Financial Samurai

I have to say that there needs to be a NYC guide too. 500K in NYC isn’t rich. It’s upper middle class. Now that I say that I might be part of the poor class being in NYC. Actually the upper poor class.

Anyway I love the fact that you said fuck it and started a website. I always say one needs to take on the fuck it philosophy. You strengthen my point.

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Financial Samurai Reply:
January 27th, 2012 at 2:46 pm

Upper poor class sounds pretty good too! I feel for Manhattan residents with the extra 2-3% cIty tax! Great city though.

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You make a really good point about what is rich. Hitting $200,000 per year is not rich, and shouldn’t be taxed as such. I’m close to that this year, and like you said, I’m just starting out. However, I think you’re right – about $500,000 per year is. Maybe they add another tax bracket (don’t change the existing), at that level.

Also, you have to remember that the “rich” usually earn their money through savings and investments, and not wages, so are taxed substantially different as well (paying capital gains rates and such). This needs to be addressed as well.

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Financial Samurai Reply:
January 28th, 2012 at 1:23 pm

Well done Rob for almost getting to the big 200 level! Hope you surpass that this year and don’t get to upset at the tax bill when you do!

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I think “rich” is incredibly subjective. I’ve lived in cities where the median home price was 2 times my annual salary; I now live in a city where it’s NINE times my salary. If you look at the highest cost of living cities in the world, NYC is actually the only U.S. city on the list: http://www.citymayors.com/features/cost_survey.html

That said, I now earn nearly US$90,000 a year. I’m not rich yet, but I am definitely upper middle class, even here in Australia where we have a high cost of living. I fully expect my income to rise over my career. And I also think that I should pay more taxes when that happens.

I agree with you that we should all seek to maximize our income. But I also know that a person’s socioeconomic status is determined by multiple factors. I would love to see my income taxed more in order to support high quality schools in poor neighborhoods and healthcare for all, for instance.

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Financial Samurai Reply:
January 27th, 2012 at 2:49 pm

“Rich” is subjective indeed. When you reach the $200,000 level where I start considering individuals to be upper middle class, let me know if you still feel the same with a $70,000+ Aussir tax bill!

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Earn Save Live Reply:
January 27th, 2012 at 11:47 pm

You know what? I am fully ok with that tax bill. :)

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Abagail Reply:
October 5th, 2012 at 4:10 am

Socio-economic status has more to do with lifestyle than sums of money.

Anyone who needs to work for a living is working class. Regardless of whether they have a corporate job or do a trade. The great majority of us are working class because that is how a society functions. If you have worked all your life and still can’t sustain your lifestyle from your capital, then I am sorry to say you have not moved out of the working class.

Middle-class are those families who don’t neccessarily need to work to put food on the table and afford housing. They may earn a passive income, own property, etc. How extravagant the lifestyle determines whether they are lower, middle or higher middle-class. You would need to have enough capital to live off, I would say $500,000 in assets/savings as a minimum to get yourself into lower middle-class.

A rich person is anyone who can not only support an extravagant lifestyle for themselves, but also the wages of their servants. If you have or could have people working for you full-time for purely domestic purposes then you are rich.

These guidelines apply over many places and time because they are at the heart of heirarchal societies.

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Financial Samurai Reply:
October 5th, 2012 at 9:11 am

I’m impressed you think middle class families “don’t necessarily need to work to put food on the table and afford housing.”

Many would say that is the definition of the wealthy. And if that truly is the definition of middle class, then I’m so bullish on our future!

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I like the guidelines you’ve come up with, as far as evaluating income levels. Living in the thriving metropolis of Buffalo, NY, I can safely take a healthy discount off those numbers though. However, you run the numbers, $200K isn’t rich in most cities. People who think that, well, live in Buffalo!! I’ve visited enough larger cities to know the “rich” bar is much higher than $200K.

My favorite definition of true wealth, though, still comes from Rich Dad, Poor Dad. Wealth is how long you can live at your desired standard of living if you stopped working today.

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Financial Samurai Reply:
January 27th, 2012 at 2:50 pm

Joe, Rob has a good definition of wealth. Can’t argue with that.

May I ask, out of all the places in the world, why Buffalo?

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Joe Reply:
January 27th, 2012 at 6:16 pm

Well, I was born here. I’ve been one of the fortunate ones to latch on to a successful company. And, of course, there’s family. The biggest reason we’re still here!!

Trust me, my wife and I fantasize almost daily about jetting out of here. At least we have good football. Oh, wait, never mind.

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Sometimes I think that “rich” is anyone who doesn’t support Obama’s divisive politicking (as opposed to the other party’s divisive policking). :-(

I’ve always thought of “rich” as being a statement of wealth – not income. Even then, cost of living, age, number of dependants etc can render one person with $X rich while another person with more than $X is not rich.

As far as getting there is concerned (wherever “there” is), the best method for most people is to focus on generating employment derived income, live well below your means, invest prudently and don’t get divorced etc. Other options based on business start ups etc are IMHO wonderful when they happen but long shots for most people.

A further thought: you can get relatively rich by earning a high income in a high cost location like NY and then retiring to a low cost location (obviously this will impact social life etc, but it works financially).

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Jerry Reply:
January 28th, 2012 at 2:47 pm

I agree with you. I think your advice is insurance for those who want to succeed and get ‘there.’ ‘There’ can mean different things to different people. I know plenty of millionaires who did not make those incomes. Ever. Yet, they made it ‘there.’ Their examples lead me to think differently about how to do things for myself and my family.

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Coming from suburbs of Atlanta, I think I’d take a sizable discount to the above numbers. Considering you can buy a 3,000+ square foot house on at least an acre in an upscale neighborhood for around $165-195,000… in Georgia, I’d say upper middle class is around $100K and rich is anything north of $250K.
(But please don’t tell the Democrats)

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My wife and I live in Oklahoma and gross about $140k per year. We are able to save and invest a ton, live in a nice house (2200 square feet), drive good cars etc with this income level. I wouldn’t call us rich, per se, however I feel that with this income level and about 10 years, we can become rich (I’m only 27 now). To feel rich here where we live, I’d say the number would be $200k to $250k in household income, however, once we get there (hopefully), I’m sure I’ll want to raise that number.

The curveball is that the wife wants to quit work in about 2 years when we start a family, so the onus will be on me to find a way to replace her income over the next 2-3 years so that we can continue on the same path toward our goals.

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Financial Samurai Reply:
January 27th, 2012 at 9:00 am

Thanks for your example highlighting your spouse’s desire to quit and be a SAHM. When you get to $250,000 or more, you will acutely feel the government breathing down your neck to take your money. You will see a much higher percentage of your income go to taxes, and you will not feel rich.

Just my opinion. Let me know when you get there!

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This is America – thus 1% of the country is rich, 1 % is poor and 98% is middle class. That is what I think from watching the news and reading and listening about politics.

