A Poll about being "Rich"

[kirksnosehair]

I'm just curious what the membership here considers to be "rich."   Obviously, "rich" is a relative term.  I saw this article today that cited a poll wherein most Americans say that a household income of $150k per year makes one "rich" and my reaction to that was a combination of  and  because I personally think you have to be pulling in enough money that you are 100% financially independent in order to be classified as "rich" but maybe you feel differently.

I'm genuinely interested in what you think, especially since it seems that a lot of you are young, and therefor unlikely to have yet achieved an income level that would be classified by anyone as "rich" (although I am sure plenty of you will be very successful!)

[lordxizor]

I'd look at more in terms of accumulated wealth rather than yearly income. Plenty of people making $100k a year or more blow it all on a too big house, fancy cars and dining out all the time. There are plenty of people making that much money living paycheck to paycheck to maintain their lifestyle. These people are not rich.

On the other hand, there's the retired couple who have lived in the same reasonably sized house for 40 years, don't drive flashy cars, are generally frugal people who never had huge incomes, but managed to save millions of dollars. They're rich.

To me the ultra rich are those who can live the flashy lifestyle, blowing lots of money on pointless things and still accumulate lasting wealth.

For me? I could easily make myself rich in the long run making $100k a year. I may be able to do it on $75k, check back in 25 years.

[pogoowner]

I think it also depends where you live. If I made $200k here in Western Pennsylvania, that would get me a heck of a lot farther than that same income in California or NYC.

[kirksnosehair]

It's just a snapshot of your own perspective.  From where you sit, what do you consider rich?  I realize geography and spending habits have a lot to do with it.

[PraXis]

I voted a million or higher because that was the highest on the poll, but I'd say $10 million+.

[chknptpie]

I voted 200k, but its a pretty hard thing to pin down. For myself and my spending habits, if I made 200k/year I would definitely feel rich.

[kirksnosehair]

As a point of reference, here's some stats on income in the US:

WHAT THE TOP 1%, 5%, 10%, 25% and 50% MAKE IN AMERICA
Based on the Internal Revenue Service’s 2010 database below, here’s how much the top Americans make:
Top 1%: $380,354
Top 5%: $159,619
Top 10%: $113,799
Top 25%: $67,280
Top 50%: >$33,048

[yorost]

Married, single, dependents?

Someone making $150,000 annually is a financial class above a middle class family pulling in $60,000. 

[kirksnosehair]

Household income.  I'll edit the question

[kirksnosehair]

Married, single, dependents?

Someone making $150,000 annually is a financial class above a middle class family pulling in $60,000.

Right, but does that make the $150k earning person/family "rich" ??

From my perspective, no, but my household income puts me almost into the 1% so I'm probably biased

[yorost]

I think you're definitely out of the middle class by that point, but I can see why someone who makes more doesn't think of it as rich.  I might consider calling that range the lower rich.  Ample disposable income and living decisions are based on quality, not necessity, but, yeah, they can't go nuts with any purchase they want.

[lordxizor]

Unless you live in a very expensive part of the country, it should be very, very easy to live on $150k a year. If you (not necessarily you Kirk, but a generic "you") can't live very comfortably on $150k a year in 99% of American cities, you're wasting a lot of money on things that aren't really necessary. At that point, you're choosing not to be rich because of your lifestyle. That my be easily justifiable (putting your kids in great private schools, giving a lot to charity, etc) but also could mean that you enjoy buying expensive vehicles and having a large house. Not that those are bad things necessarily if they're are important to you, but it's hard to look at someone making that much money and feel any sympathy if they claim they're hard off.

[Dublagent66]

Define "rich".  To me, being rich has nothing to do with money.

[kirksnosehair]

Define "rich".  To me, being rich has nothing to do with money.

That's another topic.  This poll is about the financial definition of rich. 

[yeshaberto]

i went with $250k
1.  "rich" is often more than what you make
2.  you spend what you make, therefore it is rare for someone to have excess money

[yorost]

2.  you spend what you make, therefore it is rare for someone to have excess money

That's a bad generalization.  My wife and I only slightly changed our lifestyle when our income quadrupled.  We saved money like crazy for awhile, although having a daughter slowed that down.

