I work closely with the finances of hundreds (and over the years, thousands) of people. I learned early on that income doesn’t correlate to happiness once you get past starvation level. But in recent years I’ve really been noticing that feeling rich is almost entirely unrelated to income levels. For the past year or so I’ve been trying to nail down what being “wealthy” actually means.
I think a better term for “wealthy” is “having financial wellness.” (Being physically well is healthy, being financially well is wealthy.) So far I’ve identified five characteristics:
1.) you have some savings against a rainy day. Quantity doesn’t matter. You just have to have some cushion against the vagaries of life, otherwise every little setback sends you into a tailspin and you end up with debt out of control.
2.) you have debt under control (if you can sleep at night, if it’s all going to get paid off, if YOU say it’s under control, it’s under control.) A common question is whether someone ought to pay off debt or build up savings, and my honest answer is that they should do a little bit of both at the same time. Without savings (see #1) you never really get out of debt. Again, I don’t think it matters if you are debt-free, just that you have a plan for handling the debt you do have and you’re working on it.
3.) you give something to charity. This is enormously powerful, a self-fulfilling statement to say, “I have enough so that I can share.” I don’t care how much you give or who you give it to, the important thing is to determine what YOU value, and then go make the world a better place because you existed by funding your own personal values. The feeling of being able to share is really important to being wealthy. Again, it really doesn’t matter how much, just that you do it.
4.) you save something for retirement. I recommend that people tithe to themselves. There really isn’t such a thing as “having enough money saved up”, but the act of doing something is what seems to be important to feeling wealthy. A fantastic way to do this is to put 10% aside in a retirement plan at work. You’d be shocked at how little you notice the hit in your current lifestyle. (A Roth IRA is an even BETTER idea if you are eligible for one.)
5.) you aren’t enslaved by your job. (not that you don’t have to work, just that you could find another one or change careers if you cared enough to bother.)
None of these characteristics involve being able to buy things. No one who wants to be “rich” is ever going to be rich enough. But people can be truly wealthy at just about any income level if they are actively working on these things.
Well, that’s my theory, anyway. So far. I’m still working on it. (And this is an edited version of the initial post.)
What do you think? What does being wealthy mean to you
Originally written Sept. 28, 2006