Discussing the topic openly can be uncomfortable. But you’ve probably wondered who qualifies as truly wealthy and whether you fit that definition (or ever will). According to Schwab’s 2022 Modern Wealth Survey, the average American thinks being wealthy means having a net worth of $2.2 million. However, wealth doesn’t have a universal definition. Just as beauty is in the beholder, being wealthy depends on your personal definition and circumstances. Here’s what to consider when determining whether you’re wealthy, and what most people consider wealthy.
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How much money do you need to have to be considered rich?
Schwab’s research showed that Americans’ perception of wealth is $2.2 million. This number is an increase of $300,000 over the results of last year’s survey.
Furthermore, statistics show that the top 2% of the US population has a net worth of approximately $2.4 million. On the other hand, the richest 5% of Americans have a net worth of just over $1 million. Therefore, about 2% of the population owns enough wealth to meet the current definition of wealthy.
That said, Americans’ feelings about wealth go beyond dollar figures. For example, the study found that more than half of the country’s workforce would take a lower wage to work for a company that aligned with their values. Additionally, nearly 90% of workers want fulfillment in their work and align their careers with their beliefs.
As a result, even though Americans have a certain dollar amount to be wealthy, they hold their principles in the workplace just as dearly, even going so far as to take a pay cut to work for a company that resonates with their ideals.
And because being rich is subjective, some Americans may also believe that being financially comfortable is the same as being rich. Specifically, participants in Schwab’s survey reported that a net worth of $774,000 or more means they feel comfortable. Therefore, you may have a lower goal for what it means to become rich – it depends on your lifestyle and financial priorities.
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Factors that determine whether you are rich
Because the dollar amount regarding wealth is subjective, you can analyze your financial situation in multiple ways to determine if you are wealthy. Different facets of beliefs about wealth include:
You can save
A rule of thumb for accumulating wealth is to spend less than you earn. In other words, if you can pay your monthly expenses and put your excess income into a savings or investment account, your net worth could be in the millions within a few decades. As a result, financial habits such as budgeting and goal setting are essential to becoming wealthy, regardless of the amount of money you have in mind.
You live below your means
Fintech company LendingClub recently reported that nearly two-thirds of Americans live paycheck to paycheck. This financial approach can be stressful and unsustainable, and is unlikely to save you a significant amount of wealth. Monthly budget cuts – whether you reduce your monthly subscriptions or eat at home more often – can help you create room in your budget to save money and pay for necessities. Moreover, you are prepared for financial emergencies.
You can afford the things you want
If you save money and live below your means, you can probably afford whatever you want. Whether it’s a new car or a cruise in the Caribbean, setting a financial goal and achieving it requires wealth-building habits. So being financially able to achieve your short- and long-term goals is a sign of wealth.
You are motivated by the life you want, not by money
Your ideal life might look like running your own small business. Or it could mean paying off your debts and saving a certain amount each month for retirement. But whatever your vision, it’s more important that you just have one. In other words, your motivation is fundamental to becoming rich. Greed is not enough fuel to make tough financial decisions. From limiting luxuries in your budget to taking business risks, your choices will be strongest when they come from your vision for your life.
You are on your way to getting the retirement you want
How much you need to save for your retirement can be difficult to determine. But once you’ve determined your retirement goal by consulting a financial advisor or estimating your expenses in your golden years, it’s critical to start saving now. Being rich means preparing for retirement with a solid financial foundation.
You know that money is a tool, and not your enemy
Financial problems can create the perception that money is your problem. Unfortunately, this mentality can keep you from the reality that money is your path to a better life. For example, if you’re living paycheck to paycheck and have serious credit card debt, thinking about money may be the last thing you want to do because it’s so stressful. However, avoiding this topic will prevent you from becoming debt-free.
Instead, set a small goal, such as spending an extra $25 per month on the debt with the highest interest rate or lowest balance. This approach helps you see that money is not your enemy – it is your means to building a better future.
You have options
Wealth means flexibility in facing life’s challenges. For example, you may want to take a few months off work to have a new child. Or you may want to fund a business idea with your savings. Either way, a surefire sign that you are wealthy is exercising options to improve your life, learn a new skill, or expand your wealth.
For help determining an appropriate strategy for your financial goals, contact a financial advisor.
In short
Being rich currently means you have a net worth of around $2.2 million. However, this number fluctuates over time and you can measure your wealth based on your financial priorities. As a result, healthy financial habits, such as spending less than you earn, are critical to becoming wealthy, regardless of your definition.
Tips to understand your wealth
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A financial advisor can assess your finances and help you create a wealth-building budget. SmartAsset’s free tool matches you with up to three vetted financial advisors serving your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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Some of the world’s most famous entrepreneurs started with a few dollars in their pockets and dreams for the future. But they didn’t get rich overnight. Follow in their footsteps and use this guide on how to build wealth.
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Have an emergency fund on hand in case you encounter unexpected expenses. An emergency fund should be liquid – in an account that is not at risk of significant fluctuations like the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. But with a high-interest account, you can earn compound interest. Compare savings accounts from these banks.
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