Put a Dollar Figure On It

There’ve been all kinds of articles lately about how $250,000 isn’t rich, and lots of arguments about what is and isn’t middle class. In fact, I’m not sure people even agree on what’s considered poor.

None of that is really surprising, since in many cases it’s a matter of perspective and who you’re comparing yourself to.

But I wanted to have a little fun today, if you’ll play along with me.

Let’s put a dollar amount on these terms in our own lives. Feel free to add why you put what you did too, if you want.

So in the comments, answer these questions:

    • Ignoring salary for a minute, how much in cash equivalents (cash, stocks, bonds, and precious metals) would you have to have stashed away to consider yourself rich?

 

  • How much of a household income would you have to make annually before you’d consider yourself rich? And poor?

I’m curious how all over the place we might be. My answers will be in the comments in a bit.

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13 comments

  • Cash equivalents: $500,000 (because I could absolutely live off what it earns with money leftover)

    Rich household income: $100,000
    Poor household income: $8,000 (because I’ve lived on less)

  • I think it depends on what you need for your quality of life. If you feel like you need a nice house, cars, boat, vacations, etc. Then $250,000 isn’t enough money. But if you need a good family, friends and some cash to go on some fun adventures here and there $250,000 seems like a lot of money.

  • The easy answer is just naming a figure. At this point in my life, annual income of $500,000 and $5 million in assets would certainly make me feel wealthy. Taxes will take about half of the annual earnings, so $250K after taxes would make me feel wealthy. If my $5 million yielded 5%, it would equal $250K.

    • Hm, I don’t know that it’s necessarily easy. At least not if you’re trying to figure out the minimum amount that you think of as rich, or the maximum amount you would consider poor.

  • kh

    Oh this should be interesting. :)

    Ok, first of all, I define rich or wealthy as not having to actively work for my income – no 9-5 grind for a paycheck – and still be able to live a comfortable (but not excessive) lifestyle.

    At this point in my life, to live where I want to live and do what I want to do, I would consider myself rich at an income of $100,000 after taxes. (Keep in mind that i’m a single woman with no children or dependents.) That would let me live where I want to live, do a little traveling, pursue my interests, help out friends and family, etc. I wouldn’t live the lifestyle of the rich and famous (TM), but I could pretty much do what I wanted to do and not worry about money.

    Working backwards from that, in order to achieve $100k, I’d have to have somewhere between $3-$5 million, depending on what kind of interest/dividends I could get in order to make my $100k after taxes.

    Of course there’s all kinds of commentary there about what’s comfortable vs. excessive, too! :)

    • I like your definition of rich a lot. Although based on that, I’d have to revise my annual “rich” income down quite a bit — which isn’t a bad thing!

  • Rob

    I agree with kh. There’s wealthy and then there’s WEALTHY. If I can get to a point where my passive income can cover my basic expenses (food, shelter, bills, and some luxuries with a little left over) then I’ll be happy. If I need extra money, I can still work. But not having to rely on a job to survive would give me the freedom to work on the things I want to work on and do it on my terms.

    What number do I need? Depends on whether you’re talking about my expenses today or my expenses ten years from now.

    Right now my monthly bills come out to about $2400. That covers my student loans payments, my share of the mortgage and utilities, and discretionary spending. So to meet my monthly expenses I’d need about $60,000 in income ($30,000 after taxes.) Assuming a 5% return, I’d need about $1.2 million in assets. Not impossible, but difficult.

    If you remove the debt that I’m working toward retiring, namely my student loan and mortgage debt, my expenses will drop down to around $1600. The amount of money I spend getting to work would be replaced and then some with providing my own insurance. I can probably drop that down to $1500 with budgeting. I’d need income of $36,000 before taxes. That will bring my number down to around $720,000. A much more doable number than $1.2 mil.

    That being said, there also needs to be a cushion for inflation. Each year, I’ll end up losing some value on my assets that will need to be replaced with returns. Because I don’t want to do anymore math, I’ll say either $1.4 mil with current debt or $850,000 with little to no debt.

    This is a great topic. I think I’ll do a riff on my blog (with attribution, of course.)

    • Glad you like the topic :)

      That’s pretty much how I came up with my $500,000 in cash equivalents number — based on bare-minimum monthly expenses plus a little cushion.

  • Kim

    First let me say that we are all wealthy. Even today with my debt and it is significant, I am wealthy. It takes me 1500.00 to pay all of my living expenses with out debt a month. Now factor in travel and a fun life style, by this I mean a couple trips a year. Also the freedom to spend time with family and I think if I have a savings of $300,000 I could make it. I can always find a way to earn money unless I am bedridden then does it really matter?

  • Jackie, my totals are the same as yours, except I would kick the low up to $19,000, ‘cuz I live in uber expensive Southern California.