How do you define "rich?"

mjbanker's picture
Rank: Orangutan | 286

What criteria do you define rich by? Is it a certain net worth? The price of your house? A certain percentile compared to others? I'm not trying to be shallow and materialistic, I'm genuinely curious what you all think.

Comments (56)

Feb 25, 2020

My view is that if you need to keep working for someone else to maintain your current lifestyle, you aren't rich.

Yes - that includes the vast majority of investment banking professionals.

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Feb 25, 2020
gufmo:

My view is that if you need to keep working for someone else to maintain your current lifestyle, you aren't rich.

Yes - that includes the vast majority of investment banking professionals.

When you put a lifestyle qualifier it distorts things. People can adjust their lifestyle for certain income levels. Alot of celebrities are rich but need to maintain an income because they are burning cash like crazy. That's just bad financial planning but they're still rich.

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Feb 25, 2020

That's fair. I actually really agree with your point you make below, said more eloquently than I put it. Basically whether your balance sheet informs your lifestyle as opposed to your cash flow.

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Feb 25, 2020

I'd say 2 houses in wealthy places (hamptons, Bay Area, Manhattan, vail, LA, Miami) paid off and a couple million in the bank.

I also like to use the test of the parents have a college-fund. If they don't and are paying for private school, they are probably pretty wealthy.

Array

Most Helpful
Feb 25, 2020

being able to do whatever you want whenever you want all the time

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Feb 25, 2020

How about a certain net worth? Do you guys have a set number?

Array

Feb 25, 2020

Net worth and whether it makes you "rich" is subjective. Sliding scale based on age...but maybe $10MM by 50?

I think of "richness" in terms of time more than money. Some shithead MD that has no control over their schedule pulling in $2MM a year isn't rich in my view.

Feb 25, 2020

Rich = you can live very comfortably off of investment income. That's what rich is to me. So this means you need to be generating somewhere in the neighborhood of $250k in investment income, which means about $5 million of liquid investment funds, conservatively assuming ~5% return. Assume you've paid for your house at that point. Adjust up depending on cost of living considerations, kids, etc.

Wealthy is a whole different story

EDIT: I forgot taxes, adjust up for taxes. My $250k figure is post-tax, so probably closer to $8 million in investment funds

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Feb 25, 2020

Yep. This.

Feb 25, 2020

Rich to me means ultra high net worth i.e. you can comfortably spunk away $1m+ a year on lifestyle and it wouldn't even make a dent in the growth of your portfolio. It also means, you can conceivably just have a recurring personal credit line to fund your lifestyle and not have to ever pay tax. This translates to about ~$30m+ net worth. Super rich is more family office territory at $100m+ net worth.

Being financially independent is different though, that's just when the passive income or liquidated capital gains (below the safe withdrawal rate) from your portfolio exceeds any reasonable expenses you need to fund your current (or anticipated if e.g. you want kids, want to get married etc) lifestyle. There are no extremely luxurious, crazy rich expenses here just standard expenses you'd expect depending on where in the professional/socio-economic ladder you currently fit into (excl. people who are already rich).

There are a few tiers of FI: lean (i.e. lower middle class lifestyles - i.e. $35-50k annual expenses), regular (i.e. middle middle class lifestyles - i.e. $50-100k expenses) and fat (i.e. upper middle class lifestyles - i.e. $100k+ expenses, could also argue for an obese category of $200-250k+ expenses)

Feb 26, 2020

$35-50k annual exp is lower middle class? That's spending over 100% of after-tax income in that tier.

Probably want to haircut all of those tiers by $15-20k

Feb 26, 2020

I did say "middle class" not lower/working class.. pre-tax income of c.$50-70k for a household is defintely the lower end of middle class. That's not enough to have the full range of middle class trappings but enough to eat good food, have a very cheap vacation once a year and live a more-or-less frugal but complete lifestyle when it comes to discretionary spending etc. I don't see how going further below that mark would classify as "middle class" anymore. In fact, below that range is pretty much the line where you can get a full-ride financial aid package at a lot of colleges.

Feb 27, 2020

$1mm a year is closer to VHNW, not UHNW. And even the entry level of UHNW you are still struggling to get financially secure and keep that wealth generationally.

Feb 28, 2020

UHNW is generally defined as roughly ~$30m in assets or more. VHNW is generally defined as $5mm in assets or more (with SWR of 3.5% that's $175k.. Not sure how that is closer to $1mm a year).

I mean if you're struggling on a passive income of $1mm a year or more I don't really know what to tell you. That's just your own undoing.

