Everybody wants to be considered wealthy. But how big of a net worth is required to be considered wealthy in some of the biggest cities in America?
Charles Schwab’s annual Modern Wealth Survey shares its insights for 2022. In the U.S. overall, the survey says it takes a net worth of $2.2 million to be considered wealthy, up from $1.9 million in 2021. Up 15.8% is a significant increase, but it makes sense due to high inflation and a rise in home prices.
What’s interesting is that the net worth minimum thresholds required to be wealthy or financially comfortable were much higher in 2018, 2019, and 2020. It’s nice to see our overall expectations haven’t surged to unreasonable levels.
The online survey was conducted in early February 2022, with a sample of 500 to 750 local residents for each metropolitan area, between the ages of 21 and 75.
Sadly, since then, U.S. stocks have lost all their 2021 gains in 2022. Hence, the overall net worth required of $2.2 million to be considered wealthy might be lower now if the participants were surveyed again.
Net Worth Required To Be Considered Wealthy In Various Cities
Here are the minimum net worth thresholds by city to be considered wealthy.
- San Francisco: $5.1 million
- Southern California (includes Los Angeles and San Diego): $3.9 million
- New York City: $3.4 million
- Washington, D.C.: $3.3 million
- Seattle: $3.2 million
- Phoenix: $2.7 million
- Boston: $2.7 million
- Dallas: $2.6 million
- Houston: $2.6 million
- Atlanta: $2.5 million
- Chicago: $2.5 million
- Denver: $2.3 million
Unfortunately, my city of San Francisco takes the cake where one needs about a $5.1 million net worth to be considered wealthy. The figure is up from $3.8 million in 2021, or up 35%! However, given tech stocks have crashed by 30% – 80% in 2022, the net worth figure is surely lower for San Francisco today.
To be considered “financially comfortable,” a San Francisco resident would need a net worth of at least $1.71 million, the survey finds. As a San Francisco resident, that seems reasonable depending on the composition of the net worth.
The net worth results in the survey buttress my belief that $3 million is the new $1 million to be considered a real millionaire. And a net worth of $2 million is probably the lowest threshold to be considered rich or wealthy in America today.
Surprises About The Various Net Worth Levels By City
There are several surprises about the various minimum net worth thresholds by city above.
1) New York City Requires A Lower Net Worth Than Expected
The first surprise is how New York City is only ranked third with a net worth threshold of $3.4 million. Anybody who has ever been to New York City knows it’s one of the most expensive cities in the country. But most people who visit NYC mostly just visit Manhattan.
However, New York City has five boroughs that geographically make up over 300 square miles. The cost of living in Staten Island, Queens, and The Bronx are much more affordable than in Manhattan. Hence, commuting to Manhattan, if required, is a much more affordable option. The subway system is excellent.
San Francisco, on the other hand, only spans over 49 square miles. There are definitely more affordable neighborhoods in San Francisco. I moved to one of them three miles west in 2014 and saved 40% on housing. However, the most expensive neighborhoods in San Francisco are still cheaper than Manhattan (22.7 square miles).
2) Phoenix, Dallas, Atlanta, Houston, And Chicago Net Worth Thresholds Seem Too High
The median home prices in Phoenix, Dallas, Atlanta, Houston and Chicago are all much lower than the median home prices in San Francisco (~$1.7 million), New York City (~$770,000), and the other major cities.
- Phoenix median home price ~$485,000 (+32% YoY)
- Dallas median home price ~$330,000 (+30% YoY)
- Atlanta median home price ~$398,000 (+19% YoY)
- Chicago median home price ~$318,000 (+9% YoY)
- Houston median home price ~$267,000 (+22% YoY)
We can take the respective net worth thresholds for each city and divide each by the local median home price to get a ratio. Let’s call this the Financial Samurai Wealth Reality Ratio.
This ratio helps calculate wealth expectations versus reality. The higher the ratio, the unhappier the city residents are with regards to building wealth and feeling rich.
The reason why is because their net worth target is too high versus their wealth potential. The farther away reality is from expectations, the less happy you will be!
- Phoenix $2.7 million net worth / median home price ~$485,000 = 5.56
- Dallas $2.6 million net worth / median home price ~$330,000 = 7.87
- Houston $2.6 million net worth / median home price ~$267,000 = 9.73
- Atlanta $2.5 million net worth / median home price ~$398,000 = 6.28
- Chicago $2.5 million net worth / median home price ~$318,000 = 7.86
- San Francisco $5.1 million net worth / median home price $1.7 million = 3
3) Dallas, Houston, And Chicago Residents Are The Most Frustrated Financially
Based on the Financial Samurai Wealth Reality Ratios, the expectations for what is considered wealthy for Dallas, Houston, and Chicago residents are much too high.
