How Much Money to Be Wealthy?

by Michael on Aug 2, 2013 · 3 comments

Scrooge McDuck Swimming in Gold

According to a recent survey of affluent investors by UBS, a full 70% of those with assets (excluding the house) worth $1M or more don’t consider themselves to be wealthy.

At what point do people start to feel wealthy? Well, it seems that it’s not so much about having a certain dollar amount.

Rather, people don’t start feeling wealthy until they stop having “financial constraints” on their activities. And, apparently, it’s not until people reach somewhere in the neighborhood of $5M that these constraints go away.

$5M? Seems rather steep to me. That being said, if you define wealthy as being completely free of financial constraints — and if you’re intent on keeping up with the Joneses — then I can see how that number would grow.

I also think that this answer is influenced by something that I’ll refer to as “never enough syndrome.” If you have (say) $10k, then $100k seems like a lot. At $100k, $500k becomes the new goal. At $500k, you’re still not a millionaire.

What about when you reach $1M?

Well, even after you’ve reached millionaire status, you’re still not swimming in a vat of gold coins like good old Scrooge McDuck. Thus, you still need more. $2M? $3M? How much will it take? For many, the answer always seems to be more.

I guess by the time they reach $5M, people have started reached the point at which the marginal utility of that next dollar is small enough that they can start relaxing and being (more or less) content with what they have.

Interesting stuff. What about you? How much money would you need before you’d start considering yourself wealthy?

1 Leigh August 2, 2013 at 10:28 am

It also depends on how old you are and your general life situation. I am in my mid-twenties, earning in the high $100,000 range, and have a net worth flirting with $300,000. I feel wealthy for a 25 year old, but if I was 35 years old and in this position? I probably wouldn’t. As a single person, I would be plenty happy with an investment portfolio of $1M and no mortgage – I’m not sure why people feel they need $5M. $1M would be more than sufficient to cover my needs, even at < 3% SWR.

2 Chris August 2, 2013 at 3:21 pm

I think you are right – enough is never enough. When my household hit $500k, we celebrated, but then strove forcefully for the next level. Then when we hit the $1M mark, we had a better celebration, but still continued working for the next milestone. I don’t have a specific number I’m gunning for, I just want to accumulate as much as possible. We feel wealthy because we live well below our means and can have anything we want within reason – and thankfully money creates no stress in our life. The largest stress is ‘ which account do we feed next?’ Its been pretty stress-free so far with the high-flying markets and my business running strong. I just want to have enough to not have to worry about ANYTHING when my wife retires hopefully around 55.

3 getagrip August 5, 2013 at 8:57 am

I’ve said it in other forums, but I’ve gerally found that most people, regardless of their salary, tend to think the guy making double their income is well off, and the one making more than five times their income is rich. That seems to be playing out here as well.

I agree with point about the “where you are at in life” as well. When I was young I thought if I hit the equavalent of a $50K a year salary I would be on easy street. Now with kids in college and closing in on retirement, that inflation adjusted value doesn’t seem like much at all.

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