Sep 17 2008
How Much Does One Need to be Rich?
Published by Steve Latter at 6:49 am under
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WikipediaCHICAGO, January 7, 2008 – How much money does it take to be considered rich? It turns out that $1 million just doesn’t cut it, anymore.
In fact, rich today requires at least $5 million, according to a new survey of affluent households, defined as those with investable assets of $500,000 or more. When asked how much money it takes to be rich, 45% chose $5 million, 25% selected $25 million, and 8% picked $100 million, according to the research by Millionaire Corner (http://www.millionairecorner.com/index.php), a newly launched website powered by Spectrem Group. Only 22% said $1 million is enough to be rich.
Achieving such wealth – and holding onto it for generations – is the topic of a new book by Spectrem’s Catherine S. McBreen and George H. Walper, Jr. titled “Get Rich, Stay Rich, Pass It On: The Wealth Accumulation Secrets of America’s Richest Families” (http://getrichstayrich.net/). Published this month by Portfolio and available in bookstores now, the book is based on years of research in addition to interviews with ordinary individuals who were able to amass enough wealth to pass on to future generations. “All you really need is to know how to use the same wealth-building tools Carnegie and du Pont and all the other progenitors of sustainable fortunes used,” McBreen and Walper write. “They created the model but they didn’t patent it. It’s available for your use, and this book is the operating manual.”
The authors found that the proper mix of entrepreneurial activities and income-producing real estate is the key to achieving building perpetual wealth. “Get Rich, Stay Rich, Pass It On” walks readers through not only the theory but the practice of building sustainable fortunes. It not only lays out the model, but provides exercises to help readers bring their own finances into focus and determine what they need to do to develop perpetual wealth of their own.
* * *
The data on how much it takes to be rich are based on 253 telephone interviews conducted in December 2007, with a margin of error of plus or minus 6.2 percentage points. Interviews were conducted with the financial decision-makers in households with $500,000 or more in investable assets.
About the author: Mr. Latter teaches various business courses at Paul VI Catholic High School in Fairfax, Virginia (USA) including AP Economics,
Accounting, Marketing, and Personal Finance.
Mr. Latter is a Certified Public Accountant (CPA) and former Chief Financial Officer with 8 years of high school business teaching experience. Prior to his career change to teaching in 2000, Mr. Latter spent 21 years in various auditing, accounting, and financial positions with Price Waterhouse, Sprint, and Teleglobe. 
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I find it very interesting that $5 million was picked as a point for how rich people are. Do you think that the fact that only people who make $500,000 or more were only chosen skews the data? I think it most likely does because the less people make, their idea of how much money rich people make will be different.
I think that this article gives great a perspective on how rich people think what rich is. Personally, I feel that being rich is all about perspective. For example, if one is born into a family who cannot afford to put food on the table, then maybe being able to own an iPod would be considered rich to that person. However, if someone becomes born into a family with a large house full of servants and fancy items, they may see themself as normal and others as being poor, or they may feel that they are rich. Different people see being “rich” very differently.
I personally don’t think you need 5 million to be rich. As we say in economicswe want to maximize our utility in order to be happy, but i am quite certain that with under 5 million even under 1million the majority of people could find that they are quite content, with what they have. I would think that the majority of people are inflenced by the media into thinking they need to have 5million+ to be rich. Shows on MTV and E! all market rich celebrities, and for some reason everybody wants to be like them, this leads to them thinking they need all this money to get there.
For someone to be defined as rich they need to be “plentiful in material goods and money” according to Princeton University. For $5 million to be considered rich is a completely subjective idea as it depends from whom the data is collected. The survey was collected from people with investable assets of $500,000 or more. For those that don’t have such assets or those that live on welfare and in council housing, $100,000 would be an innumerable amount of money. It all depends on who you ask on who is “rich.” Being rich is comparative to the others that are around you not a set amount of money.
I think it is interesting to see that people perceive being rich as 5 million dollars. This seems a rather substantial amount. However I think it would be much more interesting to see what people think the difference between wealthy and rich is?