Home prices are a reflection of economic opportunity, namely income levels and income growth. You can’t have a high median home price and a low median income over the long run. That is unsustainable unless your city also faces an international demand curve.
Chicago, Houston, and Dallas residents should consider relocating to a city like San Francisco with a Financial Samurai Wealth Reality Ratio of only three. Or, more conveniently, Chicago, Houston, and Dallas city residents should lower their expectations of what is the minimum net worth to be considered wealthy.
Conversely, San Francisco residents may be the most satisfied financially in the entire country. San Francisco residents are more realistic with their wealth goals, yet have a higher chance of achieving their stretch net worth goals as well.
A $5 Million Net Worth Is Reasonable After All
In a previous article, I wrote that having at least a $5 million net worth is required to retire early with a family. Even if 100% of the $5 million was invested in income-producing assets, it would only generate a realistic $150,000 – $200,000 a year. A handsome amount for most, but relatively middle-class in an expensive city.
Of course, the article was met with a lot of pushback because most people don’t live in San Francisco or a similarly expensive city. Most people don’t retire before age 60 either. However, it’s nice to see Schwab’s Modern Wealth Survey reflect the true feelings about wealth from some San Francisco residents.
The biggest reminder from the survey is that San Francisco really is one of the cheapest international cities in the world due to its high income-generation potential. I’ve been to many of the world’s great international cities. And time and time again, I’ve come home to realize what good value San Francisco is compared to cities such as London, Paris, Hong Kong, and Singapore.
It’s also nice to see more reasonable expectations for what is considered wealthy in San Francisco. Using the Dallas Financial Samurai Wealth Ratio of 7.87, San Francisco residents would require a minimum net worth threshold of $13.4 million to be considered wealthy!
Although, the ideal net worth to retire is over $10 million, $13.4 million as a minimum net worth to be considered wealthy seems a little too high.
Alas, San Francisco residents only require a $5.1 million minimum net worth to feel rich. Therefore, San Francisco is either much cheaper than everybody thinks or residents are much happier than everybody thinks. It’s likely a combination of both.
If America Was More Realistic About What It Means To Be Wealthy
It is important to have realistic expectations about wealth. If you’re always thinking you need more and more you will never be happy with what you have. Please have reasonable expectations.
Let’s accept 3:1 as a realistic Financial Samurai Wealth Wealth Reality Ratio. If we do, the the minimum net worth required to be considered wealthy in America overall is about $1.2 million since the median home price in America is about $400,000.
The great thing about amassing a $1.2 million net worth is that most people who are personal finance enthusiasts will get there. Heck, I expect everyone reading Financial Samurai to eventually become 401(k) millionaires alone! Now add on the growth of your taxable investments and becoming wealthy may be an inevitability.
Let’s embrace our wealth. If we’re on the right path, we’ll eventually become wealthier than our wildest dreams. And if we never get technically wealthy, at least we can always feel wealthy by appreciating more of what we have.
Invest In Real Estate Strategically
Personally, I’m happy living in expensive cities like San Francisco, Honolulu, and New York City due to the food, culture, and overall lifestyle. However, I’m actively investing in the cheapest cities in the country which require the lowest net worth to feel wealthy.
I do so via a private real estate investing platform like Fundrise, which specifically invests in the heartland. Fundrise invests in single-family and multi-family homes in places like Dallas, Houston, and Atlanta.
I love earning more 100% passive income as more Americans migrate to lower-cost areas of the country. The older I get, the less I want to own physical real estate due to the maintenance and tenant hassles.
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Interesting numbers, but I’m unclear — are the figures per individual or per household ?
Household, which can contain one or more income earners. It’s really up to you what do you think is enough. You can make it a game and double the figures if you want for dual income households.
Hello,
In France and in Europe, the system is different we don’t usethe “mortgage loan” to buy a real estate, until 2018 the banks loaned only 33% on our salary for an estate loan (today it’s 35%), so the debt ratios and really low, it’s very difficult of upped your social level in europe.
Example to buy Real estate : On a salary of 84 000$/ year (so 7000$/month), today the bank loane only 35 % (so 2450/month), with this you can to buy a real estate only between “$450 000 and $500 000”.
So in my coutry, to have $490 000 of patrimony without debt, you are already concidered like “Rich” or “Fortuned” (same if it’s really very very few).
For the Stock market, it’s the same, there is very few of big company as Nasdak and others : Microsoft, google, facebook, …, or still: Telsa etc.
In Europe, the goverments want than the poor and average class doesn’t evolve, so the rich persons are very badly accepted, so we hide our Wealth the more possible.
