Wealth is a subjective concept. For example, if a minimum wage worker suddenly starts earning $137,000 a year, he or she may feel wealthy. But it's also the same amount that the South China Morning Post estimates Jeff Bezos pays every day just to keep his yacht running.
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The average annual income for the top 1% is $1,316,985, according to the Economic Policy Institute, but most people would probably feel like they're in a comfortable city for much less.
To get the perspective of people who handle money for a living, GOBankingRates asked financial experts how much money they need to feel rich. Here's what they said:
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$5 million has a nice ring to it.
According to research by Charles Schwab, Americans believe they can become rich when their net worth reaches $2.2 million, but money professionals need at least twice that amount to feel like they're in the big leagues of finance. He says he needs the amount.
“I think a net worth of $5 million and an annual income of $300,000 gives you the financial foundation to feel wealthy,” says Insight Accounting, which provides estate planning, accounting, tax and financial advisory services. Vader Chaudhry, principal of .
But Chaudhry acknowledges that $5 million or any number is arbitrary, and that “rich” is more of a feeling than a dollar amount.
“True wealth comes from achieving a harmonious balance between financial security, personal fulfillment, and the ability to pursue meaningful experiences,” he said. “Through prudent investing, asset diversification, and careful financial planning, individuals can achieve a sense of abundance and satisfaction that goes beyond mere financial numbers. is the true definition of feeling wealthy.”
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Not too shabby for $3 million.
Andre Disselkamp, co-founder of Insurance, which advises international companies on corporate pensions, echoed Chaudhry in that the feeling of being wealthy cannot actually be quantified. I agree.
“That said, to give you a hard number, a net worth of $3 million, diversified across various asset classes, feels like a safe starting point,” Disselkamp said.
He arrived at this number using the 4% rule, a common guideline in retirement planning for determining a sustainable annual withdrawal rate.
“At $3 million, that's $120,000 a year, or about twice the average household income.” [was] It will also be available in the United States in 2022,” Disselkamp said. “In terms of income, I think if you have around $250,000 in passive income per year after taxes, you could start to feel wealthy.
It's important to focus on passive income because it represents financial resources that are generated without active labor, often through investments or business ventures. This amount allows for a comfortable lifestyle while providing additional funds for investments, savings, and luxuries. ”
$12,500 per month is enough if it comes from income-producing assets
Like Disselkamp, Lee Bush, a registered investment advisor and broker known on social media as “TeacherMoney Lea,” prefers to invest in wealth-producing assets rather than a large net worth or high income that could evaporate with job loss. Priority is given to stable residual income.
“For me, wealth is embodied in cultivating cash flow assets that generate a steady income of $12,500 per month,” she said. “This concept is called wealth equivalence. My personal definition of wealth is an annual income of 150,000 yen that is above the norm and that ensures a life free of inflation fears, excessive taxes, and excessive monthly savings goals. This approach resonates with the lifestyle I have chosen and fosters a sense of true abundance.”
It really depends on where and how you live.
Like anyone in any profession, financial advisors apply different amounts to the concept of wealth depending on where you live.
“Someone living in a big city might think they can get by on a six-figure income, but someone living in a small town might think that's quite affluent,” says Dennis of City University. Professor Sirshkov (Finance, Economics, Accounting) says. He lives in New York and is the head of content at Awning, a site that helps people support their retirement through real estate investing.
But lifestyle is just as important as location.
“For me, it's not necessarily a fixed number,” Shirshkov said. “It's the ability to comfortably meet my needs and some of my desires. And I know I'm not alone in feeling this way. Regardless, I've worked with clients who don't feel wealthy due to their expenses, lifestyle choices, or other factors. I’ve seen people who feel extremely wealthy because they live within their means.”
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This article originally appeared on GOBankingRates.com: I'm a Financial Advisor: This is how much money you need to feel rich
