AJ: I often wonder how my ten-year-old self would have responded to big life questions like: what does it take to feel wealthy? I feel confident that without a true concept for what things cost and without an income all my own it would have been a number that would now seem absurdly low. When I read what it takes to feel wealthy from CNN Money about the threshold at which millionaires deem themselves wealthy I honestly wasn’t surprised. When I think of wealth I think $20 million+, a point at which one could live reasonably without ever bringing in another dollar for the rest of their life.
When you pit this line of thought against the Washington Post article reviewing the actual median household income in the US in 2013, it’s absurd! $51,404 is a far cry from ever being able to build $5 million, but is certainly more than enough to live comfortably.
KJ: What I’ve learned over the years is that it is seldom about how much money you have and more about what you spend. However you may define “wealthy” – whether that’s never having to work again, having the freedom to do the things you want without stopping to wonder “do I have enough”?, or getting to a point where you only have to work part-time – the reality is it is quite a subjective discussion. If you plan to save up enough money over time to only spend the “earnings” and to leave the “principal” untouched, then consider that a traditional rule of thumb is that you can spend about 3-4% of the value of your savings each year. As in, for every $100,000 of savings, you may be able to rely on $3,000 – $4,000 of income per year – though that’s a far cry from what you actually CAN earn in today’s low interest rate environment. This can vary greatly based on your goals, investment strategy, and time-horizon, but you can see the point.
So take some extra time to think about what it means to you and set the line in your scope, so you can start heading that way. What’s your “wealthy” number…$500k, $1 MM, $5 MM, $50 MM, or $1 BN? The sky’s the limit.
- How do you define wealth?
At what point would you truly feel wealthy?
Are you where you thought you would be?
What have you done lately to try and get there?
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