I would be one of the 45% that chose $5 million as rich. $1 million US wont get you far, I’m not sure what real estate prices in the US are but in Australia $1 million wouldn’t cut it. Not to mention taxes, buying food, paying off a mortgage or paying rent, renovating your house etc. All these factors could easily spend your $1 million. But I agree with Drew, it’s all about your perspective. It depends on what lifestyle you live… if you live in a very upmarket part of the city then your perspective of rich is different to those who live in the slums.
Hello Joey, Drew, Mike, Matthew, Josh, and Alex,
Thanks for the posts. All of you make great points. Yes, rich is relative and depends on your personal perspective.
If I were to define truly rich (money only, set aside personal satisfaction and meaningfulness of life), I would define it as:
“the ability to pursue and do anything you want, whenever you want”.
Thus, by that definition, you would not NEED to work, although you might WANT to work. You could travel anytime you choose and to anyplace on the globe, and buy the nice luxuries of life whenever you want. What would that take in today’s economy? I actually like the $5 million saved/invested number if I had to pick a number. Just living off the investment returns only would generate you approximately $350,000 a year in income, net of inflation.
Of course, you ALL get the last word, because it is really a relative and subjective definition as you all pointed out!
I agree with many of the previous responds, whether one is rich or not depends on who is asked. The definition of rich varies, yet I think that 1 million dollars is not rich, now a days if one wants to live relatively well, 1 million dollars will not last as long as it might have 20 years ago. In the 80s the 1 million dollars would be enough to live the high life for a long time, yet now more costs are made for daily needs and wants. However, we earn much more money now, so the 1 million back then might be relevant to the present 5 million. Considering how much the worlds population rose in the past 20 years, the consumer’s number has risen with it since each person is a consumer. The detail which I find difficult to believe is that there exists a book on how to stay rich? I believe that there are no specific rules on how to stay rich, since the world changes as every day passes and daily new situations arise, one must make new decisions each time, therefore I find it difficult to believe. That however, is only my opinin of course.
I think the definition of being rich is that you must have money but you must also maintain the wealth. Simply put it is that you are able to live comfortably off the income you have while not touching the principal amount. I believe this amount will vary for people, so the 5 million might work for some while others can have less and others can have more.
I really think the perception of being “rich” depends on the person and their background. For example, if a person grew up dirt poor in a third world country, his view of being rich could be having 1,000 dollars which he was not accustomed to. It’s all really a matter of opinion. I believe however that it always used to be thought that 1 million dollars was the standard of being rich. Like when someone won on Who Wants To be a Millionaire, it was a big deal. With all the taxes today, you really don’t end up with a million dollars but still a considerably large amount of money. This is why i believe that most people believe that 5 million dollars is the standard for being rich because of the role of taxes.
Hello Stephen and Kevin,
Thanks for your first posts!
Yes, “rich”, certainly is a relative concept. And your add ons regarding “maintaining principal” and the role of taxes are key points as well.
PS Stephen: I am shopping for a new calculator with a square-root function
[...] Welker’s Wikinomics Blog » How Much Does One Need to be Rich? (tags: economics) [...]
I agree with the people that said that being considered rich is a question of perspective and personal background. It makes sense that the amount of money needed to be considered rich has increase over time. More and more people are rich and have several millions today then several years ago. In early time a rich person had a lot less money than the rich people do today. So as people get richer and richer (wages increase, GDP increase and decrease in taxes for the rich), the standard needed to be considered rich only increases. This statistic is also biased as they only interviewed a certain class of people, those who have $500,000 or more.
I agree with all of the posts about how wealth is directly related to ones upbringing. If this survery was expanded to different levels of income, the response could be radically different. For some of the richest in the world, 5 million dollars is mere pocket change. On the other hand, for those who live from paycheck, possesing 5 million dollars would be a dream. It would be interesting to see a survey of the same question from the lower class and then compare the results of this one.
