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Your Take: What Does Rich Mean To You?

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I listen to the American Public Media’s Marketplace shows almost every day (this was before Lynnae, Steve and I were on last week, which was really cool!) and a few months ago there was a personal finance segment, in which a caller asked about annuities in their IRA. About halfway through the answer, the personal finance expert, Chris Farrell, describes “rich” as someone who has maxed out their IRAs ($5,000/yr) and their 401(k)/403(b)s ($15,500/yr) and still has discretionary income to contribute towards investments.

I thought it was a great definition of financially rich because it was both concrete (gives a set dollar amount and criteria) and financially responsible in its message (meaning rich people should max out their IRAs and defined contribution plans). Of course, rich is a much broader word than dollars and cents and I would extend that definition to include some comments about happiness, family/loved ones, and fulfillment (basically fulfillment of Maslow’s entire Hierarchy of Needs, in a sense), but I want to leave that out of the discussion for now).

I asked some bloggers earlier this week what it meant to them and here’s what they said:

I’d like to know, how much is “rich” to you?

{ 19 comments, please add your thoughts now! }

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19 Responses to “Your Take: What Does Rich Mean To You?”

  1. Good question. I guess part of my definition would include having enough to be able to just pick up my marbles and go home. I’m not saying that I’d quit working, but the security of knowing that I’m working because I want to instead of because I have to would be huge. That would also improve my ability to maintain a healthy work/life balance, which adds to “richness” in other ways.

  2. Ken says:

    Now you need a poll on your site to ask your readers the following

    Max IRA and 401k, plus invest more
    Just max IRA and 401k
    Fully fund one, but not the other
    Partially fund both
    Partially fund only one
    Don’t fund either.

  3. Rich to me, would be having enough money to meet my financial goals with some left over. Part of that is investing enough in our retirement savings for my wife and I to do what we want during retirement. Another part is funding ESAs or 529s for any kids I have along the way. I’d also like to be able to give significantly down the road. The rest of richness is about having a great marriage and great relationships.

  4. Emily says:

    I had never thought of it that way, but I think that is a great way to define rich. Contributing that maximum legal amount to your future and still having money leftover to play with and live comfortably. I would definitely feel rich if I had those things!

  5. Pete says:

    I think defining what “rich” is can be a tough prospect, because it can be so subjective. To some being rich might mean just being able to stay current on their bills and just save a little extra. For others it might mean having millions of dollars and living in a lavish estate.

    I think the way they defined it on the TV show is probably a good general way to define being rich or wealthy, and its one I aspire to.

    thanks for the discussion!

  6. To me, wealth is not measured in dollars, but in time. The amount of wealth you have is the amount of money you have to live on without needing to work. Once you have enough passive income from investments or other to never have to work again, I think that’s the true definition of wealthy, because you own your time.

    I wrote a post the other day on the reasons that I want to be rich…might be interesting given this topic:
    http://www.ryanwaggoner.com/2008/08/8-reasons-why-i-want-to-be-rich/

  7. saladdin says:

    Never having beautiful women turn me down.

    saladdin

  8. jim says:

    That’s a good definition too saladdin. :)

  9. I agree that those are good definitions of rich, but I think being debt-free would be a good addition. Without any debt, any amount of income is gravy.

  10. Miranda says:

    I agree that having enough to cover my needs (and to me, needs includes retirement savings and emergency fund savings) and to do a great deal of what I want. That means that once a year I’d like to take a small vacation for a few days, and be able to buy new books I am interested in reading while my husband is able to buy video games. We both like to go out to eat once a week. Being able to accomplish these simple pleasures regularly is my definition of rich.

  11. Dallas says:

    I was astounded at your definition of rich. I quality but I assure you I am far far from rich. I’d like to call it scared. So scared in fact I trust CDs more than I do the market. We tap out the qualifier savings in your definition but I can’t afford to have my kitchen remodeled or go to Europe or buy a new car off the showroom. Hmmm, come to think of it maybe I can “technically” afford those things but not senisbly. Now I’m felling guilty that I have not donated more money this year to our local Humane Society…better go write a check.

  12. MattJ says:

    I will consider myself rich when the returns on my investments can reliably make twice the amount of money I can make at the best-paying job I could find.

  13. Kenny says:

    Rich has many definitions depending on the value system each person holds. I am an immigrant to the US, hence Rich translates a lot of Money (first), Knowledge (next), Access to Plenty of Everything (third) and much more.

    Rich to me means that I can afford to get any thing/service I want, anytime I want, anywhere I want, if I so desire. Now, this does not mean that I actually cater to my ‘wants’, since I have learnt to focus on my ‘needs’ and have the ‘power’ to execute for my ‘wants/desires’.

    I have been passing the above definition to my kids, and as you can notice, I have only answered the Money aspect of Richness and not the rest of them.

    Humans Seek: Happiness

    Bottom-line: HAPPINESS = RICHNESS + FREEDOM TO DO WITHOUT RESISTANCE

    Hence, Being Rich at some time in your lifetime is Important…….

    There are always exception to the above, but see My Blog Site for formula for success, that will bring Richness to your life……

    Kenny

  14. JoeTaxpayer says:

    I don’t think that’s really valid. One can gross $60k, live on $40k, so they’ve saved as story suggests, but is this person rich? Is rich based on income, wealth, or both? Is it about being able to buy what you wish, or being happy with what you have?
    Or is rich being in the top X%? Top 2% is what? 200k? Is that rich? Obama and McCain seem to aim at 250k being the cutoff.
    Joe

  15. To max out a solo K takes more than 50K. To me, being rich would mean being able to max out an employee’s 401(k) AND a solo K.

  16. Khyron says:

    But the Solo 401(k) also requires self-employment. Can you even have both of those accounts concurrently?

  17. Mark Nelson says:

    You are rich when your passive income stream is more than your expenses.

  18. Well you are always richer than other people and poorer than others..
    Even though Bill Gates is super rich, he is poorer than Buffett. Even though I am richer than one of my college roomates who graduated with thousands in credit card debt I am poorer than my other roommate whose education was paid by his parents and who is making more than me.

    I would be rich when I get enough annual alternative income that covers my expenses for two years.

  19. bryan says:

    i think you need several million dollars to be financially rich. for me, it would be monetary security not dependent on any one or two factors ie. job loss, business failure, market downturns etc. I would say that $2 million dollars in CDs providing you with a guaranteed $100k a year income would put you at the beginning of “wealth”. if you need to work for your money or be worried about money in general, you probably are not rich.. you should be able to do the things you love, have the time you want, etc. without money being a factor.

    in my mind, i picture a nice vineyard estate in france with enough money in investments where i can eat the food i want, travel when and where i want, drive the cars i want, etc. and come nowhere close to worrying about running low on cash…

    but thats just me.

    i think theres a huge difference between being in being well-off (which most americans are regardless of your income level) and being rich…


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