How to Define Wealth

On the National Public Radio website is a 30-minute segment from Talk of the Nation about how one defines wealth. While planning for the future, many Americans think (whether attainable or not) about college educations, 401(k) plans, IRAs, the stock market, owning property, savings, vehicles, lifestyles, and other materialistic needs. Everything just mentioned contributes toward “wealth.” While I recommend listening to the 30-minute segment yourself, listed below are some interesting points made:

– Net worth is what you own including the equity in your home (but which you don’t have until you sell your house)
– You have to spend below your means to truly feel wealthy
– Americans, no matter how much they make, consider themselves middle-class
– Median household income is $48,200/year
– When a household says they’re just getting by with making 100k-200k per year, they are lying because it means they can supply their basic needs but just can’t get all their needs and wants

Being rich means different things to different people and surely the definition is different to people living in Alabama compared to people living in Hollywood. I think there are two generalized definitions of wealth:

1) Wealth in terms of a dollar figure
Some people will say that having a net worth of a million dollars is considered wealthy. Another person might say having multiple houses (regardless of your savings) is considered being rich. There will be a group of people that will label themselves wealthy based on how much they have in material items or savings.

2) Wealth in terms of having enough to pay for the necessities and a sufficient amount afterward to be happy
This second definition can apply to people whether they make $100,000/year or $25,000/year. People that fit into this category will be happy that they are able to buy what they need, able to live in a decent house or apartment, can give their children the best education possible, and still able to save some money at the end of the day. Honestly, people don’t need 80GB Ipods, Coach purses, BMWs, clothes from Neiman Marcus, or $40 meals at fine dining restaurants. Those things just listed are all “wants” and people who are able to be happy with attaining their “needs” and being able to get some of their “wants” will be wealthy in this wealth definition.

I think that most people fit into the second definition because most Americans never really know how much they need “to be rich.” Even the wealthy want more. A lot of people don’t even consider retirement money or equity in your house as part of being rich or not because you don’t have that money in your pocket at the moment. Bottom line is that most people living the United States are wealthier and more well off than the rest of the world. Regardless of what class people are in, everyone does things for a reason and that reason is to become wealthier (and that term is loosely defined).

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