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Old 26 October 2017, 07:11 PM
dewey dewey is offline
 
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Icon605 How do you define rich?

I'm just curious as to what rich means to you guys. My definition is not a set dollar amount. Instead I define rich as being able to quit working and maintain the lifestyle that you want to live indefinitely. So the guy making half a mil a year and spending it all would not be rich because if he had to stop working he would run out of money soon. Whereas the person with no debt, and a paid-off house and can live on dividends, interest, pension, social security etc. is rich by my definition.

What do you think?

dewey
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Old 26 October 2017, 07:25 PM
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I think it depends on where you live. Even in the United States, if you live in a place like NYC or LA, it would take more to be "rich" than if you live in some more rural place in the middle of Ohio. However, my definition of rich would probably being able to afford a comfortable lifestyle without out going into debt. Being able to pay the bills and still have money left over. Being able to have money in the bank that you can save up for vacations, retirement fund, "just in case something breaks and needs fixed now" moments, or whatever you want to save up for.
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Old 26 October 2017, 07:46 PM
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I'm with your basic point about financial independence being the criteria, but there does need to be some sort of cutoff.

A celebrity who earns millions per year and spends all of it due to a lack of discipline is still rich. They probably won't die rich, but for now they're rich.

On the other hand, someone who is financially independent due to extreme fiscal discipline but lives very frugally and can never spend much money is not rich. It's potentially a good lifestyle they've got going, but it's not rich.

Also, age needs to be a consideration. If the reason they are financially independent is because they have their expiration date coming up soon and can afford to spend the principal, then that's not really rich, it's just retired. Not all retirees are inherently rich. If they have enough that they're living off the interest only, then maybe (though if they need an extremely tight budget to make it work, maybe not). But if they are working through steadily declining assets as they approach death that's not really "rich".

Whereas if a 20 year old had that retiree's same mortgage-free house and nest egg just handed to them by their parents, they could probably be considered rich, particularly since there is likely more coming.

Last edited by Errata; 26 October 2017 at 07:53 PM.
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Old 26 October 2017, 08:03 PM
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It seems like we had a thread on the same subject not that long ago.

But I agree with your basic premise. To me a rich person is someone who doesn't need to work, someone who had enough money to live entirely off of income from their investments. And I'll add the caveat that the person is much younger than what most people would consider a normal retirement age.

I'm not sure about the "maintain the lifestyle that you want to live indefinitely" part, though. I'd imagine someone like Justin Bieber could retire tomorrow and live what most of us would consider a reasonably comfortable lifestyle, but I doubt he could continue living the lifestyle he is currently living. But I think everyone would consider Justin Bieber rich, for now.

So in other words I think I just said pretty much the same thing Errata said.
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Old 26 October 2017, 08:34 PM
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Anyone who's heirs would be subject to inheritance tax is rich.
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Old 26 October 2017, 09:52 PM
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Rich is when you can hire someone to spank your kids for you.
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  #7  
Old 26 October 2017, 10:52 PM
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Rich is when you can use the word "summer" as a verb.
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  #8  
Old 26 October 2017, 11:35 PM
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Not to be lame but I don't see the point of "defining rich". I don't even see the point of the adjective really. But if there is some reason to use it then it should be defined for that purpose.

Now to define it.

I feel rich every day I have food, water, shelter, and company. On the flip side (and side I don't want to brag about as much), I feel not rich every time I have to worry about a bill, even if it's something I don't need but especially if it's one of those four necessities that is nevertheless keeping the belts tight because of all the other amazing things we enjoy. So I guess being rich is never having to worry about things that could be considered necessities, such as the four mentioned, to the point that one can enjoy non-necessities and still never have to worry about necessities. That's richer than 99.9999++% of the people who have ever lived on this planet. So I think I have a decent chance at being one of the 0.0001%. Not quite there yet but it could happen and that alone makes me feel very rich.
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Old 26 October 2017, 11:54 PM
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I think rich is relative. If no one in your neighborhood can afford shoes, having a pair makes you feel rich. If all your friends can afford private jets but you have to fly commercial first class, you feel poor. I feel rich when I live a little bit below my means and have extra for treats, whatever my income is.
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  #10  
Old 27 October 2017, 12:50 AM
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Rich means the majority of your spending decisions are based largely on just getting what you want rather than covering necessities.
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  #11  
Old 27 October 2017, 05:53 AM
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I guess for the most people "rich" means "having considerable more money than I".

So nobody considers himself rich, there are always others.
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  #12  
Old 27 October 2017, 05:57 AM
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Quote:
Originally Posted by Don Enrico View Post
I guess for the most people "rich" means "having considerable more money than I".

