!

not Rich ... i agree... struggling...? now that is just ask for a ass kicking!

International Pymp's picture

I agree totally with this

RE
(King Kong, 1,885
 
Points)
 on 9/21/10 at 6:32am

I agree totally with this scale of wealth. 30-80 is when you become lesser rich... meaning you can have 2 big, luxurious houses, one or two full time staff at your primary residence, a few nice cars, regular 5-star vacations with the whole family, and security for all your children and their educations, etc.... 30-80m is really not THAT rich... it's just when life STARTS to become wonderful and easy... at 10 million or so, it's clearly not a struggle, but you're not RICH... 3 kids private educations (At all the best schools up through mba or jd) will cost you 2 million dolalrs, etc

International Pymp's picture

note that the above comment

RE
(King Kong, 1,885
 
Points)
 on 9/21/10 at 6:35am

note that the above comment does not apply until you reach "patriarch" type age... like 55-60, a wife of 45 and 3 kids in college/HS

sleeplessinlondon's picture

This question is difficult to

AM
 
Points)
 on 9/21/10 at 6:47am

This question is difficult to answer as rich can be defined as many different things. I recently had a similar conversation with a director at my office (I just became a 2nd year analyst) about what amount of money paid all at once is truly life-changing?

Together we talked about it and settled on about 10-12million as a lump sum payment.

The logic goes as follows:

Use 2mm: buy yourself a nice house a car and some other material shit; still cant buy that yacht but no one is crying for you.

The remaining 10 million allows for some freedom; you could spend it all if you are a ri-tard. Or, you could park the whole fat wad in a CD collecting 5% a year netting your ass 500k of relatively low risk income and ~250K after tax.

Now most of you would probably say that is basically bitching out. But is it really? Even in my relatively short career I have seen enough of my friends get laid off to know that a steady paycheck is a big fuckin deal, and a guaranteed 250k with 0 effort is worth the opportunity cost(in my opinion) of seeking a higher return elsewhere.

Is 250k F-U money? No. But it buys you freedom. Dont like your job? Quit. Want to spend more time with your kids? Do it. Want to start a company in your free time? Don't sell 50% equity to get some vulture to give you the 100k you need to get your idea off the ground.

You could still work if you like and pretty easily double that income if you have a decent spot in finance firm....or you could do whatever you want. That's whats life changing about 12mil. It gives you freedom.

So if I had a net worth of 30mill with 2million cash, I would immediately increase my cash ratio to at least 12mill in cash.

No being married to a paycheck, and have lifestyle options is my definition of rich.

EngPhD's picture

Is someone with an IQ of 135

(Monkey, 59
 
Points)
 on 9/21/10 at 7:23am

Is someone with an IQ of 135 smart? To the CalTech electrical engineering faculty, probably not. However, to the average person, that's pretty smart-- 99%-tile. Hell, Mensa is only 98 %-tile and, for some reason, it has become synonymous with "smart."

Well, $250,000 yearly income is about 99 %-tile. To me, it is reasonable to say that is "rich." Most academic papers on the topic start the "rich" or "upper class" category at the 99 %-tile.

Slate.com had an article on this a few years ago:

But people in Georgetown mansions don't necessarily compare themselves to fellow Washingtonians in Anacostia. Relative income really works at the neighborhood level. As we know from the work of Cornell economist Robert Frank, people rate their well-being not so much based on how much they make and consume, but on how much they make and consume compared to their neighbors. After all, you have to compete with them for status and for important positional goods such as housing and schools. And here the CNBC crowd has a point. It is certainly true that in a few ZIP codes and neighborhoods, brandishing a $250,000 salary is like bringing a knife to a gunfight. There is a significant number of rich people—including a healthy contingent of filthy rich people—in places like New York City and San Francisco. If you want to live in a neighborhood where starter homes cost $1 million, and you want to send your kids to private schools, and you want to go on great vacations and have a beach house, then $250,000 likely won't cut it. For people in this situation, the knowledge that they're doing better than 98 percent of their fellow Americans is little solace when the investment banker down the street has just pulled down a $2 million bonus.

http://www.slate.com/id/2198806/

Edmundo Braverman's picture

Patrick and I were going over

ST
(Human, 14,704
 
Points)
 on 9/21/10 at 7:38am

Patrick and I were going over the recent U.S. poverty figures from the Census Bureau the other night. A couple things about the numbers surprised me.