[kirksnosehair]

Unless you live in a very expensive part of the country, it should be very, very easy to live on $150k a year. If you (not necessarily you Kirk, but a generic "you") can't live very comfortably on $150k a year in 99% of American cities, you're wasting a lot of money on things that aren't really necessary. At that point, you're choosing not to be rich because of your lifestyle. That my be easily justifiable (putting your kids in great private schools, giving a lot to charity, etc) but also could mean that you enjoy buying expensive vehicles and having a large house. Not that those are bad things necessarily if they're are important to you, but it's hard to look at someone making that much money and feel any sympathy if they claim they're hard off.

I think "rich" is a relative term, but to me I would have to be 100% financially independent in order to consider myself rich.  In other words, if I would walk away from my job right this minute and never even have to think about working another day in my life, I'd consider myself rich.  Until I can do that, I'm not rich. Yeah, sure, my wife and I have a pretty hefty combined income and we basically both buy whatever we want, pretty much whenever we want it, but we also both need to keep working in order to maintain this lifestyle.  I don't classify that as "rich"

[lordxizor]

2.  you spend what you make, therefore it is rare for someone to have excess money

That's a bad generalization.  My wife and I only slightly changed our lifestyle when our income quadrupled.  We saved money like crazy for awhile, although having a daughter slowed that down.

I think it's a fine generalization. Obviously there are exceptions, but the majority of people would increase their spending if they got a raise rather than save more. I'm with you in that I've basically banked any pay increases I've gotten, but we're not your typical American in that regard.

[yorost]

As income increases I believe investment increases, that's saving.

[kirksnosehair]

2.  you spend what you make, therefore it is rare for someone to have excess money

That's a bad generalization.  My wife and I only slightly changed our lifestyle when our income quadrupled.  We saved money like crazy for awhile, although having a daughter slowed that down.

You know what, though, I think he's got a point.  For example, when I was still climbing the corporate ladder and making half of what I make now, I didn't own a lot of music equipment because I couldn't afford to buy it.  Now I've got half a dozen high-end guitars, 5 amplifiers, a very, very well-equipped recording studio in my house, etc......i.e. you spend what you make (or what you can afford)

Of course, my wife and I married relatively late in life and had no children (my son is 25 and from a previous marriage and has never lived with me).....so we don't have a lot of expenses other than me paying my mother's rent and car payment and for her recreational activities. 

[lordxizor]

As income increases I believe investment increases, that's saving.

Among people making decent money you're probably right. I'll go out on a limb and guess that the bottom 50% in the pay scale would spend any increase they got rather than start investing much. But I could be wrong.

I would guess that most people would continue to save the same percentage of their income. If Joe used to save 10% of his $50k salary and got a big raise to $70k, he'd probably still save 10%, increasing his spending by quite a bit in the process, though also increasing his saving.

[kirksnosehair]

Unless you live in a very expensive part of the country, it should be very, very easy to live on $150k a year.

I live just outside of Boston, MA - one of the most expensive places in the US.  I was able to put my wife through full time college for 4 years all while paying my mother's rent and utility bills along with our mortgage and household expenses on less than $150k

In other words, you're right 

[lordxizor]

I live a couple hours from Boston. Every time we go there we think it would be great to live there, but it's just too damn expensive. Nice city though.

I think "rich" is a relative term, but to me I would have to be 100% financially independent in order to consider myself rich.

That's a fair definition. I'm sure if you and your wife really wanted to, you could be completely financially independent sooner than you might think. It would take some major lifestyle changes that you probably wouldn't be interested in though. That's what makes this such an interesting question. It's really completely different for everyone pretty much based on the lifestyle to choose to live and want to maintain. If I could make $150k a year, I could have a million bucks in the bank in 10 years and never need to work again because I have no interest in increasing my spending habits. In fact I'd love to decrease them even further.

[kirksnosehair]

I live a couple hours from Boston. Every time we go there we think it would be great to live there, but it's just too damn expensive. Nice city though.

I've seen 2 bedroom apartments in the Back Bay area advertised for as much as $4k per month.

I almost bought a rental in the Hyde Park section of Boston last year.  It was in foreclosure and they still wanted $580k for it.  Two family house, each unit is 3 bedrooms and about 1300 sq. ft with a single bathroom.  On a postage stamp size piece of property with people selling crack down on the corner.   

