What Does It Take to Truly Feel Wealthy?
(Bloomberg Opinion) -- I moved to New York City a decade ago at the tender age of 22. I worked three jobs that first year to make ends meet and didn’t earn more than $25,000. I remember thinking, “If I could make $80,000, I could really enjoy living in this city.”
By 2016, I was earning $80,000 and already fixated on getting to $150,000. Because then, I told myself, I could really indulge in the finer things New York had to offer.
This mindset of reaching toward ever-higher financial goals stays with us over the course of our lives. It’s helpful when it comes to paying off debt and building a strong financial foundation. But it also raises the question: How much money is enough to truly feel wealthy?
People’s views on wealth have changed during the pandemic, according to a Charles Schwab Corp. Modern Wealth Survey. In 2020 respondents said $2.6 million was needed to be wealthy, while $1.7 was needed for financial happiness and $934,000 to be financially comfortable. In 2021, respondents said $1.9 million was needed to be wealthy, $1.1 million for happiness and $624,000 to be comfortable.
To be in the top 1% in the U.S., you need to have a pretax income of about $500,000, according to a Bloomberg analysis from 2020, but this varies by region. Even joining the double-comma club doesn’t do it for most. A 2019 survey by Ameriprise found only 13% of people with $1 million or more believe themselves to be wealthy.
The point is, what it takes to feel wealthy is a moving target. Although it’s wise to think about how to grow your personal wealth, you can spare yourself a lot of anxiety by also focusing on how to find contentment. That’s the only way to get off the hedonic treadmill of never feeling satisfied with what you have because someone else always has more.
Determine the baseline for your desired lifestyle or goals.
In the U.S., a living wage in 2019 was $16.54 per hour, or $68,808 per year, for a family of four (two working adults and two children), according to the MIT Living Wage Data. In expensive metropolitan areas like New York and San Francisco, the living wage figure rose to $93,851 and $94,741.
There is a huge difference between earning enough to live and having your desired lifestyle. To start thinking about feeling wealthy, determine a specific baseline income needed for you to live the life you want — within reason of what’s possible.
This will evolve over time as your life changes. Marriages, kids, retirement and inflation are all major factors. But ultimately, setting a baseline should be about quieting the noise of external voices telling you what you should value. Instead, focus on what truly brings you satisfaction and happiness, and then you can reassess that number every few years. The pandemic should have given us a chance to reflect on what we value most.
Deal with the comparison trap.
Anytime I hit a significant milestone in my salary or net worth, the dopamine hit would quickly diminish after seeing other people’s income and net worth posts on social media and personal finance blogs.
The comparison trap is a death knell for feeling wealthy.
The problem is, we’re constantly inundated with carefully curated ads trying to sell us goods and lifestyles. Depending on social media consumption and geographic location, you can be surrounded hourly by images of people who have more than you. Even knowing some of these shows of wealth are works of fiction funded by debt seems to do very little to squash the voice whispering, “You don’t have enough. They have more than you. You’ve failed.”
Identify a scarcity mentality.
One reason you may struggle to feel wealthy is because you don’t trust it’s a lasting situation.
Scarcity mentalities present in various forms, but a dominant one in the financial realm is a persistent, underlying fear that everything will be taken away one day despite evidence to the contrary. There are myriad reasons for this mentality to take root, from how money was seen and dealt with in our childhoods to whether we entered adulthood during a financial crisis.
The suspicion that financial security let alone wealth doesn’t last can be a big part of what keeps us fixated on accumulating more and more. And what starts out as a form of protection can turn into obsession.
While you might need some good old fashioned financial therapy to truly get a handle on your scarcity mentality, one actionable step is to make sure you’re properly insured and prepared for any financial fallouts. That’s going to vary for each individual, but you can start by making sure you’re covered with health, life, disability and even homeowners insurance policies. Keeping an emergency fund should also bring you some peace of mind.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Erin Lowry is the author of “Broke Millennial,” “Broke Millennial Takes On Investing” and the forthcoming “Broke Millennial Talks Money: Stories, Scripts and Advice to Navigate Awkward Financial Conversations.”
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