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How Much Money Do You Need to be Wealthy?

How Much Money Do You Need to be Wealthy?

by Richard Orlando

[Do you consider yourself wealthy? And how much money do you actually need to be happy? These questions and our answers to them are worth examining. That’s why I’m pleased to share this guest post by Richard Orlando, Ph.D., founder of Legacy Capitals, where he discusses a recent wealth survey and challenges a view of wealth that is focused merely on the financial. – Bill]

 

According to a recent survey from Charles Schwab (referenced in an online article by Financial Advisor Magazine]), “…respondents said that on average being wealthy means having a personal net worth of $1.9 million. That’s down from $2.6 million in the prior year’s annual ‘Modern Wealth Survey.’”

“Survey participants also lowered the bar for how much money is needed to attain ‘financial happiness’… Financial happiness can be achieved with $1.1 million, according to the recent survey. That’s much lower than the $1.75 million pegged in last year’s survey.”

I think I understand why these types of survey questions are asked, but I believe they produce VERY LITTLE VALUE for families and the advisors who serve them. Here is why:

Firstly, wealthy is being defined solely in financial terms. This one-dimensional definition can force a mindset in people to think, “Now, I am wealthy.” Or, “I am so far from being wealthy.” And for the client-families we work with everyday whose net worth is north of 25, 50 or 100s of millions…how should they think about this definition of being wealthy? “Then we must be off the charts wealthy?” In reality, some of our clients whose net worth is north of $25 million still wonder if they are wealthy enough. This is because “Am I wealthy?” is more of a human and spiritual capital question.

Instead, we should use the original meaning of wealthy to include overall “well-being.” It is much more productive and helpful to define wealthy using this broader definition than just how much money do we have.

One of our client’s NextGen asked their parents, “Are we wealthy?” Their response was: If you have your health and people who love you, then you are wealthy. And if you also have lots of money, then its icing on the cake.

In terms of financial happiness…this is practically an oxymoron. There are a couple of “studies” out there that suggest that once an individual earns about $70,000 a year, anything above this amount, there is no correlation to happiness (see the chapter on Happiness in my book LEGACY). So defining happiness in terms of a financial target has much more downside than usefulness. Money is a tool, it is NOT meant to determine happiness. Financial happiness is more of a human and spiritual capital question.

I propose surveys like the aforementioned start asking more valuable questions such as:

  1. How do you define personal/family well-being?
  2. What role might money have in contributing to your personal/family’s well-being?
  3. What is your definition of personal/family happiness?
  4. What role might money have in contributing to your personal/family’s happiness?

[This article first appeared on LegacyCapitals.com.]

 

 

Photo by Khoa Pham on Unsplash

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Published August 20, 2021

Topics: Family Business

Family WealthFinancial AdvisorsHappinessValuesWealth

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