So I love the USA business for it’s amazing opportunities.
Thank you SAM for all your articles, it is very good work ;)
Hello,
For me Paris ins’t also expensive like NY, SF or London. Sure the question of the Wealth is complex, and is often linked at our personal desires…
Me I come of the class poor, children the food was miss, so I use the word “Rich” a lot (even: bourgeois) in my expressions, but it isn’t a problem, because I know than I’m rich by my experience in investment and others, all like in my net worth, I’ve sometime of taste of luxury, but I speak with all people no matter of their social level ;) If the people ask me of the help for undrestand the risk in investment or the best choice. I help them.
Or also certain days I’m too frugalist, but It’s like that :)
Good day at All ;)
Hello ALL,
For me Paris ins’t also expensive like NY, SF or London. Sure the question of the Wealth is complex, and is often linked at our personal desires…
Me I come of the class poor, children the food was miss, so I use the word “Rich” a lot (even: bourgeois) in my expressions, but it isn’t a problem, because I know than I’m rich by my experience in investment and others, all like in my net worth, I’ve sometime of taste of luxury, but I speak with all people no matter of their social level ;) If the people ask me of the help for undrestand the risk in investment or the best choice. I help them.
Or also certain days I’m too frugalist, but It’s like that :)
Thank you for your article SAM.
Good day All ;)
If you need to work to maintain your lifestyle, regardless of your net worth, then you are not wealthy.
Interesting thought experiment/post.
Have to say it doesn’t track with my experiences growing up in SF and now long time resident of Manhattan and Southampton. Apart from trying to quantify something that’s subjective/qualitative, the ratio uses the wrong inputs.
For SF, 5.1M net worth and a 1.7M median house price means you get the MEDIAN home. Being in the middle does not make one “feel” wealthy. A $1.7M house means you are not in the desirable affluent neighborhoods unless it’s a condo, and even then… As you pointed out, 5.1M means something different raising a family of 2/3 Kids vs how it is for a single young person — disposable income isn’t there.
Most wealthy I know in SF that aren’t past the $50/60M + mark would refer to themselves as “well-off” or “privileged,” or “fortunate.” When everyone around you has $4-5M+ homes, and a second home in Sonoma/Napa/Tahoe, your pool of whom you interact with ranges wildly with 9/10 Figure families that you define as wealthy. They are not taking Muni, they are not sending kids to public school, and they are not living in apartments, and generally they don’t interact with “middle class” folks in any meaningful way so while they recognize they are at the higher end of the spectrum, wealthy is always someone else, if they even use that term. People say, So and so’s doing “well,” or “really well…” “Rich” is far too crass.
$11M puts you in top 1% net worth nationally, but not in Manhattan and SF. All of this could be just down to the very loaded term “wealthy” which is a term middle class/lower income folks use to refer to those with all the trappings of upper-middle class life: a nice home, cars, luxury vacations abroad, private school for kids and college tuition without worry.
Good points. So the question is, how much do you need to feel wealthy in San Francisco or New York City? There are no wrong answers here because it’s individual preference. But taken as a whole, the numbers are meaningful.
Using the median home price is relevant because everything is relative. So if you have a more expensive home, and you have multiple, been there should be a double benefit feeling of wealthiness. And if not, and maybe because you are not Aware or appreciative enough of the median person in your city and what you have.
I struggle with what it means to feel wealthy – concepts. So I need to but meat on it. I guess I feel wealthy because of:
1. I can buy anything for $100,000 at a drop of a hat. Car, boat, etc.
2. I don’t fear a major medical bill of several hundred k will wipe me out.
3. I can be a significant safety net for my kids if needed.
4. If I lose my job tomorrow, no big deal – can retire or consult.
5. Can give away a significant amount to charity every year.
6. I could travel for a year and not alter my money equation.
7. I could buy a another real estate for up to $1M in cash without an issue.
And I could do all 1-3, 5-7 within the next few years and likely be just fine. If #4 would happen probably not though cause I would worry.
Agree that numbers/median should be a starting point…just wonder if the survey might not be representative.
My guess is that you would need minimum $15-20M, if older/retired, to feel conventionally well-off in SF or NY. That would allow for a family sized house/apt ($4M in a nice neighborhood, not “elite”), a vacation home, and enough passive/active income to carry the property tax/maintenance costs, ability to spend/travel/help out grown kids/donate that come with this lifestyle. I’ve come across surveys where the wealthy really don’t have that much of their net worth in real estate, something like less than 20%. Of course, I could have some really skewed sense of wealth.