To me PERSONALLY, I so no value in determining what income level is rich. For example if, $500,000 is rich then what is $498, 886?

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Financial Samurai Reply:
January 27th, 2012 at 8:57 am

$498,886 is considered upper middle class. Only $500,000+ is considered rich.

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David M Reply:
January 27th, 2012 at 9:49 am

Thanks – now I know that I’m not rich! :) Maybe next year!

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koy Reply:
March 1st, 2013 at 7:07 am

well i’d shoot to stay at $498,886 unless you can make up the difference of the potential increased tax amount.

I live in Vancouver (Canada), and it’s the second most expensive city in the entire world when looked at income vs. living costs (housing prices, transit and transportation prices, etc). I’d say I’d feel “well off” but not rich if I made over $200,000 (or $250,000 with two people). If I made $100,000, and the boy made $100,000, and we somehow made an extra $50,000, I’m sure we’d be able to afford a decent house and reliable cars, but with a family, kids, education, transportation and housing costs in Vancouver, we wouldn’t be THAT well off.

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Financial Samurai Reply:
January 27th, 2012 at 8:57 am

The higher you go, the less you will feel you’re getting return because of taxes. It will literally make you sick to your stomach, and I know the Canadian tax system is quite high at 40%!

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The problem with generalities is it fits some anonymous group like the rich/wealthy. I think annual earnings of nillion dollars is definitely rich, however it is what you have left that may make you rich. The million dollar earner may spend it all on frivolous things like cars, jewelry, dinners out etc and have nothing left. He may be rich, but a fool! I think we should be encouraged to save and invest. It would certainly help the economy.

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Like Joe I like RD/PD definition.

Sam you are 100% correct about wealth starts in the mind. You have to be dependent upon yourself instead of relying on others. Instead our government wants to create more dependents?

I recently listened to a Tony Robbins program the different levels of wealth (in just economic terms) and think it makes perfect sense and should be the goals we set for ourselves.

They are:
1. Financial Security: that amount of money that covers food, housing, cars, travel, and basic
entertainment.
2. Financial Independence: where you don’t have to work and everything is covered.
3. Financial Freedom: you don’t have to work and EVERYTHING YOU CAN THINK OF is
covered

In fact found the whole program online (on his web site):
http://www.tonyrobbins.com/financial-freedom/index.php

The details on how to do it in his program is simple, but still worth listening.

Enjoy.

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I’m glad to live in a small city with one of the lowest costs of living in America. I could buy a house for $250,000 that would blow the minds of people from these “major” cities. They would call it a “mansion.” It would be over 3000 square feet and have granite countertops and a inground pool, replete with fancy finishes. It would probably cost $3-4 million in San Francisco.

Granted my city is not “cool” by any measure, but I’m fine with that.

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Financial Samurai Reply:
January 28th, 2012 at 9:25 pm

John, if you are happy with where you live (where is this?), then more power to you. Living in a nice place with good weather and food is unfortunately one of my weaknesses. Hence, I’ve gotta pay up!

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John | Married (with Debt) Reply:
January 29th, 2012 at 4:24 pm

Central IL. Every time it snows I think of moving. Food here is killer if you like two pieces of toast with meat on top, a pile of fries, all smothered in melted cheese (horseshoe it’s called).

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Financial Samurai Reply:
January 29th, 2012 at 8:32 pm

Yum, that sounds good! :)

The bubble of NoCal really skews your perspective on these things.

Your categories build in substantial lifestyle inflation that makes it look like people earning huge sums of money are just “middle class”.

This is just not true – a family making wise choices with a $100K income can be “rich” while a family making poor choices, such as a $1.1M mortgage, with a $500K income can be “poor”.

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Financial Samurai Reply:
January 27th, 2012 at 8:55 am

Are you not justifying your income here? Every single level I stick to my savings rate guide (20-35%).

You aren’t understanding taxation if you think a $1.1 million mortgage is a lot for someone making $500,000+. They have an effective tax rate of 35%, and $1.1 is the max mortgage indebtedness for interest tax write-off.

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MacroCheese Reply:
January 27th, 2012 at 9:12 am

An increase in income does not require a corresponding increase in expenses in order to maintain a healthy and happy lifestyle.

It still costs roughly the same (have to factor in natural inflation of course) to keep your family fed, clothed, and sheltered.

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Financial Samurai Reply:
January 27th, 2012 at 9:26 am

Cool, so you recommend saving more than 35% right? And you are speaking from experience on your income and are saving more than 35%?

MacroCheese Reply:
January 27th, 2012 at 11:54 am

Replying to FS:

I had to crunch the numbers…I actually came up with a savings rate of somewhere around 35% of my take home pay, depending on the month. I should point out that until my wife quit to stay at home with our newborn baby, we were saving 100% of her take home income.

Above the line…I contribute up to the maximum match from my employer in a 401(k).

What I’m really getting at, I think, is that the key to being “rich” is being frugal. It’s not what you earn, it’s what you spend.

Travis Reply:
January 27th, 2012 at 9:07 am

I complete agree with you Macro. I believe that no one, regardless of your income level, ever feels that they’ve crossed the “rich” threshold, as most of these comments prove. It’s easy to look at your financial situation and feel that you’re just barely scraping by on $200,000, but if you look at your expenses, how much did you inflate your lifestyle by when you starting earning more??

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David M Reply:
January 27th, 2012 at 9:53 am

I absolute agree.

Blogs and financial advice always say you need to budget? I personally have never understood this. I spend what I need to spend and save the rest, thus budgeting is not necessary.

I really think I could earn 100% more and my spending would increase only marginally – 10% max would be my guess. Maybe I’m Warren Buffett!

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Jerry Curl Reply:
January 27th, 2012 at 10:15 am

How much do you make now? I highly doubt if your income goes up 200%, your spending only goes up 10%.

Your tax bill will be huge, and only when you get to live off capital income, then will your tax bill go down.

Jerry Curl Reply:
January 27th, 2012 at 10:14 am

Travis, unless you make $200,000, $350,000, $500,000, you and David probably have no idea.

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“Those folks are charlatans, and some do it very well, which is why they are wealthy.” – Haha, that’s depressing! So they weren’t rich, sold you advice on how to become rich, then became rich themselves?

You should edit the word HENRY in there somewhere – we’ve got to bring it back and make it stick!

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Financial Samurai Reply:
January 28th, 2012 at 8:48 am

I tried before… for some reason, it doesn’t stick. And, it doesn’t stick in my mind, so I guess not!

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In my area, making 100k a year would put you pretty far ahead of the rest of the people in town, so I’d say that would be considered rich. You’d be able to live very comfortably, and probably purchase a house outright (even after retirement account maxing) in 3-5 years, depending on other goals and lifestyle. There’s not really much of a chance of me justifying my own income here, because I dont make anywhere near 100k!

