Everyone has a different idea of what it means to be rich. For some, it’s living large like Nicki Minaj or Elon Musk. For others, it’s their college roommate Malik who always manages to keep his checking account balance above water long after everyone else has blown their last twenty at the bar.
To get a better idea of how much money people think you need to have to be rich, Charles Schwab polled 1,000 people over 21 and asked them. On average respondents said it takes a net worth of about $2.4 million to be wealthy and $1.4 million to be comfortable.
Considering that the average net worth of Americans under age 35 is less than $7,000, according to Census Bureau data, that may seem like an impossible number to achieve. If you make around the median household income of $57,617 a year, for example, and put $1,000 a month into an index fund with an average return of just under 10 percent annually it would take a whopping 32 years to hit the $2.4 million number.
Of course, some careers pay better than others. Psychiatrists, obstetricians and gynecologists, anesthesiologists, and surgeons all earn more than $200,000 on average, according to Bureau of Labor Statistics data. If you have a high paying job like that and are able to save $10,000 a month, you could be “rich” in just 11 to 12 years, assuming the same annual rate of returns.
Why your net worth is less important than you think
While it’s fun to see the numbers in your savings or investment account go up, it’s important to remember that the emotional rewards of wealth actually plateau pretty quickly. Behavioral economics expert Daniel Kahneman found, for example, that once you make around $75,000 a year, there is no noticeable increase in your day-today emotional well-being. A recent Linkedin survey also found that the more money people make, the higher their stress.
Respondents to the Schwab survey also pointed to non-monetary considerations when it came to feeling affluent. Three out of five said that spending time with their family or taking “me time” made them feel wealth, which they defined as being stress-free and able to afford whatever they want. “Wealth is often thought of as big sum of money that most of us don’t have, but that’s not the case anymore – it’s about being able to pursue your passions and live the life you want,” Joe Vietri, Schwab senior vice president, said.
In other words, once people’s basic financial needs are met, happiness comes from other factors. Positive relationships, free time, and even just working out can elevate your mood. What's more, having fun experiences and kicking back with friends can make you far happier than trying to reach some arbitrary money goal.
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