How Much Money You Need To Be Considered Rich (In Every State)
How much money do you actually need to have to be considered rich? This is the definitive answer.
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So how much money do you need to have in your bank account or invested in a brokerage to be considered rich? What is the exact net worth?
In order to have a real understanding of how much your true net worth is, you need to look at the bigger picture. Using globalrichlist.com , plug in your area and income. In the case of the average American worker, based on $50,000 per year annual salary, most Americans are in the top 0.31% of the world. Forget about being in the top 1%, they are nearly all in the decimal category.
Just for comparison sake, It would take an average labor worker in Ghana exactly 312 years to earn what most Americans will earn in just ONE year. 312 years. If you wanted a can of soda, it would take yu roughly 1 minute to earn it, and it takes them an HOUR of work. $50,000 per year would also pay the monthly salaries of 307 doctors in Malawi.
Imagine how the world feels when Americans complain about not making enough money on six figures per year? The consumer mentality needs to change.
My definition of how much money you need to be considered rich has evolved throughout the years. At first I thought it was wearing designer clothing, then I thought it was luxury watches, then cars, and ultimately I thought I could call myself rich when I started living in a million dollar condo in Las Vegas. All of these definitions are wrong.
According to CNBC and mainstream media, to be considered “rich,” in the US, you need a net worth of at least $2.3 million. Of course, that study ONLY shows what people THINK they need, and most people simply have no clue. So what it does it mean to be considered rich exactly?
Here is the answer: you are rich when you no longer have to actively work for your money. You can actually figure out your “rich” number very easily. Download an app like Mint or Personal Capital, or just start tracking what you spend on average per year. Just take what you spent last month (on everything, house, food, car, etc) , multiply it by 12 and we’ll call that your average annual expense. Then you take THAT number and multiply IT by 25. Make sure you’re using your expenses number, not your income number. This is called the “cross over point” or the rule of 25, it’s when your passive income is the same or greater than your debts and expenses.
My expenses are roughly $2,000 per month or $24,000 per year. Multiplying $24,000 times by 25 I get $600,000. I need $600,000 invested at 4%, to never have to work for money for the rest of my life because 4% of $600,000 is $24,000. This is called the rule of 25. That is the true definition of “rich”.
The cool thing with my plan about how I’m getting there with dividends. You can comfortably live on something like $24,000 per year especially if it’s through dividends and dividend growth investing because you would earn nearly ALL of that money tax free through qualified dividends if your income falls below $38,600.
Politicians, authors, reporters, nurses, teachers, engineers, also have no clue. They’re not bad at earning money, they’re just bad at understanding how to manage it. Your earning power has nothing to do with being rich, your stuff has nothing to do with it, your job title has nothing to do with it, AND – debt has nothing to do with it.
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