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Wednesday, March 29, 2017

What is Rich?

Posted by Tim Stobbs on September 19, 2013

I started to write a few replies to comments on last week’s post regarding does an income make you rich and realized rather quickly I had another post on my hands.  Broadly I thought there was some good discussion regarding what people consider ‘rich’ which forced me to ask myself the question: what do I consider rich?

I found that I had a hard time answering the question, because I can only think of one person I know who I would define as ‘rich’ purely because I know the person well enough to know it isn’t a case of more credit than brains.  The person really does have millions in investments and doesn’t need to work, but still often does on a casual basis.

I don’t assume that a fancy house, nice car and buying toys makes you rich.  In fact, the nicer their stuff is the more alarm bells go off in my head that they may have a high income, but no much invested and they may need to work to keep up their lifestyle.  I rather like the picture painted by the book,  The Millionaire Next Door, by Danko & Stanley which showed the vast majority of millionaires live modest life and are careful with their money.

So while I agree with the idea that you have enough assets producing income that you don’t have to work is part of being rich.., it isn’t everything. Thus I will point out that I do not thing that an early retirement makes you rich. The second requirement I would add was enough extra money beyond your  regular expenses to buy what they really want without worrying too much about it.  You can afford a little luxury without worrying about the cost.  It’s not to say that money is never an object and they don’t look for bargains, but rather they have enough money that it isn’t a barrier to their wants that really makes them happy in life.

For example, if a rich person decided they want a new camper they could afford what ever model they liked.  They will still shop around for the best deal and consider they needs carefully, but they would never have the thought “Oh, I can’t afford that model because it costs an extra $50,000.”  Instead, it may be “Mmm, would that extra $50,000 upgrade really be worth it given how much I’m going to use this camper?”

Yet most of all, all your comments showed me to be careful on using the word ‘rich’, as we all seem to define it a bit differently in our own heads.  While it seems everyone would like to be rich, what the actually means to a given person is often different.  It’s based on some logic, but also what makes us feel rich.  Proving again, the how you feel about your money can often be just as important as your net worth.

So what makes you feel rich? In my case two items: nice glassware and plates, but also good wine (not expensive, but good…I’ve had some excellent $10 bottles that I prefer over $40 bottles) make me feel rich.  So yes, on a random Sunday we will break out the china plates, because I just like the feeling of eating off it.

Comments

9 Responses to “What is Rich?”
  1. Kestra says:

    My husband and I like to throw around the term “we’re rich” at each other for a couple reasons. 1, to remind ourselves how lucky we are to be Canadians with above average incomes and no particular financial troubles. 2, to allow ourselves to make the occasional splurge purchase without feeling guilty about it.

    For the average working person, who isn’t mega-wealthy or early retired, I agree with your definition that being rich is being able to afford some luxuries without it affecting your bank accounts, savings or retirement plans overmuch. Absolutely, we still think about whether we will use the item and whether an extra cost is justified, but we don’t have to think about the cost itself. We can also say “yes” to each other all the time. I kind of cringe inside when I hear one part of a couple, who I know to be around the same income level as us, talk about a purchase that the other half of the couple shouldn’t have made, or they don’t like, or they can’t afford. My husband can and should buy whatever he wants. He’s a reasonable adult and knows what he is doing. He thinks the same about me. That is being rich.

  2. Goldeneer says:

    Some of our family sees us as rich since my husband retired in his 30’s to be a SAHD and I’m 4.5 years away from my retirement. On more than one occasion, family have asked us why we don’t spend frivolously on stuff and restaurant outings because “we are rich”. According to their baby boomer views, being rich means buying the fancy clothes and going out to eat most of the time. Those are values we don’t care for.

    We live in a small modest house with nice furniture that we plan to have for a very long time. We have one fancy car which is soon to be replaced with a frugal one. I cook better food than I can eat at most restaurants therefore there is no appeal to eating out. We cut back on alcohol for health and frugal reasons.

    Neither of us feel rich with the $250/mo discretionary budget that we each have but we know we are incredibly fortunate to live in Canada and have the life we want. I feel that $1000/mo could buy me most of the experiences I want.

    Being rich is a continuum. If most people I knew lived on minimum wage, we would be filthy rich. Compared to my peers, we are better off than most without having more discretionary income than them since we scrutinize every purchase and make our dollars stretch.

  3. Lambert Cook says:

    Being rich to me means having the time to do the things I want with friends and family, and knowing I’m cared for. Being rich also means being healthy to me.

    Can have all the money in the world, but if you don’t have your health, then it really doesn’t matter.

  4. Daniel says:

    I think Jean Jacques Rousseau had an interesting definition of wealth and poverty.

    He said being rich or poor is relative – not relative to others as much as relative to your own desires. Each time you are happy with what you have, you are rich. Each time you wish for more, you are poor.

  5. jon_snow says:

    I will consider myself rich when I can wake up in the morning without the cacophony of my alarm clock, and do whatever makes me happy on that particular day. My net worth is creeping close to 2 million, yet because I am mandated to get up at 5am and go a job that is devouring my soul, I actual feel “poor”. Hard to explain, really. I guess my rich/poor criteria favours fulfillment vs $$$$. When I ER, I wonder if I will magically feel happy and “rich”. I tend to think so… my wife often comments that I am completely different guy when we are on holidays… I am giving ER a trial run next year (going to ask for 6 month leave from work, if things work out well, I won’t be going back… EVER).

  6. deegee says:

    One requirement of my ER plan I was devising back in 2007-08 was that my day-to-day lifestyle would not change after I stopped working. Another was that I would have enough of a cushion or surplus of monthly income over my monthly expenses to not have to worry about small, unforeseen expenses. But yet another requirement, which is what Tim referred to in the 4th paragraph of this post, was that I would have a “slush fund,” or “super-cushion” of money I could tap into for any large expenses. While I have not had to tap into it for any really large expenses, I know that if I need, say, $20k, to do something or buy something, I know I can swing it without busting up my ER budget. It is that additional big blob of money sitting out there, earning interest (even if it is only 2.5%), which makes me feel rich.

  7. Be'en says:

    Rousseau’s definition is amazing!..

  8. periodic poster says:

    In a purely Capitalist sense, if rich is equated to financial independence, that would mean having so much CASH you no longer had to rely on ANY form of income/assets — employment, rental units, stocks, pension, etc.

    Sure you would lose gobs of purchasing power over the years, but so what. Look at that Facebook guy, his richness fluctuates by billions every month!

    In a more general sense, I relate very much to jon_snow and his situation.

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