[yeshaberto]

2.  you spend what you make, therefore it is rare for someone to have excess money

That's a bad generalization.  My wife and I only slightly changed our lifestyle when our income quadrupled.  We saved money like crazy for awhile, although having a daughter slowed that down.

that's awesome!  in my experience, though, you are among the "rare."

[nightmare_cinema]

I selected $100k as being 'rich', seems like lots of others have too, maybe it's just easy to go for that amount as it's the first instance of six figures. I earn a little over $15k so even $40 would be like crazy money for me.

[yorost]

@A few people:  Yeah, I think spending goes up as income increases, I don't dispute that at all.  More income offers more opportunity for investment and saving, though.  I don't think it's unusual for those making more money to also start padding their futures.

[snapple]

I voted 1M+

In reality, the definition has been posted in this thread of what i believe rich to be. Like, spending on flashy cars and being irresponsible with money but it having no real impact on your finances.

[kirksnosehair]

@A few people:  Yeah, I think spending goes up as income increases, I don't dispute that at all.  More income offers more opportunity for investment and saving, though.  I don't think it's unusual for those making more money to also start padding their futures.

No, you're right.  In fact, in the last 7 years I've been promoted 3 times at work, and those promotions all included substantial pay increases.  Each year I added a LOT to my 401k contributions and now I am actually contributing the max, whereas when I made less I wasn't contributing anywhere near the max.  My wife and I have also moved a lot of our savings into short-term CDs to try to maximize return while not tying the money up for a long time, in case the right house comes along at the right price.....so the point is, I think you are right that at a certain point, as income goes up, people (at least smart ones) should tend to put more money away for the future.

[Jamesman42]

I voted $100,000 based on what that would mean to me. That would be so much more than I would really need in a year. I have no desire for a big house or fancy car. A decent-sized place to live and a working, cleaned up car+insurance/gas would be the bulk of my expenses.

[Scheavo]

Casually speaking, I'd consider 100k "rich" (so much more than what I make that I really can't imagine), but really, I'd say 250K+. That's a lot of money, even if you aren't aware of it, and you don't have that much left over at the end of the month, becuase you spend more on things you don't need to (because you're rich).

[carl320]

I voted 500k, but then as others have pointed out there are other factors.

it's interesting seeing the wide variations in the answers of this poll.  I think 100k isn't a lot of money, but then I know a few people who make that kind of money and easily see half of of it go to debt payments.  So being rich isn't just what you make or have in the bank, it's how you choose to spend it IMO.

[Jamesman42]

I'm glad I am leaving undergrad school this week with only about 6 grand of debt, compared to what I see a lot of other people leave school with. I also just paid off my car, so no more car payments.

I hate having debt, like anyone else that isn't rolling in money. I plan to start paying off as much as possible once I start my career so I don't have to worry about debts. Only then will I feel sort of "rich," or at least financially comfortable and worry-free in that aspect.

[Riceball]

I went with 500k, a level that I believe a regular household would be able to live reasonably free and easy given they don't go subprime and take out massive loans or anything like that. If my household earned 500k (so we pulled ~7k per week after tax), we would be very comfortable and be able to build up a Chinese-size warchest of savings and investments.

My household is at 110k right now, and living comfortably but by no means extravagently or excessively (have private health insurance, two cars, go out regularly - only middle class staple we don't have is Foxtel). We don't need to borrow any more to fund things like houses or cars, so the plan from here is essentially to start building the empire. Our debt levels are probably around 35% of our income, so not huge but on the larger side I would think. Its a deliberate move, in my line of work its highly unlikely that I will lose income moving jobs, and my wife is in an industry that can reward handsomely if you are committed. And so, assuming things don't turn to shit (you can never really plan any other way, IMO) our living standards will only go up from here.

A doubling of our income would just go to paying down debt and investing, but a five-fold increase...I would consider ourselves rich.

A few broader observations:

 - Rich is a very subjective term. 500k for someone with a propensity to binge spend or be irresponsbile is probably not much, but 500k for someone who is a squirrel would probably be rich.

 - The way I see it, people's marginal propsensity to consume (percentage of additional dollar of income earned that is spent) is very high up until really high income levels. I would say, with little basis, that most households would spend 80% or more of additional income earned right up until you hit the million plus income mark (I'm counting debt repayments as spending here, btw, but not investments or savings). There is always more stuff to buy, and so earning more income doesn't necesserally equate to being "rich".

[kirksnosehair]

That's a good post, Riceball