Since When Did I Become Rich?

I’m rich! But no one told me until I read the latest information in the National Household Survey results this week.  If I may quote the information release:

According to the 2011 NHS, 10% of Canadians had total income of more than $80,400 in 2010 — almost triple the national median income of $27,800. To be in the top 5%, Canadians needed to have a total income of $102,300 and to be in the top 1% required $191,100, nearly seven times the national median income.

Since my current income (including employment, the small business and investments) is right around the $102,300 threshold I apparently make more than 95% of the population in Canada (give or take a a percent or two).  So that makes me rich right?

While as I look around my house and talked with my wife, we both had to agree if what we are living is rich, then I want a refund.  I live in a middle class house, in a mixed income neighborhood and we have a few toys, but I don’t own or do much which I would consider being a luxury lifestyle.

Being rich in my mind assumes that you are actually spending all that money in a given year, which granted if I did spend it all would improve our standard of living, but not that much.  We currently spend between $35K to $45K per year (the spread has to do with how many extras we do in a given year like our $7.5K month long trip this year to the East Coast this year).

So yes I can afford a second car, second home (or a much bigger primary house), a cleaning staff  and the high life….just one problem:  I don’t want it.

Instead I want more time to play with my boys, more time to read and write, the freedom to take a random Friday off to just wash the car and goof around.  I want to be independently wealthy with a modest lifestyle, screw being rich.

So do you agree that measuring your income is a poor way to determine if you are rich?  Or how do you define being rich?

15 thoughts on “Since When Did I Become Rich?”

  1. The measure of ‘richness’ by definition is “Having a great deal of money or assets; wealthy.” Your income has nothing to do with that. Income is only what comes in. It has nothing to with what you have. If you spend it on things that are not assets or assets that depreciate then you are not rich. I like to think richness is a measure of how much you keep. I could have a million dollar income and only keep $20. That is not rich, that is ridiculous. I spent a million dollars on nothing (well atleast when it comes to assets). I may be rich in experiences (travel, events, shows, concerts) but have no measurable assets to point to. By the way the richest people you know may very well be your neighbors. Especially when it comes to assets. The big one is whether you own your house or not is in my opinion the biggest measure of richness. Just because it isn’t shiny and new doesn’t make it a great asset when you owe $500,000 on it. I can’t remember the company of the commercial where it shows their number in a green bubble over their house for what they save by having on company for car, house and other insurance. I just wish in real life we could see the net worth number over the guy driving the mercedes with the huge house on the corner. I often wonder if it is actually in the red (-negative) but he is outwardly project that he is loaded. He may be perceived as being rich when in actuality is far from it. Oh to know all the facts. Wouldn’t that be nice. Thanks Tim you are doing a great job.

  2. Long time reader – first time poster. Love your site and richness to me is measured in time. Not having to be working when I really want to be doing other things is my definition of riches. FI is just a tool to get there and well on my way.

    Devin – the video I think you’re recalling is from Lending Tree just before the US housing market imploded.

    http://www.youtube.com/watch?v=r0HX4a5P8eE

  3. I always thought of monetary richness as what you are bringing in every month/year. Monetary wealth is how much you have saved/invested.

    So, yes, even if you don’t spend much you are rich. You may not feel rich but that doesn’t stop you from being rich. Just live in the shoes of someone making the median income (which you spend more than) – then you might feel monetarily rich because you do not need to make decisions like, “Can I afford to buy this?”

    Granted there is life richness. Like the couple that lives in Alaska and will go on a month long backpacking trip with their toddler. They may not have money (or maybe they do, I don’t know) but they are doing what they love and, therefore, are rich in life. Of course, you can be both.

  4. I felt richer when I had accumulated enough investable assets so I could work less and REDUCE my income, first from full-time to part-time in 2001, again in 2007 when I cut my hours and income again, and in 2008 when I was able to retire completely and earn zero wage income because I had become FI.

  5. If someone were to look at our financial information, considering our age in our early 40’s, they might very well say that we are “rich”.

