What is Rich?

I have officially blogged about the HENRY lifestyle for a year now! If you are new here, HENRY stands for (High Earners Not Rich Yet) and you can read more about them here

Throughout the time I have blogged about HENRYs, I  have confronted lots of “aha” moments from people realizing that they are also HENRYs. Conversely, others have disparaged HENRYs both in the press or on my social media. Their criticisms are often fueled by inaccuracies or misinformation. 

Thus, I am starting a new series aimed at discussing thorny topics that impact the HENRY lifestyle. Those include passive vs. active income, generational wealth, financial freedom, and many more! 

I will also be continuing the conversation on allocating money for fun activities and sharing noteworthy places and things.

First topic we are tackling is: What qualifies as rich? 

What do Americans Consider Rich? 

According to a recent poll by Seniorliving.org, Americans said that you need a net worth of at least $2.3 million to be considered rich. For those still working, poll participants said that an annual salary of over $300,000 qualifies as rich. 

Additionally, according to Schwab’s 2019 Modern Wealth Survey, an annual examination of how 750 Washington, D.C. locals think about saving, spending, investing and building wealth, the following question produced an interesting response:  If I had a Million Dollars (Would I be Rich?). 

According to the survey, D.C. residents believe it takes an average $3.0 million in personal net worth to be considered “wealthy” in their area. That’s more than 30 times the actual median net worth of U.S. households, according to the Federal Reserve’s Survey of Consumer Finances released in 2017.  

For additional context, here are the results for other major cities: 

  • According to the survey, New York City residents believe it takes an average $3.2 million in personal net worth to be considered “wealthy” in their area. That’s more than 30 times the actual median net worth of U.S. households, according to the Federal Reserve’s Survey of Consumer Finances released in 2017.
  • According to the survey, Boston residents believe it takes an average $2.4 million in personal net worth to be considered “wealthy” in their area. That’s more than 24 times the actual median net worth of U.S. households, according to the Federal Reserve’s Survey of Consumer Finances released in 2017.
  • According to the survey, Atlanta residents believe it takes an average $2.8 million in personal net worth to be considered “wealthy” in their area. That’s more than 29 times the actual median net worth of U.S. households, according to the Federal Reserve’s Survey of Consumer Finances released in 2017. 

Important Numbers 

Here are some numbers on U.S. households for additional context. The IRS says that taxpayers making $480,804 or more are the top 1% of income earners. Those making $40,078 are in the middle, whereas in 2019 a family of four making $25,750 is at the poverty threshold.

Further, the Pew Research Center defines the middle class in the United States as people earning two-thirds to twice the median household income, which was $60,336 in 2016. That means that for 2016 middle class American households were earning about $40,425 to $120,672 that year.

What Being Rich Actually Means

Unsurprisingly, there is no consensus on what being rich means. For example, while 81.2 percent of those surveyed in the Seniorliving.org poll thought that being rich is defined as having a lot of money, “71.5 thought assets including homes, cars, and jewelry, were the true marker.” For others, being rich was more of a state of mind. Specifically, “not having to stress about how much things cost, being able to buy whatever you want, or being able to travel without any financial stressors.” For those that fall into the latter category, being rich is more about the lifestyle and freedoms money can bring. 

How does this impact HENRYs?

HENRYs typically make between $100K and $250K, but have not amassed investable assets of at least $1M. More information on HENRYs here.  Thus, HENRYs may not technically be rich yet, but they have the potential. For this reason, the “YET” part is my favorite component of the HENRY definition because it alludes to a possibility –– whether it means having certain material markers or the freedom of not worrying about money. 

Further, based on my own experience building wealth, generational wealth goes beyond relying on one’s salary. Instead, having multiple streams of income,  passive income, and assets that do the work for you are the keys to achieving financial goals. 

Conclusion 

Ultimately, the difference between being rich and being wealthy is something I have thought about for much of my adult life. Some would argue that there is no actual difference, but that’s a topic I would like to explore in a future post. What do you all think?  Per usual, let me know your thoughts below because I always want to hear from you all. Are any of the facts above surprising or particularly relevant to you? Let’s talk!

6 Comments

  • I guess based on criteria I am a Henry but I certainly am not rich. I do agree the key is multiple streams of income. That’s my focus now to start to build on that. Great article!!
    Vivian

  • Based on the above article, I have a long way to go (lmao, jk). Generational wealth is the goal! It’s not only about how much you have now, but setting up the same lifestyle and mindset for your children and beyond. <3

  • I like this article!! It also seems to depend on where you live and your cost of living. I like author JL Collins definition: “As a general rule, you need to save 25 times your annual expenses (not salary) to retire. Once you’ve achieved that milestone, you are financially free. For example, if you spend $75,000 a year, you’ll need a nest egg of $1,875,000 to retire.” If you spend 200K a year or 500K a year, you’re going to need a lot more than that to be considered financial free or “rich”.

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