How much does it take to be considered wealthy? There is an answer, and it might surprise you.
It surprised me because when Schwab did this survey asking people how much they thought they needed to be wealthy in the US, their answers led to something called the Wealth Paradox Effect. I’m going to share some of the top findings from this study so that you can improve your financial life and then find out how to achieve that feeling of wealth that you might be looking for.
When they asked, “At what level of net worth would you say a person is considered wealthy,” the average answer that they gave was $2.2 million. They also asked those same people, “Do you feel wealthy?” And almost half (48%) of the respondents said, “Yes.” The average net worth of those people that said yes had 560K, much less than the $2.2 million in the previous answer. There are a few important parts of the survey that you should know, especially if you are retired or you’re thinking about retirement, and a few thoughts you probably have not heard before coming from a financial advisor and a CFP professional.
The first thought is that time is more important than money. Americans feel that having time is more important than money, especially for people who are 57 and above. Our clients often spend more money in retirement on things that save them time because they’re at the point where their money is making more money, but it’s not able to make more time. As you get older, we’re reminded how much time we actually have left, and time becomes our scarcest asset – more so than our savings in the bank or our investments.
The next thing I liked was how, for those 57 and above, they cared the least about how they compared to others. This is great because we know that comparison is the thief of joy, and feeling wealthy is up to you. It’s not a number that somebody else tells you you should be. Now the third surprise was how only a third of these individuals had a financial plan, but of the people that did, 92% of them felt confident that they are going to reach their financial goals. That feeling of confidence is just so important for overall wellbeing and not feeling stressed about money. This brings us to the next point in this study that says over 70% of people said not stressing about money is more important than having more money than others.
It’s become clear in helping hundreds of people achieve their retirement that peace of mind and contentment becomes more important, especially as we get into retirement, because it could be scary for some to switch from working and saving for 30 years to all of a sudden having to spend those savings. You might think that sounds crazy, but it’s a common feeling for many people. Those who have a level 10 out of 10 confidence about their spending and their plan have a much better retirement overall.
Now, the next thing that stood out was the importance of fulfillment and purpose in your personal life over “working on my career.” The secret here is to finding a career that can really provide purpose and fulfillment where it actually doesn’t feel like work, but that’s not easy for everyone to do.
I talk a lot about these four things: finding something that you are good at, that you love doing, that the world needs, and that also pays you to do it. That’s really the ideal career. Then when you get to this point of financial independence, you don’t need the money anymore, so you might find something new here in retirement. The three Cs is something we talk about a lot on this channel and with our clients, and it’s that idea of if you can achieve these three things (creativity, curiosity, and connection), you’ve unlocked the secret to a fulfilling life.
The next thing I like from this study is seeing that wealthy means different things to different people. More people referenced wellbeing over money when it comes to describing wealth. When describing wealth in their own words, Americans referenced wellbeing over money and assets. This harkens back to the four types of wealth that I talked about in a recent video if you want to check that out next!
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Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.