Why are people so hesitant to call themselves rich/wealthy when they are by any definition?

[Anonymous]

Anonymous wrote:1) lots of research suggests that people think of their status relative to those they’re around. Lots of posts on this thread confirms that.

2) it takes a lot of wealth to maintain an UMC lifestyle through 20-30 years of retirement and maintain real buying power. For example, if you want $200k of income for 30 years, invest conservatively during retirement (6%), and inflation is 3%, you need nearly $4 million. If you told someone you had $4 million, they’d say you’re rich. If you told them you make $200k, they wouldn’t.

This is us. We make $250k and have $4M

[Anonymous]

Anonymous wrote:I think a big part of issue is that being middle class is often tied to the need to debt. We need debt to buy houses, cars, education, and often healthcare. It takes a huge amount of wealth to avoid the need for bank loans for major life expenses.

Only because you keep increasing your baseline for what is acceptable for those expenses.

I'm middle class (HHI of 150k, spouse and I both work, one kid) and we had some college debt, though we paid that off. We don't borrow money to buy cars -- we just save up and buy decent used cars for cash (no SUVs, but then with only one kid we don't need a big vehicle, and we buy practical brands like Subaru or Toyota). We will pay off our house around 55 (purchased for $500k, now worth about $600k, so some added equity but not a massive windfall), and our intention is either to retire in place or to sell our home and downsize/move to a lower COL area. That should make us debt free before DC goes to college, which should enable us to pay for college out of saving and income and mostly minimize borrowing.

Rich people who carry a lot of debt are making a choice to do so. If our income was higher, we'd already be debt-free. Just because you scaled your lifestyle up to something that necessitates debt does not make you middle class. It just means your approach to finances relies heavily on leverage. So does Elon Musk's. Is he not rich? He bought Twitter with debt.

[Anonymous]

Anonymous wrote:1) lots of research suggests that people think of their status relative to those they’re around. Lots of posts on this thread confirms that.

2) it takes a lot of wealth to maintain an UMC lifestyle through 20-30 years of retirement and maintain real buying power. For example, if you want $200k of income for 30 years, invest conservatively during retirement (6%), and inflation is 3%, you need nearly $4 million. If you told someone you had $4 million, they’d say you’re rich. If you told them you make $200k, they wouldn’t.

But this ignores the fact that most retirement plans assume you'll own your home by the time you retire. If you told someone you make $200k every year AND own your home outright, they would absolutely consider you rich because you aren't paying a mortgage. Also, in retirement you are no longer having to take money out of your income to save for college or retirement. You don't have to pay for kids activities and food and clothes and travel. So that $200k is literally just for non-housing living expenses. That person is rich! They can go out to eat several nights a week, take expensive vacations, buy new clothes when you feel like it, outsource house cleaning and landscaping. And they can do all this without having to go to a job every day. Rich!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I grew up MC so I will always identify as MC.

Really, even if you make $1M you will still "identify as MC" Very warped sense of reality

Well, it depends on what you spend, more than what you earn. It's not real until you spend it. You could give it away.

It is still real. Even if you save it or give it away. It's your money, you have it and what you choose to do with it does not make you any less rich. Make 1M live in an
apt you rent for 1000/month and take public transportation, you are still rich.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think a big part of issue is that being middle class is often tied to the need to debt. We need debt to buy houses, cars, education, and often healthcare. It takes a huge amount of wealth to avoid the need for bank loans for major life expenses.

Only because you keep increasing your baseline for what is acceptable for those expenses.

I'm middle class (HHI of 150k, spouse and I both work, one kid) and we had some college debt, though we paid that off. We don't borrow money to buy cars -- we just save up and buy decent used cars for cash (no SUVs, but then with only one kid we don't need a big vehicle, and we buy practical brands like Subaru or Toyota). We will pay off our house around 55 (purchased for $500k, now worth about $600k, so some added equity but not a massive windfall), and our intention is either to retire in place or to sell our home and downsize/move to a lower COL area. That should make us debt free before DC goes to college, which should enable us to pay for college out of saving and income and mostly minimize borrowing.

Rich people who carry a lot of debt are making a choice to do so. If our income was higher, we'd already be debt-free. Just because you scaled your lifestyle up to something that necessitates debt does not make you middle class. It just means your approach to finances relies heavily on leverage. So does Elon Musk's. Is he not rich? He bought Twitter with debt.

+1

We have always worked to not have debt. It's a mentality of don't buy things until you can afford it. With cars, pay it off in 3 years, then keep for 7-8 years so you can pay cash for a new one or pay for 75%+ with cash. by the next time you should be able to pay cash, if not, keep the car until 10 years if no big issues. By time we were 30 we paid for all future new cars with cash (and at 30 spent $35K on a new car) Same for homes. Bought our first so we could afford on 1 income not both, as we both made great money for our ages. We bought in a decent area but not the best, and bought a nice home, but not fancy. Could have spent 35% more easily and still felt comfortable. We kept a 30 year mortgage but paid it off faster, more like a 15year. By age 40 we owned a 500K home outright. once you get in that mindset, it is truly freeing. Now we have enough that it's not an issues, no need to have debt, plenty in the market and debt would cost more than the money we would be keeping in cash equivalents. Plus, in many HCOL areas, the housing market is so hot, if you are not a cash offer, you will simply not be an attractive offer. With cash only, you can close 14-18 days after the deal. Simple easy fast.
Still driving a 14+ yo vehicle because heck, it still runs just fine. Sure I'd love a new one and yes, we certainly can afford it. But I'm fine driving the older car so why would I waste money on a new one just because I can.

