A 50 year old person earning $300,000 a year with expenses of $300,000 and less than a month's worth of living expenses put aside is not wealthy (in my opinion).
A 30 year old person earning $30,000 a year with expenses of $20,000 and having 2 years worth of living expenses put aside is, in a relative sense, wealthier.
So the question is:
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What definition do you use to define true financial wealth?"
I've heard that you can define financial independence by the assets one can withdraw safely year after year, such as 2-3-4-5% or more. That leads to a net worth ranging from 15 to 50 times annual expenses - depending on one's life expectancy and if one wants to leave a legacy. Stanley and Danko did a good job defining it in "The Millionaire Next Door."
Personally, my definition of being wealthy is a low multiple of what my current annual living expenses are - times 50 - once again depending on age and legacy.
Example: If I live on $50,000 a year, in order to consider myself "wealthy," I'd multiply that $50,000 by 3-5, then again by 50 - giving a range between $7.5 to $12.5 million. That number would be different for a 25 or an 85 year old.
This is far different from being financially independent - a number which is a LOT less.
I'll never be wealthy, but I believe that I am financially independent. I purchase items on sale, use coupons, do not visit those 'high end' stores to buy fancy 'fashion designer' clothes or drive a 'luxury' car like a lot of my neighbors do. Then again, I spend most days in the pool and hot tub, while they're sitting in rush hour traffic or at work.
Ultimately, it's about needs versus wants. Financial independence covers my needs and a few 'wants.' Financial wealth covers a multitude of 'wants.'
Maybe that explains why so many entertainers and sports figures die broke, their 'wants' far exceed their needs and their ability to pay for it over the long term. I've personally known and been friendly with a few over the years. They earned more in one year than I earned in a lifetime and, over the years they earned more than I could in 40 or 50 lifetimes, yet my net worth is now higher then theirs! All I did was live mostly within my means, save and make more than my fair share of investing blunders along the way, too.
It was announced recently that the Queen of England was broke and down to her last million!
I've seen Buckingham Palace recently, the annual budget to keep it going is $60 million a year. I can assure you that I won't be taking up any collections for Queen Elizabeth or her family. She can move to Florida and rent a small condo for under $800 a month and still live like a queen (well, sort of)!
Striving for financial independence or financial wealth - what are your goals?
What do you think?