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Financial Samurai Reply:
January 28th, 2012 at 8:48 am

I see your point, as being rich is relative. If everybody made $500,000, you wouldn’t feel rich at all!

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What a lot of naysayers don’t realize is how much income taxes are paid at higher levels. They are talking out of their ass if they think $200,000 is rich, simply b/c they have no idea.

In NYC, I would say $500,000 is “upper middle class”. San Francisco… perhaps the same although your dollar goes 20-30% farther for property.

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We’re right smack in the middle of middle class. We are somewhat frugal and Portland is not that expensive compare to CA so we are comfortable. :)
Yeah, I would say 500k income is rich.

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Aloysa Reply:
January 30th, 2012 at 3:12 pm

Ahh… I always wondered if Portland is somewhere similar to Salt Lake. Seems like I was right.

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Having lived and grown up in a high cost city (Los Angeles) then moving to a low cost mid-western city, these numbers definitely look legit to me. My parents made right around 100k when I was growing up around 10 years ago. Obviously they didn’t give me their tax return but it’s not terribly hard to figure it out. I would have called us middle class, but it felt like lower middle class because of some of their choices. They owned a home, but the neighborhood is not great, and the house is small. They drove newer cars, but not brand new most of the time. They paid for private school because the school near our home was unsafe. It also lost its accreditation 3 years after I graduated. Compared to the people in the private school I went to, we were poor. Compared to the people in my neighborhood we were upper middle class. Had they lived where I lived now, they could have owned a nice home in a nice neighborhood and pocketed the private school costs because the schools are great. Until you’ve actually lived in one of these cities, it’s difficult to comprehend the difference in cost of living.

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Scientific research has identified the number somewhere around $70K-$80K in annual income, in order to “feel rich.” As many have pointed out, however, that is practically poverty level in some parts of the country in the sense of “real life”, especially if a family is living on that income. But, from a quality of life standpoint, research shows that is the tipping point between being very financially stressed, and having more flexibility to not worry about every dime is within that range. Additionally, it is the “ceiling” where you may feel happier, or not, based on your income and financial stress. Income above that, again, according to research, doesn’t impact your happiness level.

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Financial Samurai Reply:
January 27th, 2012 at 10:40 am

Guess how much these researchers make on average? You guessed it, $70,000-$80,000 a year.

http://www.financialsamurai.com/2010/09/20/the-magical-income-number-level-for-maximum-happiness/

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Nice and relevant post Sam. I put emphasis on another financial aspect besides income. It’s the savings.. To me savings is the ultimate income one can have. It does not matter if you earn $200 or close to it.. if you cannot save enough bucks, you will start at the beginning next month. So, savings is must.. nice post..

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Financial Samurai Reply:
January 28th, 2012 at 9:27 pm

Which begs the question: Why don’t more people save more money?

A lot of folks on my recommended savings post say they felt like they got their guts kicked bc they were light compared to the chart.

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Huge difference between being monetarily wealthy, and *feeling* wealthy. Obviously you’re talking about monetary wealth, but take a look at this comment stream of New Yorkers making $700K+ and feel “poor”. It’s insane.

http://gawker.com/5873793/rich-people-are-funny-when-they-whine-about-feeling-poor

Here in Hawaii, we need about $50K year to send our kids to private school (public schools here are known for being not so great), plus if we ever wanted to buy a house with 3 bedrooms and a yard we’d be shelling out close to $700K. That would be another $4000+ mortgage and property taxes a month – so just for those two expenses that’s over $8K/month already. Ouch!

We make $32K/year. I think we’ve got a long way to go…lol.

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Financial Samurai Reply:
January 27th, 2012 at 11:17 am

Kris, so what is rich in Hawaii for a family of two in your opinion?

Taxes kill the New Yorkers.

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I think this is the best case for calling a $350,000 income “upper middle class” and not “rich” that I have ever seen! Seems hard to believe when you say it, but with your analysis only based on expensive cities, it’s easier to see what you’re saying.

I still think it’s hard to define “rich” based on income. It’s really about your net worth and not what you make, but there’s no way that makes sense to tax people based on what they’re worth.

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Financial Samurai Reply:
January 27th, 2012 at 12:10 pm

Thanks Jeff. I encourage everyone to do the math and calculate what their after tax income is, rather than speculating what it is.

And really, is it so bad to be “upper middle class”?

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David M Reply:
January 27th, 2012 at 3:45 pm

Not at all in my opinion!

Based upon what you have written above I would be upper middle class – however, I grew up pretty poor – thus I feel rich.

I earn more and have saved more than I ever in my wildest dreams imagined.

I grew up in a family of nine children and my father died when I was 4 months old at 35 years of age. We grew up on social security. Did I ever go to bed hungry – no. However, did I get an allowance or even 1/4 of the spending money other people got to go to the store – also no. We grew up with a black and white television and of course did not have cable.

I have great memories of my childhood and now I really appreciate every dollar I earn save, invest, and/or spend.

I’m unbelievable happy being upper middle class!!!!!!!!

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Even after reading this post, I still think that $200k is rich. I base this on the fact the making 200k+ puts you in the top 1.5% of income earners (according to wikipedia). Of course, I guess I’m still thinking about it as someone who lives in a low cost-of-living area. I don’t make anywhere NEAR 200k but yet I still feel rich in that I have enough money for everything I need and then some.

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Michael Reply:
January 27th, 2012 at 6:39 pm

If you never lived in NYC (or similarly expensive local) you just won’t get it. My wife and I have a combined gross income over $200k. We live in a modest 1 bedroom apartment and drive an 8 year old car. Our commute to the office on average takes one hour, each way. We don’t have children and thus are saving quite a bit each month, but as we look to buy a home to raise a family, we are finding out that our income doesn’t take us very far. Homes that are just 10 minutes closer to Manhattan can cost anywhere from $600k to well over 1 million. Two bedroom apartments as large as our 1 bedroom start at 1 million. It’s pretty crazy. $200k in NYC is most certainly middle class – an average 3 bedroom home in the suburbs, a typical long commute to the office, kids in public schools with one or two vacations per year – a decent lifestyle, but certainly not rich.

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Financial Samurai Reply:
January 28th, 2012 at 8:17 am

That is crazy that a 1 bedroom apartment STARTS at 1 million… ugh. How much are you guys saving a year if you don’t mind me asking?

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Michael Reply:
January 28th, 2012 at 7:27 pm

Yeah, crazy right. I was speaking about a nice 1 bedrooms in Manhattan. There are small 1 bedrooms avail for less. Outside of Manhattan, prices drop considerably, but are still expensive compared to the rest of the country. We’re currently saving about half of what we net each month (non retirement).

I think the part where you mention having a capital base is probably the best definition of rich in there. Income can change, whether you decide to stop working or life decides for you. Your income certainly influences capital, but as we know, lifestyles, friends, and co-workers have expectations. If you make 500k and only set aside 10k a year in savings are you rich? I don’t think so. Grant following Sam’s strategy will help you put more away, but unless you really have something to fall back on, income is transitory, wealth lasts.