Feb 25, 2020

Ask yourself if $10 is a lot of money?

My answer is, if everything you need and want is $9 total, you're rich; if everything you need is $11, you're not rich.

Add and subtract 0's as needed.

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Feb 26, 2020
ironman32:

if everything you need and want is $9 total, you're rich

this is a big 'and want' here - lol

https://media.tenor.com/images/ea25d0ae4712ab04a685c556416f051b/tenor.gif

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

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Feb 26, 2020

https://media.tenor.com/images/99c33d51b4892e086b207f21b8776741/tenor.gif

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Feb 26, 2020

You my friend...are a smart man!

"Be persistent and you will get, be consistent and you will keep it, be grateful and you will get more"

phuckQuotes

Feb 25, 2020

I think everyone defines rich relative to others. For me, I used to look at it by income. People who could afford basic necessities in life were my point of reference. Anyone doing better than the basics is rich in my eyes, mainly because anyone without basics is generally poor (this is a subjective way of looking at it--I have or I don't have).

Wealth is the main academic measurement of being "rich". Those who have a certain dollar value in illiquid assets are generally considered "rich". In this way I think even more people fall below levels of being poor than using a basic metric like HH income or purchasing power.

I believe the bottom 50% combined have an average net worth of of less than $17K, which is 62.8 MILLION American families. $17K is not horrible but it's not a number growing very fast either.

The wealth measurement is difficult, because no one knows what 17k in net worth means. It could be that people have high levels of debt, 100% in their retirement acccounts, which may also not be enough to even cover retirement, or locked up in their home value.

Most people measure their financial health in two ways: purchasing power and where they stand relative to others. I don't think people really go to great lengths to think about and be grateful for what they can afford, but most are willing to compare themselves to others.

The question of rich becomes pretty stupid really fast, except when it's you who feels left out of the economic abundance. For wealth, specifically, I think it's healthy to think about how to increase wealth, since we know that higher wealth leads to healthier consumers but also the psychological aspect of feeling more healthy.

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Feb 25, 2020

$10M+

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Feb 26, 2020

Yeah that is accurate for being rich. Then there's Oprah rich, which means that the person you're talking about is probably in the three comma club.

https://i.redd.it/85fsezhekld21.jpg !-- Images -->

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Feb 28, 2020

Oprah rich? She is a multi-billioniare, she is extremely wealthy.

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Mar 4, 2020

Tres Coma

Feb 25, 2020
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Funniest
Feb 26, 2020

A lot of butter and sugar. Usually dense in calories.

I tried.
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Feb 28, 2020

I'm sure your name is not an indicator of your thought process

Feb 26, 2020

Money is a resource. The resource is only as meaningful as your needs / wants. Without putting a dollar amount on it, because everyone's is different, being "rich" is about having the resources to do:

1; What you want
2. How you want
3. When you want
4. With whom you want

The last point is a big one, being able to spend your time with the people you love and enjoy vs. being forced to spend your time with fools and jerks.

I think rich and wealth are different things. Wealth is about actual dollars (quantity). Rich is about the relationship between your wealth and your life.

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Feb 26, 2020

I think Gordon summed it up nicely: "I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing."

Feb 26, 2020

Love it! Also keep in mind this quote is from 30+ years ago. Inflation averaging 2-3% since then, the numbers have doubled now.

Feb 26, 2020
Great Ape Jake:

I think Gordon summed it up nicely: "I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing."

This is wealthy.

Feb 26, 2020

As a second question, what income level would you say defines each class? (lower, middle, upper middle, rich)

Array

Feb 26, 2020

Lower: <$30k
Lower middle: $30-50k
Middle: $50-100k
Upper middle: $100-500k
Rich: >$500k

I read somewhere that most people make less than $30k a year so my numbers are probably skewed high.

Feb 26, 2020

I find it bizarre how your upper middle range is so wide but your lower middle and middle range is incredibly low/tight.

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Feb 26, 2020

Low: <$40k/year

Lower middle: $40-80k/year

Middle middle: $80-150k/year

Upper middle: $150-400k/year

High earners: $400-600k/year

Very high earners: $600k to $1M/year

Executive earners: $1-2M

Ballers: >$2M/year

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  • Prospect in Other
Feb 28, 2020

Depends on location but I think this is solid

Feb 26, 2020

I've said this before--if you can publicly drop the N-word (in a negative way) in public (social media, TV, etc.) without it harming you materially financially then you are very likely rich. If I did such an act on Twitter I would lose my job and it would be difficult to pay my mortgage, to be frank, because I can't see myself getting re-hired by a notable employer. On the extreme end, if Mike Bloomberg did that today he'd still be unbelievably wealthy for basically forever.

