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.