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Financial Samurai Reply:
January 28th, 2012 at 9:29 pm

I do believe if you are making 500k and only saving 10k you are rich bc spending 490k on life is big balling!

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I’m in the camp that rich is a lifestyle, not a paycheck. It does help to have a big income to live a rich lifestyle, but it is possible to do amazing things on $40k or $50k per year depending on your goals, dreams, and circumstances.

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Financial Samurai Reply:
January 27th, 2012 at 1:56 pm

What type of amazing things can you do on 40-50k a year and how much is one able to save?

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Love this post and the debate it sparked.

My husband and I are considered by the government to be in the top 1.5% of wealthiest Americans… but we live in Southern California!! How far our salaries go out here cannot even compare to other parts of the country.

I do agree that “rich” is more about lifestyle than income, although I believe actual “wealth” requires a substantial capital base.

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I think I agree with your assessments; often times people consider something like 200K “rich” but that’s not, especially for someone without much saved. I think when you’re hitting 400-500K and more, that’s outside the range of even doctors, lawyers, etc and usually into execs and entrepreneurs – long-term wealth.

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Interesting discussion Sam dono. I think I would feel rich if I had more purchasing power than 99% of the people around me. $190K is rich for me, because that will put me in the top 1% of all income earners in my country. Unfortunately I’m not even half way there yet. If I were in the US then making $380K would be considered rich for me, because that’s the 1% cut off line for you guys. I guess we can round that off to $400K, which isn’t far off from your thinking.

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Financial Samurai Reply:
January 27th, 2012 at 8:49 pm

Which country dO you live in mate? I’ll check out your blog now, thx.

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Liquid Reply:
January 27th, 2012 at 9:44 pm

Canada (^_-)

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Financial Samurai Reply:
January 28th, 2012 at 9:30 pm

Ah yes, the land of 40% taxes and cheaper health care for all.

I think i’d stop at 100,000 if I lived in Canada and relax!

I really believe that it is a bad idea to create class war by targeting certain income level for the tax hike. Instead, best way to mobilize economy and to create wealth is to cut taxes. President Regan did that in early 80′s and the time is ripe now for the new leader to so.

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David M Reply:
January 28th, 2012 at 3:33 am

Yes he did – cut taxes – but ALSO – cut deductions, loopholes, credits, etc.

I would love to see us go back to something similar to what the tax reform act of 1986 created. Chances of that happening anytime soon – Slim to None!!! Unfortunately.

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Growing up in a lower middle class family, I think I have a whole different perspective on what it means to be rich. I have 3 brothers and 1 sister (5 of us total) and I don’t think my parents ever made more than $100,000 a year. Most of the time it was $60,000 or $70,000. Now that my wife and I make more than that with no kids, we feel extremely wealthy. I can’t even imagine making $350,000 per year. If we kept our lifestyle the same, we could invest $300k per year and retire in 5 years…. crazy.

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Financial Samurai Reply:
January 28th, 2012 at 8:19 am

And the kick in the nuts is, you can’t even invest 300K per year for 5 years b/c after taxes, you only have about $245,000 and still need to eat and live!

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You & I seem to be very similar in our definitions of rich.

Thanks to my stupid decisions (& our bankruptcy) I feel like I’m just now starting the first leg of a race that was started 15 years ago. Almost like we were frozen in time for a long period of time. I’m WAY behind where I should be at this point for retirement savings. The only way to ‘fix’ that is to find a way to increase our income to try to make up for lost time.

All actions have consequences.

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Financial Samurai Reply:
January 28th, 2012 at 9:31 pm

There’s so much money out there for the taking, anything is possible! Good luck!

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Rich is a function of location, age, income, and assets. To try and define rich by any single variable ignores other important features.

You could have a paid for residence, have a massive portfolio with conservative investments and be living outside of Southern California or the Eastern Seaboard with an income of “only” $100k and not be rich, but live in either of those areas and have no assets, a massive mortgage, and make $250k a year and be rich.

Fact of the matter is that the current tax structure isn’t designed to handle such massive discrepancies in cost-of-living from location to location. The government recognizes the difference when it comes to employee compensation, by don’t they recognize it with respect to the income tax.

If you are going to use income to define rich, it should be based on a comparison with the local median income for the surrounding area. If you are at 3 or 4 times the median income for an area (For example: metropolitan area if urban, county if rural) then it is safe to say that you are rich (at least relative to where you live) [A better measure might be 2 standard deviations above the median]

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I really like the idea of finding a mentor, but getting the right one is easier said than done. I’ve had “part-time mentors” at various points in my life for various things, but most were very specialized in certain aspects of life. There are definitely avenues of life right now where I could use a good sounding board. On the flip side, I love taking the opportunity to help out others and be a mentor the rare times it comes up.

So Sam, maybe you should write a post about how to find a mentor!!!

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Financial Samurai Reply:
January 28th, 2012 at 9:32 pm

Ok, sounds good! Having a powerful ally is really fantastic for one’s everything!

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Why are we dividing people into classes, Sam? If the idea of a tax is unjust, then it must be unjust period, not simply unjust because we happen to be in whatever bucket the government has placed us into. Doesn’t this attitude of placing people into categories just divide us more?

I believe that we are all rich, relatively speaking, and we are all blessed to be alive today. I don’t make a six figure salary, and yes, sometimes I do get envious — I am human, after all. However, the best way for me to benefit is to turn this envy toward making my own circumstances better, and in doing so, I can add back more value into the world.

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Financial Samurai Reply:
January 28th, 2012 at 9:34 pm

Because the term “rich” is attempted to be defined by my post.

It’s not bad to be lower middle class just like it’s not bad being rich.

It’s only bad when you are lower middle class and act rich and blow yourself up. We have to spend accordingly.

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Good post.

I think it’s good you’ve clarified the two aspects of monetary wealth – income and capital.

Just because you make good money, doesn’t mean you are rich.

I also agree with your income levels. Anyone making $500K+ should be “rolling in it”. They could be rolling in something else, but mostly likely that income should provide a very, very fine standard of living! :)

Without making tons of money myself, I’ll have to go the capital route – smart investing. Hopefully every month and year along, I’m getting there.

Cheers Sam!
Mark

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Where I live in, $350,000 is enough for being rich. Important factor is the calculation is pro big city dwellers. If we consider rest of the population who live in much cheaper places, its equivalent to tax opportunity loss for the state.

Shouldn’t there be a mathematical formula to determine your tax rate? Rather than income being the only criteria..oh yeah its called income tax!

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Financial Samurai Reply:
January 29th, 2012 at 8:32 pm

SB, where do you live again?

