As you work diligently every day, manage your debts, and actively save money, you may eventually ask yourself: how much money do you need to be considered wealthy? And what are the indicators of wealth?
Renowned yet controversial podcaster Joe Rogan once said, feeling economically “successful” is when he has enough money to go out for dinner at night without feeling guilty or pressured about expenses for the next day.
Rogan’s net worth is currently estimated at 200 million US dollars, which may not be as significant as Elon Musk’s wealth, but it still makes him wealthier than most people.
The key lies in the subjective perception of wealth by individuals, which can stem from various aspects. In a country where over half of the six-figure earners are living paycheck to paycheck (the US), how do you know if you are wealthy, or at least wealthier than you might imagine?
Gobankingrate website has compiled seven key signs indicating that you might be wealthier than most Americans.
Salary plays a crucial role in wealth accumulation.
“The median household income in the US is approximately 75,000 US dollars,” stated Joel Ohman, a registered financial planner and CEO of Clearsurance, to Gobankingrate website. “So, if your income exceeds this figure, you are above half of the population.”
Ohman emphasized that how much wealth can be accumulated with a 75,000 US dollars income depends on the cost of living in the area.
Due to significant differences in living costs across regions, the Median Income (AMI) of an area serves as a more accurate standard for measuring wealth.
Even with substantial income, if expenses surpass the income, wealth accumulation is not possible, and many high earners seem to be living paycheck to paycheck. Therefore, a more accurate measure of wealth is the balance in your bank account.
“If your income is above average and your savings are four times your annual income, and you’re just in your twenties, then your financial situation is very good,” Ohman remarked.
The benchmarks set by Ohman are quite high. The standard guideline suggests saving according to age: save the same amount as your annual income at 30, three times your income at 40, six times at 50, eight times at 60, and ten times at 67 years old.
Multiple studies indicate that over half of Americans have not achieved these goals. Therefore, even if you can reach the savings goal within ten years, it can place you among the wealthier half of the population.
Financial experts like Ben Richardson, a capital market advisor and director of Acuity Training, believe that if “you’re not being suffocated by debts or massive bills,” you are wealthier than you think.
“‘Wealth’ has a different meaning for everyone,” added Kendall Meade, a registered financial planner at SoFi. “For some, it may simply mean being able to comfortably afford their lifestyle. For others, it might be a specific target salary or savings amount. And for some, it could mean having the freedom to change careers or leave the workforce entirely.”
“In the current economic situation, along with inflation, many families are living paycheck to paycheck, having to anticipate when the next paycheck will arrive to ease their financial burden,” remarked Richardson.
“You have saved enough funds for retirement, no longer worry about emergency fund issues, or have reached the savings goal,” Richardson continued.
This means you have extra money to invest.
“If some people work two jobs to make ends meet, but if you have enough money to invest or use for passive income at any time, the situation is different,” Richardson added.
“Vacations can be seen as a luxurious lifestyle, especially international travel,” Richardson highlighted.
People without savings or living paycheck to paycheck may dream of going on vacation but can’t afford it. However, if you can effortlessly book flights and hotels without worries and cover all expenses, you might be wealthier than you think.
“If you can purchase luxury items without tapping into savings, you might be wealthier than you think,” said Richardson.
As Joe Rogan said, even if you don’t have a high disposable income, being able to dine out without worrying about the bill can make you feel wealthy.
Wealth is subjective, and some indicators suggest you might be wealthier than you imagine, but quantifying it isn’t easy. How can you shift your perspective from being in the red to being affluent?
So ask yourself: What’s your income? How much is in your bank account?
In the simplest terms, the answers to these two questions will determine your relative wealth compared to others.