The results of a recent YouGov survey show that most Americans think you need to make $100,000 per year to be considered “rich.” Assuming you weren’t one of the people interviewed for that survey, does $100,000 a year sound like wealth to you? What if someone makes less than six figures per year? Can they still be considered wealthy? How can someone with a goal of getting rich know when they’ve finally arrived?
Here’s the challenging thing about defining what it means to be rich or wealthy—it’s all relative. In a recent article for CNBC, reporter Kathleen Elkins shared that, according to the 2018 Global Wealth Report, “If you have just $4,210 to your name, you’re better off than half of the people around the globe.” That report went on to show that anyone with a net worth of $93,170 or more ranks in the world’s wealthiest 10 percent. How about that? It turns out wealth has little to do with your income after all. Yes, earning a lot of money can help you build wealth, but there’s more to it than that. We’ve all heard stories of individuals who made massive amounts of money yet wound up broke and bankrupt. At the same time, there are many examples of ordinary people who earned average salaries and somehow managed to retire with extraordinary wealth and financial stability. When you analyze their stories, you find that those who were successful focused less on their income and more on their net worth. If you want to “get rich,” you’ll need to make your money work for you instead of the other way around.
Maybe “net worth” is a new concept for you; maybe it’s not. Either way, let’s define the term for the sake of clarity. Credit Suisse, the research institute that compiled the Global Wealth Report mentioned above, defines net worth as “the value of financial assets plus real assets (principally housing) owned by households, minus their debts.” Simply put, your net worth is the difference between what you own and what you owe. By this definition, it’s easy to see why income is only part of the wealth equation. You might earn $250,000 per year, but if your debts and payments outweigh your income and assets, you’re just broke at a higher level.
So, how much does it take to be rich? That answer is going to be different for everyone. Your situation is unique, which means your road to riches will be as well. Fortunately, you don’t have to plan your route alone if you’re a Park City Federal Credit Union member. Our financial advisors are ready to help you find your starting point, establish your financial goals, and select the best products and tools to accomplish those goals.
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