I’m generally happy with where I am because I have “enough,” (both financially and time-wise, even if I have to remind myself not to keep coveting more or thinking too much about money). That said, I am very aware many people in either location would not consider me wealthy. As it turns out, a number of more well-off friends often offer to pick up the tab when we go out! And I do the same for my less fortunate friends.
Sam,
This reminds me of the famous story where researchers discovered bronze medalists were happier than silver medalists because silver medalist compared themselves to a gold medalist- while bronze medalists compared themselves to those off the podium who didn’t medal. Growing up in NYC, I can tell you no millionaires ever feel rich because they always know about the billionaire next door, Trump, etc.
Yes, I remember that medal study.
Everybody is grinding super hard in NYC. And you come across so many people who are wealth it’s tough to feel wealthy yourself sometimes.
But if you move to Hawaii… ah, what a life.
I like the analysis and alternative methodology. My only issue is comparing San Francisco to other world class cities. I’ve lived here for 25+ years and can tell you it’s not. It’s ideally geographically located and beautiful, but it’s hardly world-class in functionality. Shity public transportation and overall cleanliness etc. Sub par museums/theater/opera, nightlife, etc. It’s hard to find a good restaurant open past 10pm. And hardly international comparatively. It’s a tech driven wealth bubble. IMHO it appears to be a lot of younger people with high paying jobs who think they are ‘rich’ but haven’t learned how much things actually cost ie raising a family here. I assume the $5mil # is based on what people think they would need to afford decent housing and some over priced meals. From personal experience I think you need more than that if you want to travel, send kids to private school etc.
Totally understand. And the bashing of SF is one of the media’s and lots of folks favorite pastimes!
Based on your name, are you broke or are you fine? And do you own or do you rent? B/c being broke anywhere will make life less enjoyable, especially in a more expensive city. But I’m guessing you’re being a little facetious after 25+ years of saving and investing.
No city is perfect. But after growing up overseas for 13 years and seeing so many cities and countries since 1977, SF is in the top 10% IMO. What other cities have you lived in that you think are better?
maybe chicago and dallas stick out because they have higher property taxes vs rest of country
Maybe! Illinois property tax is certainly one of the highest in the country. But at least Texas has no state income tax.
Just curious if you have any idea how Hawaii fits into this? Having been raised there and left for several reason but cost being one of them. I just wondered how it fit.
Was wondering the same thing. We left Kailua after 15 years and moved to Tampa. Much better cost of living will good quality of life… would love to retire part time in Hawaii though.
Sure, this is the beauty of the newly created Financial Samurai Wealth Realty Ratio! Find the median home price in Hawaii = $890,000. Then multiply by the multiple range of other comparable cities. Let’s use the 12 on the list: 3X – 8X.
Therefore, Hawaiian residents would need $2,670,000 to $7,120,000 to feel wealthy.
However, given Hawaii is the best place on Earth, one would require a LOWER multiple to feel wealthy. Weather is amazing. Beaches and hiking is free. More relaxed and happier.
Therefore, I would say Hawaiian residents need AT MOST $2,670,000 to feel wealthy. But I would think a 2X multiple = $1,780,000 is plenty!
Ah.. I love formulas and breaking things down.
Prior to 2020 we enjoyed 3 months in Waikoloa, HI scuba, 3 months Crystal River FLA, 3 months other travel and 3 months home Easton Md. Figure VRBO nice 800 k condo rental & rental car are 15K per month in Hawaii depends on property and location. The VRBO rentals are now opening again.
Now Home because my wife is doing alternative health treatments >$100k per year. Retirement since Fall 2015 good to have money for fun and unexpected challenges. Hope to visit Waikoloa to scuba in 2023 2 to 3 months.
Thank you for HI calculation.
Steve
Great post, and thought provoking.
I was confused about the ratio because it seemed the other way to me – where a person would be happier as the primary residence becomes a smaller portion of their net worth, making the ratio larger.
Shouldn’t the Dallas and Chicago folks be happy, since they don’t have to be house-rich like the San Francisco folks?
Looking forward to my pre-order of your book, Buy This Not That !
I agree with the confusion about the ratio. I lived in Southern California for 50 year. I won’t move back to LA for triple my income. I agree that the happiness ratio doesn’t work in my case. I have my home paid off and it is less than 5% off my net worth.
Living in a smaller city doesn’t limit my income opportunities. In fact spending less on my personal residence allowed my to grow my cash flow business and properties.
I think people in less expensive home markets can still be objective about what they consider rich…it’s just they don’t tie up such a big % of there own net worth in there primarily residence.
It’s obvious you live San Francisco Sam but I would be miserable living there!