First of all, the official poverty line for a family of four was $22,000 this year. I really have no way to judge, but that seems awfully high to me. You're not living high on the hog at $1,850 a month, but you can feed a family on that. Obviously, housing is going to be sub-par, but it's still a roof over your head. I'm not trying to be a dick here, I was just surprised that you're considered "impoverished" if you make $22k or less.

Especially when compared to the median household income of $48,000. Again, I don't have a lot to base it on, but $48k seems awfully low for the median household income. Note that it's the median, and not the average, so there are the same number of people making less than $48k as there are making more.

I just thought the numbers were interesting. If $48,000 is the "real" middle class (as the median number would suggest), then I guess $250k a year would seem wealthy. The thing I found really odd (and somewhat disturbing) is that the official poverty line seems to be rising to meet the median income.

This just in: Household net worth drops again:

http://www.cnbc.com/id/39233593

Silver lining: Consumers lowered their overall debt load by another 2.3% this quarter.

igaida's picture

We are definitely due for a

(Chimp, 4
 
Points)
 on 9/21/10 at 8:17am

We are definitely due for a realignment of progressive taxation levels, but 250k a year for the majority of the country is rich.

The problem with having a nationwide tax rate is that the cost of living is very different across different geographical areas, and there is no sensible way to adjust for geographical differences. 250k is nothing in NYC, but in Kansas you are Donald Trump.

It can be argued that those above 250k have more opportunities to engage in transactions which get favorable tax results (such as capital gains or sophisticated investment transactions), whereas those who make less have less access to making money using those methods. While you probably won't hear many politicians saying it out loud, our tax system favors those with investable capital, and only those with extra money have that.

I think the 250k level should be raised to 350k. Additionally, there should be another level at around 750k-1m+ which would feature a modest (~1%) increase, in order to soften the blow on the 350k crowd. I think its safe to say that if you make 750k a year, you are rich.

IlliniProgrammer's picture

My goal has always been to

ST
(Almost Human, 9,258
 
Points)
 on 9/21/10 at 10:26am

My goal has always been to hit $5 million of inflation-adjusted net worth and retire. A farm on one of the Great Lakes is the perfect retirement plan. Short of massive, massive sovereign risk, all of your basic needs in retirement- aside from clothing- are taken care of for as long as you can push a plow.

I think the right way to handle this is to raise everyone's taxes by 1-2% this year and remove the tax cuts on the top two tax brackets next year. It's the responsible thing to do- as long as it's combined with spending cuts.

Work hard, play hard.

In reply to sleeplessinlondon
speeddemon's picture

sleeplessinlondon wrote: The

O
(Monkey, 47
 
Points)
 on 9/21/10 at 9:29am
sleeplessinlondon:

The remaining 10 million allows for some freedom; you could spend it all if you are a ri-tard. Or, you could park the whole fat wad in a CD collecting 5% a year netting your ass 500k of relatively low risk income and ~250K after tax.

Wait, which CDs pay 5% a year anymore???

surferdude867's picture

Edmundo Braverman wrote: On

O
(Baboon, 147
 
Points)
 on 9/21/10 at 9:30am
Edmundo Braverman:

On top of that, he gave the best and most unvarnished advice about getting rich I've ever read, summed up in two sentences:

  1. Don't try to get rich because you won't make it, and
  2. You'll ruin your life in the attempt

From personal experience I've found this to be true, but I don't know why this happens. Thoughts? Why does chasing the money inevitably end in failure?

Side question: The phrase "do what you love and the money will follow" is all I hear from the guys I would consider rich. All of them are or were at one time business owners, and it seems all of them chased a dream. My question is what happens to the people who take their shot and come up short? You never hear about them.

