After reading an article on Yahoo Finance, Study Finds Only 28 Percent of Millionaires Think They’re Rich, my first response was, “Well, duh!” It takes a great deal more money to live today than back in the sixties/seventies/eighties when $1 million offered a comfortable lifestyle. Why would anyone be surprised to find out that people with $1 – $5 million don’t consider themselves rich? Because it would take most of us with a median $51,500 salary years to accumulate such wealth.
“Rich” in this article is defined as having no financial constraints on what you want to do, and even $5 million won’t allow me to maintain a comfortable two bedroom flat in any major city of the world without financial concerns. Granted $5 million will probably allow me to live in modest comfort for a time. After all, if my imaginary $5 million earned a feasible 2 percent income per year, I would have an annual income of $100,000, but any significant outlay–medical, home, or children–would jeopardize this comfort quickly.
This brings me to a very important point. The article pointed out that most people consider wealth as a stream of income, as in Pride and Prejudice where the wealthy Mr. Darcy is described as having an income of $10,000 per year, not a pool of assets whose value can change at any moment. This makes sense to me because I for one have never felt wealthy owning our modest house. It’s hypothetical selling price isn’t an income and it comes with a mortgage–a significant expense in our monthly budget.
Another good point found in this article is that $5 million goes a lot further in Keokuk, Iowa, than New York City. Ultimately $5 million is only worth the goods and services it can purchase and people with $5 million in rural America probably have greater financial peace of mind than those with $5 million in a major metropolitan area. In the end, we must tame our never ending desire for more if we are to consider ourselves wealthy. After all, according to a Time Magazine article, once we reach an income of $75,000 annually, further increases in wealth don’t translate into comparable increases happiness.