So while we have increased our baseline for many things, we only did that well after majority of Americans would (when a $2M home is only 10% of your networth, paying cash is not that big of a deal). But part of the way we got there was by living below our means and making smart financial choices. We didn't just spend to spend because we can afford it. We still live frugally in many ways. And yes, we are cognizant that we are rich---pretty difficult not to be aware of that

[Anonymous]

I grew up poor AF, grinded hard in college, went to law school, then grinded in biglaw. I have no issue at all saying we are rich. I feel incredibly rich. We sometimes upgrade to a better class on planes. I don’t worry about the price of raspberries or shop for sales for paper towels. My kids go to private school and not on FA. When we get a dent in the car, we get it fixed. We run the AC all summer and the heat all winter. We throw the kids birthday parties at venues and bring in a professionally decorated cake.

I’m so incredibly grateful for all that I have and everything we can give our kids. And I can’t even imagine not thinking this is what it means to be rich.

[Anonymous]

Honestly the 700k poster exemplifies why there’s a mental health crisis here. Everyone needs to practice more gratitude and not constantly compare up. That post was like saying: well there are super models in the world, I cannot possibly be pretty if I am an average 9/10. You can be pretty even if there are thousands or even millions of people who are prettier. Same with being rich, people. Get a grip.

[Anonymous]

Anonymous wrote:Honestly the 700k poster exemplifies why there’s a mental health crisis here. Everyone needs to practice more gratitude and not constantly compare up. That post was like saying: well there are super models in the world, I cannot possibly be pretty if I am an average 9/10. You can be pretty even if there are thousands or even millions of people who are prettier. Same with being rich, people. Get a grip.

Most people are only capable of looking up the ladder. Never down.

[Anonymous]

I’ll get 700k off the hook by saying we make $900k and while we fully understand where this puts us on the larger scale, we don’t live “rich”. One car, not nearly as much house as one would say we can afford, as we are risk averse and don’t want to worry about paying a big mortgage on one salary. Don’t have a 2nd home. I stash points and miles for nice travel, which is the area where we splurge. And save a lot. Always wonder if people we see around us in DC have more money than we do, or just spend more.

[Anonymous]

I may be one of those people. I came from nothing, and I still have the mentality of being frugal. My cars and my house will never give away my HHI. The bottom line, I don’t need to call myself anything.

[Anonymous]

Rich is how much you spend.

Wealth is how much you have.

To some extent, both of these can only be truly measured over the course of a lifetime.

A salaried person who wears out of a high income job at age 50 or 65 has a different lifetime financial situation from someone who owns a business or celebrity that keeps paying well for another 10 or 20 years with minor maintenance .

Someone with major medical problems can lose their wealth, and someone with huge savings may never touch it out of a sense of preparation.

Raising 4 kids keeps you less financially wealthy than 0 kids, but also children are a different kind of wealth.

[Anonymous]

Anonymous wrote:Because there is always a bigger fish. And most people will be looking up and comparing themselves to them.

We make $700K. I do not consider myself rich or wealthy because there are big law partners making $3M a year. To me, those guys are wealthy and we're just small fry.

It's how it works.

I do understand this opinion. I wrestle with feeling the same way. But, I would imagine that a lot of those people making $3M a year feel "not rich" compared to people making $10-20M or more.

The problem with this type of thinking is that someone always has more. So does that mean only billionaires are rich? What about someone who "only" has one billion and feels hard done by because he can't afford to buy Twitter as a toy?

[Anonymous]

LOL, I once posted on DCUM about a financial question and was told that we are "poor" and "not saving enough" because we *only* have ~$5.5M in liquid investments plus ~$1M equity in our house. At age 42.

Apparently we are still one medical emergency away from bankruptcy. So, you know. No fancy vacations or dinners out for us. Ramen or starve.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Because there is always a bigger fish. And most people will be looking up and comparing themselves to them.

We make $700K. I do not consider myself rich or wealthy because there are big law partners making $3M a year. To me, those guys are wealthy and we're just small fry.

It's how it works.

I do understand this opinion. I wrestle with feeling the same way. But, I would imagine that a lot of those people making $3M a year feel "not rich" compared to people making $10-20M or more.

The problem with this type of thinking is that someone always has more. So does that mean only billionaires are rich? What about someone who "only" has one billion and feels hard done by because he can't afford to buy Twitter as a toy?

The funny thing to me is, our HHI is $700k because DH IS a big law partner. And I feel rich. Maybe one day he will make $3mm and we will be insanely loaded. But we are rich now.

[Anonymous]

Anonymous wrote:LOL, I once posted on DCUM about a financial question and was told that we are "poor" and "not saving enough" because we *only* have ~$5.5M in liquid investments plus ~$1M equity in our house. At age 42.

Apparently we are still one medical emergency away from bankruptcy. So, you know. No fancy vacations or dinners out for us. Ramen or starve.

The crazy thing is, this is true. It could happen.