When does someone become rich?
Some people believe a certain net worth makes you rich. Maybe $1 million in net worth. In fact, some people choose to challenge their friends to a race, seeing who can get to $1 million first.
But net worth can’t all be spent. It can be tied up in assets like homes or retirement accounts that are very difficult to turn into real money. Maybe a better definition of rich is having a certain amount of liquid cash on hand. Maybe $500,000 in cold hard cash makes you rich.
But having cash today doesn’t mean you’ll have cash tomorrow. Some people don’t care how much money they have sitting in the bank. They consider themselves rich as long as they have enough passive income to pay all their bills without having to work. This is a nice definition of rich, and my personal preferred definition.
Well, it was until this weekend.
Life Throws You Curveballs
If I have enough passive income to pay all my bills this month, that doesn’t necessarily mean I have enough to pay all my bills next month. Or even tomorrow.
The fact is, life can be hard.
It can come right up behind you, give you an atomic wedgie and then put your torn underwear on your head.
For example, my Mom and Step Dad recently separated. Only time will tell what will happen between them in the future, but right now they need time apart. I helped my mom move into her new apartment this weekend.
My parents don’t have a lot of money, and because of that, they only had one car. Now that they aren’t living together, my mom needs a way to get to and from work. Neither of them has the money to buy a new car, and both of them need to drive to go to work. My mom needed a car, but definitely couldn’t afford to take on the car payment from their one vehicle.
She needed a miracle.
Rich Enough to Provide Miracles
She got one from her brother. My uncle Kevin (who has a pretty great name) drove his slightly used 2008 Toyota Camry Hybrid 1,600 miles across the country to give to my mom. And it’s not like this was an extra car he had lying around. My uncle gave my mom his car, and then bought himself a new car to replace it.
That’s the rich I want to be.
And let’s not forget to mention, I also hope to be the kind of person who is willing to provide this kind of help to people who need and deserve it. My uncle is really an awesome guy.
But back to his finances, he has enough money coming in every month that he can live the life he wants to live and provide for his immediate family. Then, he also has enough money saved up that he can take control of an emergency situation for someone he loves that requires tens of thousands of dollars.
It could have been his sister needing a car. Or maybe his neighbor lost his job and needs a short term loan. Maybe his daughter needs braces or his uninsured nephew needs money to pay off medical bills from a car accident.
I hope to be rich enough one day that I can provide for myself and my family, and have enough money in the bank to help the people I care about when they need and deserve it. And if I have enough money left over to hire a Mariachi band to sing a unique personalized “I’m sorry” song whenever I say or do something stupid to Tag, that’d be nice too.
There’s my definition of “rich“.
What’s yours?
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
That’s such a lovely story about your uncle. (And sorry to hear about your parents’ separation, too. That’s rough.) I don’t really know what my definition of rich would be, but it would definitely be similar to that. If I can have enough cash flow to be able to take care of myself, my family, and others, in the case of an emergency, then that’s all I really need.
Yeah, I guess the only thing to define is: who are the people you want to be able to financially help or support, and how much do you want to be able to provide for those people (which may be different depending on the individual)
I like your definition a lot. Mine wouldn’t be too far: when I have enough money to have all the basics debt free, like a nice house and new car and food and all bills covered for a year ahead, a source of income that I don’t dislike and just do to survive, and enough to helpnfriends and family and any person that comes my way and I’d like to help then I’d be rich!
I hope you get that rich one day!
My opinion is you are rich when you FEEL rich.
Some people have millions in the bank and still feel unable to help their nearest and dearest.
On the other hand, lets take your awesome Uncle Kevin (great name btw). I don’t know the details of his bank balance but I do know he felt rich enough to help out when needed.
The man is rich in spirit. Without richness of spirit, no amount of millions will make one rich.
TMG
That’s a great point. There is a big difference between having a rich life and having a rich bank account. I want both eventually, but I think the second is pretty meaningless without the first.
Debt-free with enough passive income to sustain a lower-middle class lifestyle is easily within the definition of “rich” to me. (That means you can live an average lifestyle without even lifting a finger!) Median income in the US is about $30,000. Assuming a 4% return, that will take $750,000 in income-earning wealth to maintain. So $750,000 in the bank is one way of being “rich” to me.
If you are working and making $250,000 a year… that’s also rich. You’re in the upper 2% of Americans, and America is one of the wealthiest countries on the planet. I’d say you’re plenty well-off.
I disagree with your definition because it has no upper bound. First you need enough passive income for yourself… and your family. Then enough for all of you to live a middle-upper class, then perhaps upper-class lifestyle. But that’s not enough, because then you need to be able to take care of your extended family too. And enough such that your house could burn down and you’d be OK. And all of your extended family’s houses too. And you need to be able to help your *extended* extended family. Inevitably, everyone gets on that list. (And you have to do this all with passive income, which means 20x more wealth than you’d need if you were being productive.)
At that point, no one ever is rich. “Sure I make 5 million a year, but I have to pay for a $10 million mortgage, send my three kids to Harvard Law School, and pay for cancer surgery for my mom! I barely have enough to buy a new yacht every other year, I can’t be rich!” … but seriously, you’re rich.
@ Evan D
Then perhaps another definition of poor is having not having enough to make MANY choices.
And conversely, being rich is having enough NOT to need to make many choices.
TMG
Very true – when you are poor you don’t get to make many choices about your life. You are working on trying to fulfill your basic needs in any way you can. (The poor are very much on the physiological level of Maslow’s Hierarchy of Needs.) For example, I get to “choose” to eat cereal for 3 out of 4 meals a day. (Cheap! Delicious! Theoretically nutritious!) When I get to choose more varied meals, I’ll certainly feel a bit more wealthy. 😉
You are correct in that there was no upper bound the way I explained it. However, I would have limits set on how much I’m willing to help certain people. I might only be willing to help some people I know for about $43. Others, like my mom, I’d want to provide much more assistance if needed. A large majority of people in the world (and even a majority of people I know) would be eligible for $0 of assistance from me. I would only grant the help to people I like enough and who I feel deserve the help.
I used to think rich was when I could walk into a store like Macy’s and buy every color Polo shirt. I no longer feel that way because I can can do that. To me rich means I have many more choices in life. I can travel, go out to dinner or get a new car and it won’t change my life. I do not think of myself as rich, but comfortable. As I close in on retirement, I think slightly differently.
My friend you have reached a turning point! You are really beginning to appreciate the value of the being able to manage money well. Freedom to live the life you desire while helping others in time of need – true riches indeed!
I love you definition of rich and I think it starts with living well below your means. Rich is related to your cash flow, not your pay check (if you ask me). 🙂
That’s a great definition of Rich! I’ll have to revise my definition too.
This is the perfect day to reflect on the things that make you ‘rich’ and it leads me to think about my family, my health and enough to live comfortably. Life is hard and there’s no insurance for divorce or bad days and such so we must forge ahead and do what we can each day.
Thought provoking. I don’t know the answer. I have a net worth greater than I had hoped for when I was young, yet I wouldn’t consider myself rich. I think wealth is measured in more than $$$$.