So nobody considers himself rich, there are always others.
Not really true. There is some grey area in between, but actual rich people know they're rich. The non-rich people that you call rich might correctly deny it, because they know how non-rich they are. But some people are undeniably rich, and they know it. There is always someone even richer, and even rich people may look at what someone else has and want more, but that doesn't mean they think they're not rich.
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Old 27 October 2017, 02:04 PM
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Quote:
Originally Posted by WildaBeast View Post
It seems like we had a thread on the same subject not that long ago.

But I agree with your basic premise. To me a rich person is someone who doesn't need to work, someone who had enough money to live entirely off of income from their investments. And I'll add the caveat that the person is much younger than what most people would consider a normal retirement age.

I'm not sure about the "maintain the lifestyle that you want to live indefinitely" part, though. I'd imagine someone like Justin Bieber could retire tomorrow and live what most of us would consider a reasonably comfortable lifestyle, but I doubt he could continue living the lifestyle he is currently living. But I think everyone would consider Justin Bieber rich, for now.

So in other words I think I just said pretty much the same thing Errata said.
Sorry, I missed the other thread. I will search for it.

I think the part about maintaining the lifestyle is important, though. At the minimum level I don't consider someone who survives by scrimping and denying himself any luxuries just so he doesn't have to work to be rich. My definition requires the ability to provide everything that one wishes for. And by indefinitely I meant without eating into savings.

The argument that someone who makes millions while spending it all is rich is something I object to. To give an extreme counter example, suppose I mortgage my house to the hilt, borrow from all my credit cards and hit up all my friends for loans and take all that cash and live the life of a millionaire until it is gone. Am I rich while I am spending that money? That is why I say that the definition must include being able to maintain the lifestyle indefinitely.

dewey
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  #14  
Old 27 October 2017, 02:16 PM
dewey dewey is offline
 
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Quote:
Originally Posted by ganzfeld View Post
Not to be lame but I don't see the point of "defining rich". I don't even see the point of the adjective really. But if there is some reason to use it then it should be defined for that purpose.

Now to define it.

I feel rich every day I have food, water, shelter, and company. On the flip side (and side I don't want to brag about as much), I feel not rich every time I have to worry about a bill, even if it's something I don't need but especially if it's one of those four necessities that is nevertheless keeping the belts tight because of all the other amazing things we enjoy. So I guess being rich is never having to worry about things that could be considered necessities, such as the four mentioned, to the point that one can enjoy non-necessities and still never have to worry about necessities. That's richer than 99.9999++% of the people who have ever lived on this planet. So I think I have a decent chance at being one of the 0.0001%. Not quite there yet but it could happen and that alone makes me feel very rich.
Not lame at all to question the term "rich". However a lot of people write about, and talk about, and think about "the rich".

I think you have a very sensible definition. I think anybody who never has to worry about the necessities and can also enjoy non-necessities it certainly rich. Rich is indeed a state of mind rather than a balance sheet.

I would like more people to feel that being rich is an attainable goal. That they should not be thinking of yachts and mansions but rather of comfort and satisfaction.

dewey
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Old 27 October 2017, 02:18 PM
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Isn't a level of comfort and satisfaction what the term "well off" is for? I mean, there is even the version "comfortably well off".
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Old 27 October 2017, 03:04 PM
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Quote:
Originally Posted by Errata View Post
Not really true. There is some grey area in between, but actual rich people know they're rich. The non-rich people that you call rich might correctly deny it ...
I think it's at least partly true... you're contradicting yourself a bit there when you say that there are people who you would call rich who would actually deny it.

I wrote a massive post that I've cut because it isn't interesting, but I think being rich is having "too much" money, and not many people would think they have "too much" money. I'm rich by many standards, in that I can afford to own property (with a mortgage, currently) in a reasonably expensive area, I can afford to go on holiday and spend time not working, and I stand to inherit some money.

But the net amount needed to make me that well off is way lower than the sums people think of as being "rich". My net worth is probably a little under £200,000, most of which is the equity in my flat. My parents' estate (which I hope I won't get a share of just yet...) is probably less than the threshold for estate tax / inheritance tax, although I'm not sure exactly - again, a lot of that would be the value of their house. I'll be nowhere near being a millionaire even taking that into account.

And I don't have a stupid lifestyle - I don't even own a car. Essentially the factor that makes me well off is owning a flat - which is a two-bedroom flat, reasonable size in a reasonably good area, but hardly a luxury penthouse. The property market in the UK has gone silly enough that this is out of reach for some of my colleagues, who are in equivalent jobs to the one I was in when I first bought property, and who are older than I was then. These are people in skilled, well-paid jobs.

I don't think anything about my lifestyle is unreasonable - simply owning property shouldn't be enough to make you "rich". There's nothing about the level of security I have that (to my mind) shouldn't be generally available to all. The sort of sums of money that many prominent politicians and business people have are way more than that, and a lot of those people would claim not to be "rich" as well - or would have a few years ago, before people started to cotton on.