Cmoss's picture

$250k/yr is more than i could

O
 
Points)
 on 9/21/10 at 9:38am

$250k/yr is more than i could ever dream of spending

International Pymp's picture

If you have 3 children and a

RE
(King Kong, 1,885
 
Points)
 on 9/21/10 at 9:54am

If you have 3 children and a wife, then buying a nice house in manhattan costs 10-12 million dollars. Let's keep that in mind. A 4 bedroom, 6000 square foot apartment in an extremely nice neighborhood with nice views, a friendly doorman, etc... ONE APARTMENT.. one apartment, for that matter, that is not over-done with fancy works of art or overly large and distasteful new money bullshit with 8 bedrooms and diamond studs on the black velvet chairs in the screening room.

Again - I agree with the scale above. 30-80m is where one enters the level of becoming actually rich.... but being TRULY rich is in the many hundreds of millions

There's nothing wrong with NOT having money and having a lot of money is in NO WAY a prerequisite for enjoying life, but this is America, and we work in finance... let's dream big. Dare I mention it: "greed is good"

In reply to Edmundo Braverman
surferdude867's picture

Edmundo Braverman

O
(Baboon, 147
 
Points)
 on 9/21/10 at 10:39am
Edmundo Braverman:

First of all, the official poverty line for a family of four was $22,000 this year. I really have no way to judge, but that seems awfully high to me. You're not living high on the hog at $1,850 a month, but you can feed a family on that. Obviously, housing is going to be sub-par, but it's still a roof over your head. I'm not trying to be a dick here, I was just surprised that you're considered "impoverished" if you make $22k or less.

Really? That's only 15 dollars a day per person...

Even in the slums a 1 bedroom apartment will run you $500 a month. That leaves you $1350 for everything else for 4 people: food, clothing, transportation etc.

You've got kids, how much would it cost to feed and clothe 2 infants just enough to keep them healthy?

In reply to moneytoblow
George87's picture

moneytoblow

IB
(Orangutan, 253
 
Points)
 on 9/21/10 at 10:45am
In reply to surferdude867
Edmundo Braverman's picture

surferdude867 wrote: Edmundo

ST
(Human, 14,704
 
Points)
 on 9/21/10 at 10:57am

GoodBread's picture

Edmundo, I'm pretty sure

AM
(Neanderthal, 3,637
 
Points)
 on 9/21/10 at 11:26am

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TNA's picture

If you prevent your lifestyle

O
(Human, 13,710
 
Points)
 on 9/21/10 at 11:33am

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Edmundo Braverman's picture

LOL@Soylent Green Who would

ST
(Human, 14,704
 
Points)
 on 9/21/10 at 11:47am

FinancePun's picture

igaida nailed it in my

IB
 
Points)
 on 9/21/10 at 11:49am

"Dude, not trying to be a dick here, but your shop looks like a frontrunner for the cover of Better Boilerrooms & Chophouses or Bucketshop Quarterly."

-Uncle Eddie

spoonfork's picture

This is a pretty neat site

ST
 
Points)
 on 9/21/10 at 11:51am
TNA's picture

Yeah, for some reason I

O
(Human, 13,710
 
Points)
 on 9/21/10 at 11:51am

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In reply to Anthony .
surferdude867's picture

Anthony . wrote: If you

O
(Baboon, 147
 
Points)
 on 9/21/10 at 12:31pm
nutsaboutWS's picture

20mm+ is what I consider

IB
(Gorilla, 642
 
Points)
 on 9/21/10 at 12:46pm

--
"Those who say don't know, and those who know don't say."

Edmundo Braverman's picture

@FinancePun If you grew up in

ST
(Human, 14,704
 
Points)
 on 9/21/10 at 12:51pm

In reply to Anthony .
Kools's picture

Anthony . wrote: Do we have

O
 
Points)
 on 9/21/10 at 12:53pm
In reply to Kools
TNA's picture

Kools wrote: Anthony .