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It’s interesting how “rich” is such a relative term. For someone like yourself who lives in a wealthy area and hangs out with some pretty “well-to-do” folks, half a million a year in income seems about right. For myself, living in rural Canada, I would consider a family income of 250K to be “rich.” Yet I recognize that is really isn’t “rich” in terms of standard of living for someone living where you are. So aren’t both of us right? This is why I prefer consumer taxes to income taxes. The more you spend the more you owe, it rewards people who are focused on building wealth.

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Financial Samurai Reply:
January 29th, 2012 at 8:35 pm

I guess we can both be right, however when you are making 250K and supporting a family, I highly doubt you will feel rich. 40% tax in Canada at the level right?

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I love the Jon Kabat-Zinn reference. I think what is amazing about income, wealth and this numbers game in general is that it is whatever you want it to be and the potential to reach a level of wealth that at one point seemed impossible becomes entirely possible! Will you soon see me out of debt and on the road to building income and capital? Yes, because I’m totally focused on it!

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Great post! It’s shocking when you see the number laid out that way. I spend some time on this subject as well as I believe high income earners are also highly susceptable to bad decisions. Notably lifestyle creep.

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I never realized how much you are taxed when you income levels are that high. Yet also you seem to be able to live off of so much less if you are “smart” with your finances. I like the idea of taxing the millionaires. Who is going to really feel sorry for someone complaining about making 1 million a year.

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Interesting break down. In Canada our taxes are even higher. Youch.

I think being rich all depends on where you live, the cost of living, and what you have in your life to support. I also think being rich is a perspective. You can own a small house in a small neighbourhood and have no debt and be rich but people wouldn’t necessarily think you are.

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I give some, I spend some and I save some. I give a tithe and then spend a tenth in wild and complete abandonment, as long as it’s in budget. Per investing, I am a tad unique, with RMD from an inheritance, I am near the $5K max per year for tax advantage accounts (also I’m overweight in stocks) so investing is in bonds/bond funds (purpose of the bond fund is to save up to have enough for a lot of 5 [munis]). So the article does not quite fit my situation, for regardless of size it goes toward my long term rebalancing act.

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Average income in the U.S. is ~ $50,000 which is a “middle-class” income in most places.

$200,000-250,000 is considered VERY WEALTHY in the vast majority of the United States.

$200K -$250K might not be all that much if you blow it all living in EXTREMELY high cost of living cities such as San Fan, NY City, etc but general speaking $200-250K is a hell of a lot of money NOT just “middle-class”. Who says you have to have 4 kids, pay 40K+ for their college, save $$$ and so on??? Trying to somehow justify how 200K isn’t a shit-ton of money? That’s not fooling anybody.

100K is considered “upper middle-class” in most areas of the United States. Nobody said you have to live in the most expensive cities (NY, San Fran,etc) in the U.S. and save 1/2 your income, pay $40K for college, etc.

500K and beyond is just stupid wealthy compares to the average American. Even 100K rates in the upper 15-20% of income earners.

Some folks are apparently living in a fairy tale World.

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Financial Samurai Reply:
February 1st, 2012 at 5:06 pm

How easy/commonplace is it to find a $250,000 income in a low cost area?

Thx

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While the idea of being ‘rich’ is a simple one, it is actually a concept with many different ideas and viewpoints. Depending on your income level your idea of ‘rich’ might be different. The more income you currently have, the more additional income it will take to consider yourself ‘rich’.

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Janna Reply:
February 2nd, 2012 at 9:17 am

Right! Just like the older you get, your definition of “old” keep getting higher and higher!!

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I think you mean your mortgage would be $6,000 a month, not $60,000 a month on a million dollar home.

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Financial Samurai Reply:
February 3rd, 2012 at 10:43 am

Thanks for the catch! I mean $60,000 a year actually for a PMI loan. $5,000 a month including $1,800 or so in principal pay down.

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Where you’re located definitely need to be factored in to who is considered “rich.” Cost of living makes quite a difference. What is considered “wealthy?”

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Mark D. Cook Reply:
February 11th, 2012 at 4:14 pm

needs*

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Is this based on Household income or personal income?
Thanks

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I live in Los Angeles, and I made about $200k last year from my job, plus another $24k from rental income. But I’m losing about $1,500 per month from the rental per month, and I am under about $200k for both my primary and investment property. So I definitely don’t feel rich and would be extremely ticked off if I get taxed any more! Also, with my income level, I can’t even take any passive losses on my investment property.

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Financial Samurai Reply:
March 15th, 2012 at 8:14 am

Not being able to take passive losses on your investment property is where things are a bitch. I think the income threshold is around $150,000 AGI right? Seems so arbitrary and unfair.

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So much ignorance here. The author, and most of you, don’t realize that “rich” is about assets – not income.

If I inherit $50 million, don’t invest it (and have no income), I am not rich???

If I make $400K but owe $7 million, I am rich? Nope.

Stupid confusion displayed here.

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Financial Samurai Reply:
May 17th, 2012 at 8:20 am

The post isn’t entitled “What Asset Level Is Considered Rich”. Of course $50 million is rich. That’s for stating the obvious.

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Why do you have someone making $50,000 putting nearly half of their gross income into a 401k and such, but someone making TWICE that, putting $5,000 *less?* That doesn’t make any sense.

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I think your views a little skewed. To you $50,000 for a single person is the starting point for lower middle class. And those people have 401Ks etc…So after all the savvy savings, a mere $2000 a month is enough for a frugal lifestyle. Well…think on this: I was raised in a family of 5 to immigrant parents making $38,000 annually TOGETHER. We didn’t have 401ks, IRAs, bonds, etc…And we didn’t live a frugal lifestyle. We lived within our means and managed to save for rainy days. Even with that income, my parents manged to take us on vacations. Maybe we didn’t go to Disney world or go on cruises once a year but we had adventures together. And they put 3 of their kids through college. So, you saying that $50K for a single person is lower middle class to me sounds as if you’re spoiled and privileged. You want to live the life of a luxury that you cannot afford and think that’s the only way to live. Anything beneath it is a frugal lifestyle. We didn’t have a lot of money to burn but we weren’t dirt poor. We learned to prioritize and live on a budget. So a single person making $50K a year compared to us should be able to accomplish a lot more than just a frugal lifestyle.

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Financial Samurai Reply:
July 29th, 2012 at 9:53 pm

Perhaps $50,000 now isn’t worth the same as it was when you were growing up 20+ years ago??

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Jerry A. Reply:
August 3rd, 2012 at 9:54 am

Perhaps, FS, you’re out of touch with most of America. The median household (not personal) income is right about $50k. That means more than half of American families are poor by your definition of what is rich. Do we really want to live in a country where so many people are poor? Do we really want to live in a country where so many entitled people, who are in the top 2% of all income earners, do not feel “rich”?

Yes, FS, you’re one of the entitled, and so are many of your commenters. You load up your “expenses” with personal savings, which you get to keep. Other people here say they have to pay for private school because public schools are not good enough for their special snowflakes.