Hi Carly!
So clearly explained!
In the news yesterday, a new list of the wealthiest Americans was discussed and Bill Gates (the ex-Microsoft executive turned philanthropist) is at the top of the list with a net worth of $57B! Net worth is calculated by taking all of your assets (real estate values, stocks, and other investments & assets) and subtracting any debt or liabilities that you owe.
Thanks for the post!
In all honesty, after hearing one of your opening prayers before class, the first thought that comes to mind is: the definition of being rich is being happy. Now economically, I think being economically sound and comfortable, never having to worry about paying the bills, defines what being rich is. To me there is not specific value, rather, it depends on how smart people are with money.
Hi Isabel! Thanks for your first post!
Yes, of course, “rich” refers to “economically rich”. But, yes, there has been much research on happiness, and there is less of a correlation between money and happiness than you might think. The short version of the research is money is not a key determinant of happiness as long as the person has the basics such as food, clothing, shelter, and security. So in America, for example, there is little correlation in happiness levels between the wealthy and middle class.
I find this amount of 5million quite interesting, and it got me thinking. I think this amount will depend on the people, and their situation. By their situation I mean their income, and what it takes to maximize their utility. Some people are used to more normal goods, while there’s people who buy inferior goods, might consider a constant use of normal goods rich, and wealthy. My conclusion is that it depends on the people who are asked, what their current situation is, and also their surroundings.
So i think, rich has to be defined. If you think of happyness its different from every perspectiv. people are rich of having a happy family and having children, having clothes, a roof over their heads. Just the basic needs have to at least be satisfied. If you think of the amount of money you own, i think $ 5 mill is way too much of being considered rich. You are rich when you can buy whatever you want and dont have to worry about your money. You have to consider their situation and the place they live. A place like switzerland is pretty expensive but if you go to Asia you can buy way more for the same amount of money you spend in Switzerland. You achieve utility by owning the goods and services you need.
Being rich in today’s society is greatly different than what it was for our parents and our grandparents. If you asked one of your grandparents what they consider rich they might say anyone who makes 6 digits. However those surveys show pretty good numbers. And I can understand how you need at least $500,000 in assests to be considered rich but if you ask people who make 10-25 thousand a year, rich to them might be something like $100,000 as well. It all has to do with the people you interview. In my opinion being rich is if you make $250,000 a year or more and invest it properly and not just lose it all gambling or thoriwng it away. But as we all know $ isn’t what makes us happy. Especially according to Mr.Latter. If you want to have a rich life you need to have good strong relationships with other people.
Being rich in today’s society is greatly different than what it was for our parents and our grandparents. If you asked one of your grandparents what they consider rich they might say anyone who makes 6 digits. However those surveys show pretty good numbers. And I can understand how you need at least $500,000 in assests to be considered rich but if you ask people who make 10-25 thousand a year, rich to them might be something like $100,000 as well. It all has to do with the people you interview. In my opinion being rich is if you make $250,000 a year or more and invest it properly and not just lose it all gambling or thoriwng it away. But as we all know $ isn’t what makes us happy. Especially according to Mr.Latter. If you want to have a rich life you need to have good strong relationships with other people. That’s what will make you happy at the end of your lfie.
It is a common perspective in today’s society that in order to be considered rich, you have to make a certain amount of money. As stated in this article, rich today requires at least $5 million. I, however, strongly disagree with this statement. In my opinion, being rich all depends on how you look at it. For example, a person who grows up in an impoverished, lower class area is obviously going to view the requirements of being rich much differently than a person who grows up in a wealthy and privileged family. What one person deems as being as being associated with wealth may seem like nothing to another. With that being said, I agree with the blog responses above that point out that the results of the survey may have been radically different if it gathered responses from a variety of different social classes.
In my opinion, one’s wealth in no way affects his or her happiness. You could have the $5 million required to be considered rich, and still not be truly happy. Instead of focusing on what you don’t have, you should be grateful for what you do have.