It’s just a different way of thinking. To help, you should share what your median home price is of your city and how much minimum net worth you think you need to feel wealthy.
So the median home in my neighborhood is 340k. My home is worth about 700k. To me wealth now is mostly about being healthy, and having the freedom to pursue my interests. I have 5 kids that still may want to go to college in addition to parents and a sister that needs help. So my number is probably bigger than most in this immediate area. I started feeling “rich” when my monthly cash flow hit 100k. I have learned and appreciate your insights regarding time left in your life vs. chasing $$s
Agree
Agreed. Should be inverted.
No. Because the survey is aspirational wealth. What people THINK they need to be wealthy.
So if you think you need 8X your home value to be wealthy, you have a longer race to run than someone who only needs 3X their home value to feel wealthy.
Good point, Derek – thanks. I think that helps clear up some of my confusion about this Ratio.
I think I was confused because it looks like the ratio’s meaning _flips_ at some point. For example, if one starts early in their wealth-building, and then reaches the median income for their city, the road will seem long if wealth is many multiples away from the median they had just reached. When the wealth threshold is reached, and passed, the ratio looks different – and one wants their primary residence to be a smaller portion of their NW.
I don’t think “Happiness” or “Discouragement” are the right words, though – perhaps “Challenging” would be better. For anyone at any ratio, if they have a diversified portfolio, I think they would be happier if their non-Residence returns outperformed their Residence’s appreciation. If fortunate, ver time one’s ratio will grow, with the residence becoming a smaller portion of NW.
Since you’ve lived in several international locations including Taipei, what wealth number would you give Taipei? I’m considering relocating there. Thanks
Cost of living and income earning potential really does vary so much from one city to the next. I remember when my employer was trying to get people to move from SF to North Carolina for a new office and openly said it would mean lower salaries due to the lower cost of living.
That’s a much bigger difference than I would have expected between SF and NYC. I would have totally thought NYC would come in at #1 instead.
Idk if using median home value is accurate when calculating the Financial Samurai Wealth Reality Ratio in Chicago. Illinois has an anomalous property tax rate that is probably suppressing home values compared to the rest of the country.
Hard to say about net worth to feel wealthy in NorCal. Wealthy is also hard to define. In terms of cash flow, I like to ask people what they feel is the minimum amount of cash flow needed annually to never have to worry about money to live the lifestyle they want (probably the definition of wealth). The younger the person I ask, the lower the number tends to be, which is likely due to not knowing the true cost of the lifestyle they want and lack of exposure to lifestyle inflation. Tastes definitely tend to change over time (get more expensive).
Boston surprises me. I would have expected Boston to fall nearby Seattle and DC given similar incomes and housing prices for those regions.
I think your calculation is a good back of the envelope calculation but also wonder how much of a factor property tax rates are. Higher property tax rates in Chicago and Texas cities limit home prices and seem likely to skew the outcome to areas with relatively lower property taxes.
An alternative method might be to take the net worth minus the median home value divided by a cost of living index. This could represent the amount of net worth above and beyond ones principal residence needed to feel wealthy adjusted for cost of living
Yes agree with this method of computation. Comparing to median home value is too simplistic.
Also, I would fine tune this computation by introducing a 90%tile home value (vs avg home value). This would take care of elastic property value in a given market.
(Net worth – 90%tile home value)/ (cost of life per year)
That ratio gives you the nb of years of yearly expenses that your net worth cover after housing cost.
This give a more tailored definition, someone with a lower cost of life would “feel” rich with a lower net worth.
I currently have 5m$ Net worth, live in Manhattan, have a seven figure income and certainly do not feel rich. A 90%tile manhattan 3 bedroom cost more than 5m$.. So clearly not rich in my book because of the choices we made to live in downtown Manhattan.
For context, out of 430 3bedroom total current listing in downtown Manhattan, the 90%tile 3bedroom cost is 9.8m$, median 3bed cost is 4.9m$. Even if you take a 10% haircut if you assume these are inflated price in current environment, this does not change the picture much.
If you live in this (overpriced) area you can’t feel rich below 10m$. You can live very comfortably but you will need to make some compromises.
I think there are two type of wealth or maybe even three. There is the medium standard for wealthy which might mean 2.5-3 million dollars.
Then there is the FU money standard which means to me if you never worked another day in your life, your passive income like you say is 150 to 200k (or greater with dividends, rental income, 401k dispersions, small pension, social security as couple or even a mindless 2 day a week work gig it could be 300k ++) and then there is obscene money. 40/50/60 plus million.
Ah yes, your statement reminded me of this post.
The Two Levels Of Wealth, One Of Which Doesn’t Rely On Index Funds To Get Rich