How about working to make public schools better? Oh no, that would take realistic tax rates.

How about social programs so people in our country don’t go to be hungry? Oh no, that would take realistic tax rates.

How about paying for all of the programs that we use instead of putting it on the national credit card (public debt)? Instead of making our kids pay for our mistakes? Oh no, that would take realistic tax rates.

What you wrote here makes me sick. You want what this country offers you, but whine when it comes time to pay the bills. I’ll bet you call yourself a patriot, but you’re probably not a vet like me. Refusing to pay for what you say you’re “entitled” to is unpatriotic as well as pathetic.

Just to avoid the usual BS, I grew up lower middle class or even poor. I went to public schools. I now have several graduate degrees. I have a side business as well as a professional job. My household’s income puts us in the top 5%. Our net worth puts us in the top 3% because we save money instead of living in a McMansion and buying every piece of electronic garbage out there.

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Financial Samurai Reply:
August 3rd, 2012 at 10:09 am

I’m pretty sure I’ve paid more taxes and donated way more in charity to you. Why the attack? I don’t attack you for not helping out our countrymen as much.

I’m happy you are paying taxes to support others who are not. It’s my turn to take a break, so thanks for your contribution!

I think you’ll enjoy this post http://www.financialsamurai.com/2012/08/02/going-john-galt-protest-government-waste/

Lloyd Reply:
August 17th, 2012 at 11:09 am

Jerry had some weird point of view.
Charity and earring is not opposed to each other.

When I was 16,made first 10K,I donated all of them to red cross and have worked there part time for free till now.that does’t stop me from building my own business and living relatively large.

I THOUGHT I WAS MIDDLE CLASS BUT I JUST FOUND OUT I WAS POOR LOLLOL

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Financial Samurai Reply:
August 15th, 2012 at 7:00 am

It’s all good Jenn! The great thing if you are young is that you can always find a way to get richer if you wish! And if you are happy with your current income, then does it really matter if you are poor?

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Hey man good article.
I made just enough to be considered rich on your list,good thing is that i do not have to pay that much tax,since tax rate in hong kong for me is roughly overall 15%.
Just found out your blog and am fully intrigued.will follow.

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Finally – someone who got it right! There are so many articles out there trying to define “rich” and I have to constantly say that my annual HH income of $200k is certainly not “rich” even if I live in the state free tax of Texas. No debt and live in a modest 3700 sq ft home, by Texas standards that’s an average size home. Spouse and I left California for a better cost of living.

No kids, although we wanted some. It just hasnt happened for us yet. We contribute the max to 401k and still qualify to contribute to Roth IRAs and we max out our pre-tax FSA accounts as well so that strips us down a quick $54,000. We invest about $10,000 on top of that every year and the rest goes to daily living expenses. Surely we live well but we have to keep working to keep building that retirement account. Plus if that family ever happens for us, we’ll need a nice cushion of savings because I’m going to take a few years off. If it doesn’t happen, then I’ll start looking for a different job that is something “fun” instead of staying on the hamster wheel making the big bucks. Money isn’t everything although it is sure nice to not worry about who’s making the mortgage and electric bill payment!

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And here I was getting excited over my husband and I combined making over $100,000 a year LoL..and we are not even out of college yet.i feel screwed lol. Being a clinical child and adolescent psychologist (average $70000 a year) and husband civil engineering ($100,000 a year) we will obviously not make enough..yikes! Any suggestions on how to make more off what we earn? As you can see I am money dumb lol. by the way we live in Tulsa, Ok.

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Justine Reply:
September 13th, 2012 at 12:08 am

No, you’re fine. You’re really fine. And you’re not even out of college?
You’ll receive raises, do not fear.

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i think you are all on drugs and a bunch of cry baby’s. only 17% of this country make over 100 k.
they say 52k is the medium income but this figure is distorted due to the outrageous amount of money the 17% make. in this country 58% make less than 27k and 17% make less than 57k. that equals 75% of this country under 57k. fs states that someone making 50k could save 22k. i strongly disagree. i make 50k and 12%goes to my 401k, 4%goes to savings. that leaves a whopping 2000 per month take home. the total of just my rent and utilities is 1400 a month. this leaves 600 to pay for any debt inured medical food gas. that’s is 150 a week to live on.
you people should feel fortunate you are in the upper income level. i know people that have 1-3 children making 25k per year working 2 jobs about 50+hours per week. how do you suppose they survive after all their expense’s. you people need to stop wining.

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Financial Samurai Reply:
August 31st, 2012 at 8:05 am

What is your effective tax rate?

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Justine Reply:
September 13th, 2012 at 12:07 am

Come on Samurai. What is your effective tax rate????
If one pays more taxes, it’s because one makes more money and brings more money home! Tax rates are marginal!

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Financial Samurai Reply:
September 13th, 2012 at 12:14 am

Over 30% including state taxes.

And yours?

@paul
I must agree Paul. I am a mother of two living on 22k a year, it is about 18k after taxes… Meaning I have about 1500 a month to pay all my bills and support my 4 year old and 5 year old. I live in pa. I have a garden to supplement my groceries, I am not not complaining but am saying that the only way I am getting through is by instinct, self sustainability. When it gets over whelming I just think it could be worse. I get quite upset when this rich topic comes up, because I feel if you can cover your basic needs, you are good, if you can afford multiple cars and vacations in exotic places, multiple homes, etc… You need to be so grateful, you are rich. I know first hand life can be gone in a second, the money is worth nothing to you then. Live a rich life on what you have. Sorry to carry on I hope I have contributed something to the discussion. I guess the point is, it really is all relative.

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well… ugh… i feel sick. It’s time you clows to a walk on “reality” street. It’s clear that most of you have never been poor. It takes almost nothing to survive.

Comparing your “money” to the country’s averages? Compare it to the world. Think, india, china and south america for instance, forget about africa because you already have forgotten about it.

You eat once a day? Clean water? a roof over your head? You’re rich. FU.

