Ask the average American on the street if they are in favor of raising taxes on “the rich,” and invariably, you’ll receive a “yes” answer. They will cite tax loopholes, fairness concerns, greed of the wealth, a stalled economy, and virtually any other reason to make their case. Of course the rich should pay more in taxes. Wealth is evil and should be punished!
The problem is that no two people are likely to agree with a definition of “rich.” Ask an attorney if he is rich, and he will likely say “no.” Ask the same question of a surgeon, and she will answer in kind. But to a city bus driver, the attorney and the surgeon are rich beyond imagination. And to the widowed mother of three children who works at the local diner, the bus driver is surely living a lavish life!
According to the Washington Post, a Pew Research Center Poll revealed that 54 percent of Americans favor raising taxes on the rich to expand programs for the poor. The problem is that fewer and fewer Americans are able to identify whether they are rich; they think a “rich” person is someone who earns more money than they do.
Side note: I once heard a joke that the ticket to becoming rich is earning more money than your brother-in-law!
The Washington Post provides further intriguing data on the matter straight from the minds of Americans:
According to a 2013 Washington Post survey, people who live in households making less than $50,000 say that an income of $200,000 would make you rich, while people with incomes between $50,000 and $100,000 say you’d need $260,000 to be rich. And people making over $100,000 say they wouldn’t feel rich unless they were making a cool half a million dollars a year — or more.
THE GREAT DIVIDE
Americans are clearly divided on this issue, and perhaps for good reason. After all, a number of factors are at play in the “how much is really rich” discussion, including family size, location, expenses, level of consumer debt obligations, amount of savings and investments, and so on.
Yet the United States tax code is calculated and cold when it comes to many of the aforementioned factors. Barring unforeseen variances, a married couple earning $50,000 will still pay the same amount of federal taxes in Manhattan as they would in rural Tennessee. The primary difference is they might feel rich living in Tennessee.
So is “richness” forever destined to be defined in an ambiguous, subjective manner?
THE GRAND CONFUSION
I vividly recall a family discussion from my childhood regarding the supposed “riches” of a distant family friend. One family member reasoned that this friend, a respected businessman, must be rich due to his sizable income. Another member of the family supported her hypothesis by citing the friend’s large home on the lake, fleet of luxury vehicles, and designer wardrobe.
As I child, I simply nodded my head in agreement and wonder. As an adult, I see the truth.
Income, no matter how high, does not make a person rich. Possessions, no matter how numerous and luxurious, do not make a person rich.
Consider two fictitious people. We’ll call them Charles and Leonard. Chuck earns $100,000 per year, and Lenny earns $150,000. Lenny may appear to be the richer of the two, but his 6 bedroom home, BMW, and multi-millionaire lifestyle comprised of weekend trips to the casino and multiple rounds for the entire bar are sucking him dry. Meanwhile, boring Charlie spends only $45,000 per year, lives in a modest town home, and drives a Toyota Corolla. Now who is rich?
Sadly, most Americans have defined richness in a backwards manner. We put Lenny on a glorified pedestal and lament Chuck’s evident misfortune. In doing so, we have it all wrong.
As Paula Pant is famous for stating, you can afford anything, but not everything. Being rich doesn’t mean having all the things. It means having money and freedom to buy all the things. Richness is not all about how much money you earn; it is about how much you keep. Richness is not all about how much you spend; it is about how you spend it.
HOW TO BE RICH AT ANY INCOME
This isn’t the first piece written about how much money it takes to be rich, and it won’t be the last. But this will be one of the few articles which rejects stating solid income and asset amounts as a threshold for being rich. The simple reason?
I believe anyone can be rich at any income.
At the end of the day, the only person who determines whether you are rich is you. Others can point, gossip, sneer, and conjecture all they wish, but it will only impact you if you allow it.
If you want to be rich, regardless of your income, it’s up to you to set about changing your mindset and actions. Most “rich” people have mastered the act, and you can learn from them.
1. Stop caring what other people think of you
If you care what other people think of you, you will have a difficult time becoming or even feeling rich. A desire to impress others is a sure fire path to financial mediocrity. Be a kind, caring person to the best of your ability, but don’t allow others’ feelings to impact your finances.
2. Think more about what you have and less about what you lack
Are you a glass half-empty or glass half-full person? I aim to be neither. Though it is hard, I try to navigate my life by a “full glass” mindset. Even a glass half-full mindset leaves you wanting more. And the trouble is that even when you do get more, the glass perpetually remains half full. Learn to practice gratitude for what you do possess.
3. Know your most precious asset
Ask the world’s billionaires to pick one asset which they covet most, and I believe most would say “time.” In a world of great inequality, time is the great equalizer. Use time well and you can make a lasting impact; waste time, and it is gone forever.
Most people would benefit from the eye-opening experience of charting their time in fifteen minute blocks for an entire week. I have done so for a few days in the past, and the results were humbling. The ways you choose to spend your time indicate what is most important to you.
By building habits, routines, and structures into your daily life, it is possible to unlock the full potential of the time which is available to you.
4. Save first, spend what is left
While the first three action steps reside in your psyche, the final step is as practical as they come: rather than spending first and saving whatever money is left, save first and allow yourself to only spend what remains. This is a sure fire way to grow the gap between the two most important numbers for financial success: your net income and your net expenses.
THE HEART OF THE ISSUE
French designer Coco Chanel said, “There are people who have money and there are people who are rich.” According to Benjamin Franklin, “Content makes poor men rich; discontent makes rich men poor.” These two anecdotes strike a powerful chord. They speak to the power of the human mind and spirit. Ultimately, it is up to individual to change her mindset and take action to build a rich life.
What does it mean to be “rich” in today’s world? How do you define it?