    Yet, we drive a 13 year old vehicle, live in much less house than we could afford – really, we have very little to show that we are even in the same ball park as the “Joneses”.

    I know that if we had lived up to our income, and looked the part of being “rich”, we would in reality be much poorer, and my ER plans would be a whimsical fantasy.

  6. Firstly, I don’t think being in the top 5% of income would be a definition of ‘rich’, even if you were considering income as the only criteria. Perhaps if you are in the top 1% income you could live the lifestyle of the ‘rich’, but you’d be spending all your income to support a ‘rich’ lifestyle, and end up asset-poor.

    To my mind a better definition of ‘rich’ is having a net worth that puts you in the top 1% of the population, as from that you could derive an income stream independent of your work income sufficient to support a very comfortable lifestyle.

    Then again having a top 5% income in Canada, the US, or Australia definitely makes you ‘rich’ compared to the vast bulk of the world’s population. So, yes, you are ‘rich’ even if to you it doesn’t feel like it 😉

  7. I find it fascinating that people that are rich don’t like to consider themselves rich. Let’s face it, there is nothing wrong with being rich! Sorry to burst your bubble, but it is OK. If you spend as much or more money as those that are in the median income and you make more than 3 times the median income then you are rich! And it is OK that you are rich. There is nothing wrong with that!

  8. A book I read mentioned that the yardstick for measuring how poor or how rich a person is taking a look at how many paychecks away a person is from poverty. Make a hypothetical assessment of how long you will last without any income. If you can only afford to provide for basic sustenance, at the same time maintain your current lifestyle, for a short period of time (e.g. 1 – 2 years), then you are not rich.

  9. ChrisG, does that mean selling every asset you own (real estate, stocks etc) and then living on the proceeds? If that’s the case, and assuming that my wife and I could live on 24k per year (we could if necessary), our money would last 70 years. According to this method of determining “richness”, I guess we are loaded. Although living on 24k in the most expensive part of Canada, we would likely look poor.

  10. jon_snow, this is why I specifically said “maintain your current lifestyle”. “Richness” is really very subjective. You can decide to live on $100k per year and feel rich but the guy next door accustomed to living on $150k a year might feel that living on $100k a year is being frugal. I think a person should define his/her own “rich” lifestyle instead of letting society define it for him/her. 🙂

    And No, you don’t need to sell your assets. To be rich, one doesn’t have to be fully liquid. If your assets (e.g. rental properties, stocks that pay out dividends) is a source of regular income during retirement, why sell, right? You are rich when you can buy big ticket items without having to worry about when you’ll be able to pay them off.

  11. jon_snow, in my original post, when I said “without any income”, I meant “not having a 9 to 5 day job”, whether working for someone or operating a business. In short, during retirement.

  12. You have the choice to be able to buy those things without going into debt, which is by my definition, someone who is rich.

    Someone who doesn’t even have the choice (or the luxury) to say: I COULD buy that but I don’t WANT to, is someone who isn’t as rich as you are.

    I (right now) by my stats, make an average of $70K a year over my working career, but I work less than 50% of the time. That to me, is the ultimate balance in defining whether I am rich or not.

  13. I think everyone defines “rich” differently depending on your values. Some value big houses and fancy cars as indicators of richness. Others value time and experiences as their indicators, its not as visual to the average passerby but the richest people I know are the ones who can afford to spend as much time as they want doing the things they want.

    This is how I personally feel rich and its a discussion we have with our kids all the time. We have no real debts and an abundance of free time so we can spend all the time we want together (my wife homeschools our kids and I work at home about 35 hours a week with about 2 + months of vacation). We could go out and buy a fancy new car or a bigger house but we’d rather spend our time together than working more.

    Time is more valuable than material possessions and the freedom of doing what we want with our time is what makes us rich.

  14. I always thought of someone as rich as someone who can do what they want, and is happy with what they have.

    So yes technically that could include homeless people, but I think deep down they probably aren’t happy with what they have.

    So I’m halfway there (happy with what I have) I just can’t do what I want, like retire, or not work… not yet anyway. Working on it.

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