O
(Human, 13,710
 
Points)
 on 9/21/10 at 12:59pm

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GoodBread's picture

Btw, it's super rich bracket

AM
(Neanderthal, 3,637
 
Points)
 on 9/21/10 at 1:01pm

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Kools's picture

22K will take you MUCH

O
 
Points)
 on 9/21/10 at 1:01pm
happypantsmcgee's picture

Section 8 housing is the way

O
(Almost Human, 9,627
 
Points)
 on 9/21/10 at 1:10pm

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to Kools
LIBOR's picture

Kools wrote: 22K will take

EN
(Neanderthal, 2,156
 
Points)
 on 9/21/10 at 1:12pm

looking for that pick-me-up to power through an all-nighter?

In reply to Anthony .
Kools's picture

Anthony . wrote: Yeah, you

O
 
Points)
 on 9/21/10 at 1:23pm
Edmundo Braverman's picture

Here is where the country is

ST
(Human, 14,704
 
Points)
 on 9/21/10 at 1:25pm

In reply to happypantsmcgee
Kools's picture

happypantsmcgee

O
 
Points)
 on 9/21/10 at 1:28pm
In reply to nutsaboutWS
IlliniProgrammer's picture

nutsaboutWS wrote: 20mm+ is

ST
(Almost Human, 9,258
 
Points)
 on 9/21/10 at 1:40pm

Work hard, play hard.

In reply to Kools
happypantsmcgee's picture

Kools wrote: I've found that

O
(Almost Human, 9,627
 
Points)
 on 9/21/10 at 1:37pm

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to Anthony .
cphbravo96's picture

Anthony . wrote: If you

PE
 
Points)
 on 9/21/10 at 1:49pm

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so."
- Ronald Reagan

liberty's picture

Hahaha at Soylent Green, shit

O
(Monkey, 44
 
Points)
 on 9/21/10 at 2:05pm

"I don't know how else to put this, but... we're over." "Okay. I disagree."

FinancePun's picture

Anthony, While I agree with

IB
 
Points)
 on 9/21/10 at 2:29pm

"Dude, not trying to be a dick here, but your shop looks like a frontrunner for the cover of Better Boilerrooms & Chophouses or Bucketshop Quarterly."

-Uncle Eddie

In reply to Edmundo Braverman
liberty's picture

Edmundo Braverman wrote: It's

O
(Monkey, 44
 
Points)
 on 9/21/10 at 2:34pm

"I don't know how else to put this, but... we're over." "Okay. I disagree."

happypantsmcgee's picture

FinancePun, on a small scale

O
(Almost Human, 9,627
 
Points)
 on 9/21/10 at 2:35pm

If I had asked people what they wanted, they would have said faster horses - Henry Ford

TNA's picture

All I am saying is that low

O
(Human, 13,710
 
Points)
 on 9/21/10 at 2:48pm

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IlliniProgrammer's picture

I don't find it shocking that

ST
(Almost Human, 9,258
 
Points)
 on 9/21/10 at 3:14pm

Work hard, play hard.

In reply to Liberty M
Edmundo Braverman's picture

Liberty M wrote: Edmundo

ST
(Human, 14,704
 
Points)
 on 9/21/10 at 3:10pm

FabulousFab's picture

Edmundo I have a question for

 
Points)
 on 9/21/10 at 3:13pm
In reply to Anthony .
cphbravo96's picture

Anthony . wrote: ...All you

PE
 
Points)
 on 9/21/10 at 3:14pm

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so."
- Ronald Reagan

In reply to Edmundo Braverman
liberty's picture

Edmundo Braverman

O
(Monkey, 44
 
Points)
 on 9/21/10 at 3:24pm

"I don't know how else to put this, but... we're over." "Okay. I disagree."

In reply to FabulousFab
Edmundo Braverman's picture

FabulousFab wrote: Edmundo I

ST
(Human, 14,704
 
Points)
 on 9/21/10 at 3:22pm

GoodBread's picture

French people who live in the

AM
(Neanderthal, 3,637
 
Points)
 on 9/21/10 at 3:43pm

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