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Financial Samurai Reply:
September 2nd, 2012 at 2:53 pm

Comrade. Please share with us where your anger comes from. Thanks

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lloyd Reply:
October 9th, 2012 at 1:47 am

please advise

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lloyd Reply:
October 9th, 2012 at 1:46 am

stop patronize china for god sakes..geez
china is richer than you think ,in fact, in cities like wen zhou ,or any one that near sea or port,
ppl makes more than 30k USD on average and living cost is much much lower.
so stop worrying about us and be more concerned about your government with their debt.(number will stun you,hahaha) .this is also to sam.

my entirely earning are from foreign so i am not quiet familiar with your tax system even though i live here. i been follow this blog for a fairly long time and i notice a huge lot of saving that sam promoted is depend on this 401k.is that like pension?

anyway i have read an article on forbes or somewhere else that US government are missing 20 trillions in their pension and that problem is gonna blast soon.but worst of worst is this one interesting fact, that your government ,who is in debt of 547 trillions ,has a tax earning that can’t even pay off the interests that those huge debt generates.

thats hilarious,right? let’s think of this goverment as a person.so it will be like this.
that he borrowed say 100k from the bank to buy a car with no down payment. he plans to pay it off in next five years.lets consume the interests rate is mere 2 percent yearly ,so roughly he ought to pay the bank interests for about 2k every year for the next five years.and now guess what? he founds out that after all the spending he can’t even pay off the 2k due every year. not to mention the 100k itself.

interesting right? because in the scenario china is the bank. you americans really need to work on your illusions and grow some brian.not to listen to the first thing your media and government promoted is the first step to facing the reality.

but really ,this whole you own us thing is less of our concern as we don’t need the money urgently anyway. in the economic crysis china has huge shares of all the investment bank that survived in united states and our government is nice enough not to pulled out their investment.and if we did, there will probably be no wall street now.

so really ,think about this ,what if when you are old ,you thought you have everything planed only to founds out that your government has no money to pay off your pension?
and yea, definitely not vote for obama. he taxed your butt off and still the government is in new debt? with all the taxes obama s getting, the chinese government can probably build ark that can survives 2012 for everybody on the earth and still have plenty left.

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My husband and I made a combined income of $77,000 last year we have cut corners on everything we live in a tiny tiny home 350sqft. We use free firewood in winter we moved to the back areas of east tn to afford to keep living we eat not more than 3ounces of meat three times per week and beans and rice the rest of the week. We have cut healthcare and everything possible to cut last year we came out even and we can not seem to find one dollar to save. We never leave home we work from home so transportation cost is next to nothing. We really have cut every corner we can so in my humble opinion this article is on the money about it depends on where you live how much you earn but the numbers are all off because this past year groceries alone ran us almost $10K and we do not have special diets or anything and we do not buy alcohol or anything expensive all beans and rice so short of going hungry and never leaving home and only buying what you truly need in a cheap are cost $77K for two people then to me it takes at least $150K to be happy and able to save a bit for retirement and have some for travel and some to have folks over for a meal etc… None of which we have been able to do. Not certain where the numbers above come from but life is expensive period.

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night Reply:
March 1st, 2013 at 8:03 am

i don’t understand your predicament being the way it is in Tennessee.. i just got out of college and i can live off of 200$ of groceries a month and i live in Charleston SC.. my friend lives with her bf in outside of chapel hill and make way less than y’all do… somethings wrong there.

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The wife and I pull in a little over $300k/yr and with taxes (NY residents BTW) and child support, gas, mortgage, camps, piano lessons, lacrosse, soccer, food….I am just scrapeing by. We live in a modest ranch house have 2 crappy cars and play muni golf. We dont go to fancy restaurants or live an extravagant lifestyle. On what planet am I considered wealthy? And they want to raise my taxes? Are they @#$# nuts?

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Wow. Your article, although interesting, feels depressing and out of touch.

$350,000 is not rich? How far does the middle class stretch??

$200,000 per person (I’m not talking per household) is at the very least upper middle class.
As far as I am concerned, anyone making $200,000 or more is rich, unless they have a money management problem.

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Financial Samurai Reply:
September 13th, 2012 at 12:05 am

$350,000 is upper middle class in cities like SF, NYC, Paris, London, Hong Kong. In non international cities, I would say $350,000 is rich.

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My wife and I have a combined gross of ~$184K (net ~$135K) and I have to say that I feel anything but rich. I live just outside of Cleveland Ohio, and we are likely in the top 2-3% of households in Northeast Ohio in terms of income, but I feel like the government (at all levels) takes from me far in excess of the value that it provides. The effective tax rate for my household is around 28% factoring in all levels of government.

I am fed up with people telling me I’m rich… I am not rich!

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Financial Samurai Reply:
September 17th, 2012 at 11:34 am

That’s a good income for Ohio Michael! That’s like $1 million here in San Francisco!

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Michael Reply:
September 17th, 2012 at 1:16 pm

I work in IT (contracting as a software engineer which leads to better hourly rates than I could achieve as a salaried worker) and my wife is a bench scientist (medical testing). We are both highly educated (masters plus) and we have both been high achievers since our school days.

I don’t know if it would quite equate out to a million in SF, but it is rather comfortable. I’d like to think that though we have made both good and bad decisions that we’re on a rather solid path. For example, I purchased a home a few years back when I was single, and making less, that was only 2.25X my gross rather than the nearly 6X the bank said I could “afford” but on the flip side of that coin we managed to accumulate nearly $100K in student loan debt between the two of us. I’m not super worried since most of the student loan debt is at bargain basement rates right now thanks to Mr. Bernanke, and I’m in no hurry to repay loans that have negative “inflation-adjusted” interest rates.

Last time I did the calculations we’ve got a savings rate of about 35% of net across all of the vehicles available to us. We’re a bit behind the guidelines for savings based on our ages (I turn 30 in 5 days, and my wife is about 6 months younger than I), but I blame that on a later start due to graduate school. Either way, I’m working on a solid dividend performers portfolio that’s already replacing around 8% of our yearly expenses, and compounding rather quickly due to reinvested dividends and monthly contributions.

Modern finance is truly a beautiful thing if you’re willing to devote a little bit of brain power to crack open Excel and run the numbers.

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Financial Samurai Reply:
September 17th, 2012 at 8:08 pm

I think you don’t feel rich b/c you are only 29 years old. Give yourself a full 10 years of working, saving, and investing and I’m sure you will start feeling very rich, especially if you stay in your state!

what i do is pay every expense with my company so i spend 50k a year in food and gas alone.. through the company.. in my area you can be rich with 250k.. of course saving more thank 100k a year.. right now i am saving around 180K.. my car is paid and only owe 180k for the morgage

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OK so here I am and know what it is to work 2-3 jobs at a time. Have never been wealthy, in fact my best years I got 16,000 and that was working 3 Jobs. In all my years of working, SO FAR I have yet to see a poor or real middle income person Employ anyone. Was working at a Machine shop, they got their taxes raised again, besides all the other increases to take in consideration for expense, I got my hours cut and another one also. SO now why do we want to increase the taxes on the rich (225,000 or more) for? Am lost with the question, Someone show me the math, Poor people Do not create or maintain employees….Rich people do! AND they need some sort of incentive!!

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Financial Samurai Reply:
October 12th, 2012 at 9:41 am

Abe, great perspective given your income.

I’ve never met a poor person employ anybody either.

But, it’s easier to vote on raising taxes on others so we can benefit rather than work harder ourselves! Go USA!

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Brett Reply:
November 18th, 2012 at 3:25 pm

Abe the hard work you did working three jobs is the equivalent of 1/15 of the hard work that a rich person is doing. That means you need to work 15 years to be worth what this one person is able to do. When a CEO cuts himself a check for 10,000,000 dollars after working for two years for a company and the company loses value during their term imagine how long it would take you to make that much money. 500 years at 20,000 a year. I definitely need to educate myself through this website about taxes but thinking about compensation like that for a person who seemingly works hard vs. a higher up can be difficult to swallow.

