I read a great an article from a financial blogger than I really like, Financial Samurai, about feeling rich.  This is a really interesting concept as it is so different for everyone.  Some people feel rich so long as they can get some food that day while other people don’t feel rich while flying on their private jet.  So what does it take to feel rich?

A disclaimer before I start talking about myself personally.  I am talking about rich in terms of financial assets only.  I am not talking about happiness so please don’t think that.  I believe happiness, as well as unhappiness, is possible in absolutely any circumstance as it all has to do with attitude.  Okay moving on to feeling rich.

As you consider this question I think you will probably come to the same conclusion that I did.  There really isn’t a number you can put on it.  I mean I hope people like Bill Gates and Mark Zuckerburger feel rich but who knows.  You hear of people all the time that are multi-millionaires with huge salaries that will lie, cheat and steal to make their net worth go up a half of a percent.  Why would anyone still be ferociously chasing money that had a hundred million dollars?  In fact, I saw a very interesting study on people with over a million dollars in investments if they felt rich.  Only 28% of the people with $1-5 million felt rich and only 60% of the people with over $5 million felt rich.  Five million dollars plus and only 6 out of ten felt rich.  Seems crazy but in some circles that really is just a modest amount.

So does that mean you can never feel rich?  Is it one of those things where you will always want more?  Once you reach one goal it is just time for the next one?  Maybe, but hopefully, there is a better way to look at feeling rich.  Let’s look at a few ways and situations in which I think someone could and should feel rich.

  1. Awesome Income to Expense Ratio – This is probably the easiest for most people to obtain right now but the key is being frugal and keeping the expenses low.  If over half your take home pay is going towards saving and investing you are absolutely winning with money and should absolutely feel rich.  Let’s say you have a household income of $60,000 a year after taxes or $5000 a month.  A nice salary for sure but certainly not unheard of.  If you are saving $3000 month and living off $2000 a month you could realistically retire in 11-14 years even if you have saved nothing for retirement yet.  At the end of 13 years, you would have about $940,000 if the market returned the average 8% per year.  From there you could withdraw 3% per year, which would give you $2300 a month (a $300/month raise) to live off of for the rest of your life.  Most people that retire before they are 40 do it like this.
  2. Big Net Worth – When your Net Worth is about 50 times higher than your annual expenses.  That number is a relative number.  If you have annual expenses around $50,000 then you should feel rich when you have more than $2.5 million in assets.  For someone in a 3,000 square foot apartment in Tribeca, NY with two kids in private school and annual expenses of $500,000 they would need $25 million in assets.  Now we can see how 4 out of 10 people with $5 million plus can feel like they are way behind.
  3. Earning a Living Passively – If you just have money rolling in every month but don’t feel like you even have a job you should feel rich.  “What!  Who in the world is in that situation?”  The most common form of passive income is rent.  It really isn’t hard to imagine having a couple properties that were bringing in $2,000 a month.  If you get good tenants you are probably only looking at an hour or two per work a month on each rental.  Maybe you wrote an E-Book that brings you a few hundred dollars a month in sales.  You own some stock in companies paying dividends.  Now building your passive income stream isn’t easy.  That takes a lot of work.  But once you break the inertia and get things moving you just need to give it a tiny nudge from time to time to keep it going.
  4. You Have a Job You Love – This is similar to the passive income in that you are earning a living but don’t feel like you are working.  A lot of professional athletes love what they do.  Like, can’t get enough of it and use to do the same work for free until they made the pros.  Look at professional golfers who are still competing on the champions tour when they are 70.  They aren’t going out there for the money but just because they like being out there.  Most of us probably don’t have professional athlete in our future but that doesn’t mean we can’t earn our living doing something we love.  Maybe you are a personal trainer who works with clients out of your home gym?  Maybe you have your own blog where you are just writing about the things you love?  Maybe you and your buddy start a craft brew shop?  Any job will have some headaches but if you would keep showing up to your job for free then you should feel rich.

Those are four ways to feel rich financially.  Two of them don’t even require having any money saved.  I know everyone has different ideas on this topic but that is my list and those are four goals that I’m actively working towards.  Not sure which one I’m going to hit first.  If you feel rich I would love to why or if you have anything else to add to the list?

-Grant