Feb 26, 2020

Being Rich means you can eat McDonalds and still look like Angelina Jolie in the Matrix

What concert costs 45 cents? 50 Cent feat. Nickelback.

Feb 28, 2020
Jamie_Diamond:

Being Rich means you can eat McDonalds and still look like Angelina Jolie in the Matrix

You mean Trinity in the Matrix? Or Angelina Jolie in Tomb Raider?

"Don't blame me, I voted for Angelina Jolie" lololol

https://pics.me.me/voted-for-y-favorite-lady-riariin-11-if-youre-angelina-27838448.png

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

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Feb 26, 2020

If you get mad because your neighbor, Phil, just pulled a 911 off the lot then you're not rich.

Feb 26, 2020

In the USA, we're all wealthy in the 21st century. At least in terms of historical standard of living purposes. The amount of abundance today is just extreme. Pretty amazing.

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Feb 27, 2020

The amount to feel rich is relative. I see above some comments about breaking out each class by income. However, those numbers are dependent on where you are. SF and NYC, $100k is probably low class, but in most Texas major cities you live well on $100k. Take that $100k to Ruston, LA and you're living very well off. This is why a Federal minimum wage doesn't really help. Take it a step further. If you're able to make $100k remotely, and you're willing to move overseas, you can now go and be rich in a 2nd/3rd world country somewhere.

I live great off what I make in Texas, but I wouldn't go work in a place like SF or NYC unless I was offered at minimum 2x's what I make here; and I'm getting close to the top 5% US.

Throw in what it means to be rich to each person, and that further complicates things. Are your hobbies expensive? Are your tastes expensive? Or are you like my MD friend who has an awesome house, but is a homebody and spends very little day to day. Once he pays of the house, he's great and can feel rich on little! Me on the other hand. I have a regular cookie cutter house, but love to travel internationally, love sports cars, and I am more social in general. That means I have to continue to generate income, or a higher investment amount paying interest to feel rich and do those things.

Therefore, in my opinion this question cannot be answered with a number; everyone defines rich differently.

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Feb 27, 2020

When passive income sustains an upper middle class lifestyle ($m+)

Feb 27, 2020

Everything is relative, but you are technically rich if you can live off the interest generated by your assets without touching them. You are extremely rich if you can live off the interest on the interest.

  • Analyst 2 in HF - EquityHedge
Feb 27, 2020

Total asset * (LIBOR + 3) = X, where X is an amount that can cover annual spending of you and your responsibilities (family, health, rent/house etc).

  • Analyst 1 in CorpStrat
Feb 28, 2020

$100m net worth

Feb 28, 2020

I think this is termed 'mega rich'.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Feb 29, 2020

The great Dom Mazzetti once said something along the lines of "the day you start lifting is the day you become forever small" - meaning of course, once you start lifting weights, you are forever chasing your pump

Using this framework, I think a parallel could be made between lifting weights and earning money. In other words, the day you start working and earning a paycheck, is the day you are forever poor (where "poor" really just means "not rich enough")

Every time you hit a new net worth or annual earnings benchmark, you gain visibility to the NEXT level of wealth and it seems more attainable which is enticing. Granted, the marginal utility of a dollar decreases at a certain level, but I think this is idea is generally true for most of us that browse WSO

Feb 29, 2020

I grew up in a fairly affluent neighborhood but people were always competing for the perception of being "rich". What do I mean by this? Buying a C-class benz or 3-series and buying that LV clutch vs the handbag etc. This disillusioned me forsure. After college and legitimately having no money for food some weeks, rich to me is having financial freedom to not worry about not only basics like rent on my own place in nyc, memberships to various things etc, but things like going to places I want to for the weekend, buying things I like and not being denied any experiences with friends etc. Obviously this is within reason (ie not going to Wempe and splurging on a Patek) but the idea of not having to worry about "can I pay for this" is something I think is very valuable.

Edit: It is very important, especially in NYC to keep yourself grounded financially and not compare yourself to other people in terms of income or net worth. Especially in ny, you will always have people who are wealthier than you and someone wealthier than that guy. To you, rich should be something you define and push the boundaries on dependent on what you want or achieve, not something which is based on benchmarking everyone around you. This is tall advice forsure but its something I am working on and think that you guys could benefit from a headstart in this mentality. Comparing yourself to other's wealth can and likely will crush your sense of self-perception

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Mar 2, 2020
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