Even my cut-down post turned out fairly long! At least I cut out my entire, detailed financial history though.

(eta) The other complicating factor is that many "rich" individuals with the proper wealthy lifestyle are basing this on a lot of debt and credit, so it's hard to say how much they're really worth. I calculated my net worth above by estimating the current price of the flat and subtracting the outstanding mortgage. If you've got a lot more properties that are more heavily mortgaged, and things bought on payment plans and so on, you might end up with a negative net worth while outwardly having a far more lavish lifestyle - at least until your creditors catch on.
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Old 27 October 2017, 05:10 PM
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A term I've heard a few times (with variations for permissible language) is the idea of "Screw You" money -- that is, having enough in savings, investments, or property that you can walk away from just about any situation if you decide you've had enough of it: whether it's a job, a business partnership, a marriage, a particular location, etc. I imagine that's what most people think of when they think of "rich": being able to make (most) decisions without considering the financial consequences. (Obviously, even Bill Gates has to consider the financial consequences of some decisions, but for 98% or more of what most of us do, money would not be an object for him.)

That's different from being comfortable/well off. If I had enough money to pay all my bills as they came in (without living extravagantly, but without being overly frugal, either), live independently (e.g., without family members or roommates) in a comfortable place, afford transportation and all necessities, take a decent vacation every couple of years, and put enough away to both meet most unexpected but non-catastrophic expenses and be reasonably certain I could retire in some comfort in another ten years or so, I'd consider that comfortable/well off.
Being "rich" implies to me I'd be able to go beyond that: say, afford a second home, or travel first-class and stay in five-star hotels if I felt like it, or own expensive toys such as a yacht or private plane, or live in a mansion rather than just a decent house or condo. (I've always wanted to own a place the papers would refer to as a "compound..." ) Or perhaps donate enough to a political campaign that I could get my Senator on the phone whenever I wanted...
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Old 27 October 2017, 09:45 PM
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Quote:
Originally Posted by dewey View Post
To give an extreme counter example, suppose I mortgage my house to the hilt, borrow from all my credit cards and hit up all my friends for loans and take all that cash and live the life of a millionaire until it is gone. Am I rich while I am spending that money?
I suppose it depends on exactly how much equity you have in your home, but for most people it's simply not an option to spend like that even if they leveraged all their credit. Most people don't have $20 million worth of credit to draw on to spend a year living the same lifestyle as someone who earns and spends $20 million in a year. Maybe you could keep up with the multimillionaire for an outrageous week on vacation, but when talking about income thresholds we were speaking in terms of an entire year, and an entire annual income, which would put that lifestyle out of most ordinary people's reach even with credit.

Furthermore, the celebrity in this situation would end up with a net worth of around $0 after their wild year, while the borrower would end up with a net worth of around -$20 million, so the borrower is objectively far worse off. Plus the celebrity would still have the asset of whatever fame and career allowed them to earn that much. Maybe their peak is behind them and they'll only earn $5 million next year and $1 million the year after that, but they're still going to be in a situation to live a better lifestyle than the vast majority of the population for years to come before their fame fully fades. You on the other hand would be entering the next year without such an asset, and with a crippling financial hangover that would take you decades to recover from if you ever do.

Earning potential is a factor in wealth. Poor long term financial planning doesn't completely cancel out the fact that someone with a massive annual income can live a lifestyle far beyond what most people can. And unlike your debt blowout scenario, it's at least somewhat sustainable if they're only spending what they earn rather than more than they earn. Because their earnings, while not guaranteed to continue forever, are at least somewhat correlated from year to year.

Lifestyle can certainly be misleading and shouldn't be the sole consideration, but the differences are usually only taking someone's present lifestyle one or two steps up the ladder from their actual sustainable financial situation. Not 10 steps up the ladder all the way from average to very rich.
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Old 28 October 2017, 12:27 AM
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Between a rock star making/spending $20 million a year vs. the person scraping by on Social Security, the best line I've heard is "You aren't poor, you're just broke."

The rock star has a lot more potential by being able to invest his money in things.

A doctor with medical school debt is broke, not poor...etcetera etcetera
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Old 28 October 2017, 08:07 PM
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Regarding "screw you" money as a metric of wealth, while the idea makes sense, I'm not sure it always works out that way. Few people buy houses they can afford to just walk away from; people tend to buy as much house as they can. A high-paying job that makes you rich might be harder to walk away from than a minimum-wage gig that's easily replaceable. When I worked in restaurants in my 20s, several of my coworkers quit after a rough night without anything else lined up, which worked out fine because there were plenty of other restaurants and bars that would hire anyone with experience. A marriage in which neither person had any assets would also be logistically easier to dissolve. Being free to be spontaneous in ways most people can't afford really comes down to your liquid assets, which is typically a function of living well within or below your means, or just having nothing to lose, which is kind of the opposite of being rich.
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