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woww most of you act like money is falling from the sky please explain to me how the fuck making 200000 grand a year is middle class both in canada and the usa sure the cost of living eats up alot of income 85 percent of the american population makes 100000 or less thats 95 percent in canada gross income the top 1 percent control about 43 percent of financial wealth in the us lets be real people anything over 150000 ur balling compared to ur country

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Financial Samurai Reply:
October 17th, 2012 at 11:09 am

Angry much?

Obama and Romney say $250,000 and under is middle class, so who are we to argue?

Money is raining from the sky. Look at Apple’s earnings and the number of people spending $500-$1000 for an iphone5 they don’t need.

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100000 or less

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what are you people doing to make 150 200 grand a year impoting exporting rails hmmmm…?

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ty for deletein the truth samuri

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deleted repost 85 percent percent of americans make 100000 or less 95 percent of canadians make 100000or less stop feeding the innocent lies

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sorry but $50,000 before taxes / yr is poor. period. so now above$175,000 your rich.

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I think that $200,000.00 after income tax and social security tax is a good figure to use to be considered “well off.” What one chooses to invest in or contribute to is their choice. The average American should not have to make up for what someone who makes 200,000. chooses to use for tax deductions. I’m not talking about businesses, I am talking about the working taxpayer, not a business. Businesses should pay taxes based on the balance of income after deductible expenses. We live on approximately $45,000.- per year. We have no health insurance except for Medicare. We do not envy those who have more than us but we do expect those who have more to pay their share.

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Financial Samurai Reply:
November 9th, 2012 at 4:31 pm

And what is their fair share when the top 10% pay 70% of all taxes, but earn only 47% of all income?

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My business grossed 510k last year (I own 4 Fedex routes), after paying the other drivers I still made 340k. I’m 25 with no kids or wife, I own a 1996 Altima (First car and only car I ever bought) and live in apartment owned by my dad.
I have no expenses what so ever, not one… besides utilities.
After the accountant is done, I only paid taxes on 117k of the overall amount of 340k income.

It all varies per case, I have a business and a LLC so I can deduct practically anything from my income… is different when you have a set salary… you’re screwed.

I consider myself rich, point and simple.

With that being said, I inhered all of this from my dad.

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Financial Samurai Reply:
December 10th, 2012 at 7:58 am

Miguel,

I was just going to ask how you were able to get 4 FedEx routes at the age of 25 and make an operating profit of $340,000 before taxes until you said you inherited this all from your dad.

Does this mean your dad is no longer with us? Or, does he have other businesses to run?

What are your thoughts about being rich through inheritance vs. through your own work? I love understanding the psychology of wealth.

Thx, Sam

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been 25 doesnt mean anything of how much you can make… my wife and i operate cellphone stores. i am 25 also.. like the person above you pay whatever you want..take whatever cash you want and use credit card on anything including vacation and everything will come from the business… so, if i made over 300+ last year which will be more than 350 this coming year i can put that i only made 80k a year and pay little tax.. still spend around 50k year coming form business expense and save 60k from check and save another 180k cash for a rainy day.. i have a morgage of 1500 but make payments of 2500, plus add a bonus extra each year… i just bought the house and plan to pay it all in 3 years

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Regarding the 100k income level, one can contribute to a Roth IRA.

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Do not agree because the more you make the more you spend

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@ Jai Catalano
After reading your, and many others, definition of rich I feel it’s gotta be based on net worth. A person or couple making 500k a year with very little savings can become lower middle class very fast with poor financial decision making, or say for example the loss of a job. If the “rich”couple haven’t saved, get caught up in lifestyle additions and are carrying debt, to me they aren’t rich at all. I net 650k after tax, have 728k liquid, own a shopping plaza and 7 rental homes, 16 businesses etc…and not to sound whiny, but I DO NOT feel rich at all. I read in one of the comments that the more you make your definition of rich changes…almost, well exactly like a sliding scale. I am what most consider to be a high net worth(6.4 million) individual, but I am a small fish compared with a few people I associate with. I live in a military town, so to 99.9 percent of those around me I am “rich”, and while I do feel upper middle class, I do not feel rich. You would never know I make and have what I do. My closest friend and mentor has a 60million net worth, and he is like me..not a “flasher”…the people that flaunt money and want people to believe they are rich usually are not. If you feel rich, well who can argue with that. If you don’t,same thing…I am self made, started my businesses with a 500 dollar loan. I feel successful but not rich….yet

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nbsdmp Reply:
April 30th, 2013 at 5:34 am

So BD wolf, interesting post because I’m somewhat similar to you, maybe a little bit farther down the path but still think the same way as you sometimes. I’ve been blessed to have some very weathly mentors that have guided me and collectively the group I hang with probably averages in the $50~$70M net worth…next to them I don’t feel rich. I do live my life though 100% debt free and save a ton each year, so I do actually feel “rich”, because rich to me equates to being able to do what I want to do when I want to do it. I’m not flying private all the time, but that’s not important to me…what is important is not having the stress of life wear on you. It is probalby good not to feel rich so it keeps you grounded, some of what I stuggle with though is getting to the end and having the huge pile of money that I probably didn’t deploy to maximize life enjoyment…it is a tough balance!

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Interesting thoughts….. Living in NY and making 430k is far from middle class for my family. After the mortgage, taxes, bills, daycare etc I am left with 1700 a month to spend as I please. No big holidays or fancy cars on my horizon.

My 2 cents.

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Financial Samurai Reply:
February 3rd, 2013 at 8:18 pm

Wow…. only $1,700/month left making $430,000 a year is pretty tight. Hopefully you’ve put away at least $50,000 in savings on top of maxing out the 401K and then have $1,700/month left? Tell me $1,700/month isn’t all that’s left for savings.

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Old school thought: Godliness with contentment is great gain.

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Great read! I completely agree with your assessment of the levels of income and it varies by locale. Just turning thirty and my wife and I gross approx. 470k. We were making 200k annually a couple years ago, and did not feel rich by any means especially considering kids in near future. I must say though, 470k in Austin, TX is very comfortable. No state income tax, although high property tax but the housing is not like California or NYC. We were able to get a great place on the lake for 700k, so shelter costs are relatively low. The area where we are lost is retirement planning and this was very helpful!

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Financial Samurai Reply:
May 4th, 2013 at 5:50 pm

Hi Mate, 470K in Austin must be incredible! If you like Texas, then you’ve got it made given the costs and no state income taxes. 470K would be like $1 million here in SF I’d have to imagine. I’d consider signing up with Personal Capital with that type of income to track your finances. It’s free and it’s helped me manage my wealth better now that I’m retired. Welcome to my site! Best, Sam

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