In 1991, I traveled to Alaska with three friends to get rich. Why? We had learned that we could make $5,000–$7,000 a month working in Alaska over the Summer. I thought I would leave Alaska having made $25,000. I was going to be rich.
I was going to get a new mountain bike, leather jackets, and 100 new CDs. My list went on. What happened? We only worked for a month and a half. I did not get rich that summer. But how do you know if you are rich or not? What does it mean to be rich? What is your definition of rich?
In this episode of Best in Wealth, I will cover the definition(s) of rich, what rich is in terms of income, and what the three levels of wealth are according to Stewart Butterfield. Check it out!
Outline of This Episode
- [1:07] I always wanted to be rich
- [4:32] Does your income make you rich?
- [7:07] What is the definition of rich?
- [9:26] The three levels of wealth
- [13:09] Are you rich?
Does your income make you rich?
Where do you stand compared to the broader population? The average income in the United States is $50,000 but the median income is $70,000. For married couples, the median is $106,000. If your income is $106,000 you are smack in the middle.
If you want to be in the top 10% of richest households, you need to make $212,000 annually. Do you make that much? To be in the top 1%, you need to make $570,000 a year. Would you consider yourself rich?
What if you made $300,000 but you have nothing in savings? What if your expenses equal your income? You might not be nearly as rich as someone who makes $100,000 but already has $1 million in retirement accounts. When we dig deeper, I think it is the second person who is rich.
The definition of rich
According to Google, the definition of “rich” is having abundant possessions and material wealth. It can also mean something of high value or quality. But is being rich all about the money, the income, or the nest egg? I do not think so.
What if you have all the money in the world but you are in poor health, and your health prevents you from living the life you want? Are you rich? I would not call that rich. What if you do not have good relationships with loved ones? You have money, but you are miserable. Are you rich? Probably not.
We need to think at a higher level. We need abundance in the cornerstones of wealth: Our careers, family, friends, spirituality, and health (mental and physical). If you are only making $100,000 and wish you were making more but your buckets are filled, I would argue that you are far richer than someone who just won the lottery but does not have good health or relationships.
The three levels of wealth
Stewart Butterfield, the founder of Slack, turned into a billionaire quickly. He believes there are three levels of wealth that you need to reach.
- Level One: You no longer have to stress out about debt. Maybe you paid off your credit cards, student loans, etc.
- Level Two: This is achieved when you no longer care how much a meal at a restaurant costs. You order whatever you want.
- Level Three: This is reached when an individual does not care how much a vacation costs. They do not care about the cost of their hotel, flying first class, or where they go.
Stewart points out that these three levels are subjective. But are you in any of these stages? Do you spend like you are on a different level?
While there is no single definition of what it means to be rich, the three levels show us how building wealth can provide peace of mind in different ways. Maybe it is the flexibility of being debt free. Maybe it is going on a dream vacation without worrying about the cost. What matters the most to you?
What if you came up with your own definition? What are your “three levels?” Work with a financial planner to come up with a plan that makes sense to you.
Connect With Scott Wellens
- Connect with Fortress Planning Group on LinkedIn
- Connect with Scott on LinkedIn
- Follow Scott on Twitter
- Fortress Planning Group on Facebook
- Subscribe to Best In Wealth Podcast
- View Scott's profile on Fee-Only Network and NAPFA
The Best In Wealth Podcast is hosted by Scott Wellens. Scott Wellens is the principal at Fortress Planning Group. Fortress Planning Group is a registered investment advisory firm regulated by the Securities Act of Wisconsin in accordance and compliance with securities laws and regulations. Fortress Planning Group does not render or offer to render personalized investment or tax advice through the Best In Wealth Podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.