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I recently was reading the Economist special report about global readers and it got me thinking about a few different things. One of them is about what the definition of being rich means. It’s a very difficult thing to define and most that give it a try use absolute numbers to do so. Capgemeni, a consultant, defines a rich, or a high net worth individual as being someone with investable assets of $1M or more. By that measure, there are about 10 million rich people on the planet.
My two big problems with that measure are that:
-it does not account for the cost of life (some places such as the US cost many times more to live in than others such as Vietnam)
–only counting investable assets seems tricky. Does an entrepeneur that owns a private company worth millions not qualify? What about someone who owns a $1M house without a mortgage?
Credit Suisse uses net assets of $1M as the criteria which is simple and makes more sense to me. That estimate qualifies more individuals as “rich”: 24.2 million or 0.5% of the world population.
To me, that is a better criteria but it still lacks consideration for some parts of being rich.
So what do I consider necessary to be considered “Rich”?
Personally, I will consider myself as rich when my monthly passive income will be enough to pay for my expenses. Too simplistic? Not really in my opinion! I do understand that it would be virtually impossible for companies to estimate how many individuals qualify.
So would I exclude a lot of those “standard rich”? Absolutely. In my opinion, having a lot of debt and a very costly lifestyle (expensive cars, etc) may work fine for a number of years, but if you can’t survive a few months after losing that great job, you are far from rich. I guess it could be debated in many different ways but I feel very strongly about it.
Now the irony here might be that having enough money to live off of through passive income requires one, two and often all of these criteria;
#1-a “passive” business or large amount of cash & investments
#2-a reasonable level of spending
#3-a solid and systematic investment methodology
Of course, billionaires will be able to qualify without looking too carefully at their spending but for most of us, reasonable spending become a big key of the ingredient. That is ironic because our society often promotes big spending as the best way to show off how great things have been going.
Do you agree? Do you think that being rich should be defined in another way? I’d love to hear from you about this.
I would define rich as not having to worry about money. I think too much weight is placed on the amount of money and not on expenses. Personally I feel that I’m rich because I could live off my cash reserves for a good year or two with no work. By monetary means am I rich? Nope. My expenses are so low though that I feel rich and secure. I’m probably the minority thinking this though.
Great article!
completely agree. anyone able to live off passive income i would consider to be a rich lifestyle. the amount of time it would free up to do the things you want to do would be invaluable.
I consider someone rich if he is debt-free, with enough savings for his retirement and has a comfortable house to live in. Money alone shouldn’t be the gauge for being rich.
No debts (at all)= being rich
Rich is someone who has more money then 90% of the people in their country.
@Ravi – Thanks for the good words. I actually like your definition, it does mean that some insecure people can never become “rich” though, do you agree?
@Skye – Yep… hoping to get there
@Mihou – In these years, that is very true
@Open Source Portfolio – So it would be difficult to compare between countries right? I mean between a rich and a poor country.
In my opinion you have to have that proverbial f..k you money to be considered rich.
Being rich is having a roof over your head, enough food on your table to fill your belly, great friends and sane family members, and good health to enjoy life. Beyond that, money has nothing to do with it. 😉
@Funny about Money – Could easily agree and the difference would probably be between being “rich” and “financially rich:)
There are plenty of good answers here and thoughts on what it takes to be rich. I would agree that having passive income sufficient to pay bills makes one financially free. It means little if you don’t have anyone to share that with, either. But for coming up with a simple number, I would have to say $5 million.
@optionsdude – No doubt, having a significant other is important. $5 million hey? Are you on your way there?
@My ATM – Fair enough, I agree to some extent but cash does have its importance too in my opinion.