How Much MONEY Does it Take to Be RICH?
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- Опубликовано: 28 ноя 2024
- #money #rich #economics
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How much money does it take to be rich? In this video, I answer that question and share with viewers how many Americans actually have achieved that level of wealth.
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For me, the best definition of being rich is the ability to grow my wealth while being able cover my cost of living indefinitely with passive sources of income.
Well said!
But what are the cost of living of a rich person?
@@ordoabchao4202 to me being rich is less about how much you’re spending and more about how fast you’re growing, so with that reasoning, being rich is about keeping cost down and maximizing savings and ROIC.
@@ordoabchao4202It should be within reason. Know your bottom line and live within your means.
@@ordoabchao4202 mortgage + energy + food = cost of living
Wealthy is when your passive income is higher than your burn rate.
In Chinese instead of calling someone "rich", we often say if someone has achieved "financial freedom", where it basically means you can start doing whatever you want within reason, and never go broke.
When you no longer have to trade your time for money you are rich.
I watched the DW documentary about the upper class in Germany and one of the men interviewed there said you need $200mm before you would be considered “wealthy.” What you said about the higher tax rates definitely makes sense for why that number is so high. Friends in New York say an income of $2mm a year is appropriate, which falls in line with your $25-$40mm assessment when adjusting for inflation.
€100Millions said
1mil if house and car paid off, is actually quite decent.
Frank knight report says to be in 1% in usa, one needs 5.8 mil after debt. So let say 2mil house paid off, main car lexus paid off, fun car older ferrari 200k paid off, you left with with 3.55 mil at 5% thats like 177k per year. Thats rich. 0 taxes possibly to, if you do buy,borrow,die... never sell those 3.55 mil of stock.
Alex hermozy (net worth 100+mil) did a video saying that with 300k post tax a year, can live almost billionaires life style. That included renting everything. So having 177k and no need to pay for rent and car, can let you live very well. Easily flying first class few times a year, even a charter or two.
I would say 4-6 mil without debt is rich, and wealthy everyone 25-30+ mil (UHNWI).
Elon Musk doesn’t need to buy a fighter jet everyday to go broke. He just needs to buy a few more Twitters / X and he’d become a millionaire. (Old joke of how to become a millionaire)
Lol! You made the same joke that I thought!
When you live in a house that is top 1% cost in an expensive city and the house is
Agreed
I think you're mostly wrong about the FIRE movement. Most use the 4% rule (4% withdrawal rate in first year) which allows to adjust upward for inflation every year. In most cases the 4% rule is overly conservative and would allow people to increase their withdrawals if they have good returns over time. Also, a lot of FIRE people end up working a little bit, but typically on their own terms, which allows them to either spend more or take less out of their portfolios. But I do agree, most FIRE people are happy to live a "middle middle" class lifestyle but can't afford an upper middle class lifestyle. However, when you have time freedom, it also allows you to spend less money because you have the time/energy to plan better.
What would it cost to own a nice, big home in a coastal city, 2-3 late model luxury cars, being able to go on somewhat extravagant vacations yearly (like to Europe), having the ability to frequently afford cultural events, being able to send a large family of kids to a private school, and own a some bling as well as few nice toys (like a motorhome and a 40 foot yacht)? The ability to generate sufficient passive income to pay for that will define how much it costs to be at the entry level of rich.
As a side note, the rich don’t live exclusively off of passive income. In the US, they’re expected to work - as not having a job reduces one’s social status. And it’s not going to be some ordinary job - that pays ordinary wages. It’s going to be a prestigious job that pays well - and adds a decent chunk of change to the pot every year. Like lawyer or doctor or executive.
Not having a job is only shameful if you are under the truly rich level
I’ll add being able to afford a lavish second home, fly private or at least first class without blinking an eye at the cost and also being able to afford staff to manage your affairs (landscaping, housecleaning, personal assistant). So to be TRULY rich, I’d put the number closer to $100 million.
@@AFNickManaging wealth and the risk of losing it seems like a full time job to me. Perhaps not a stressful one, but I'd find ways to fill 40h/week with that.
A lot of very wealthy heirs do have jobs, wether as CEO’s Government positions, or head of a charity (like Rockefellers, or Buffet’s Kids)
I think for a single person $5M is a little high of a number to be considered wealthy, but in the right ballpark. I'd put it as low as $3M, but if we're talking wealthy and not just upper middle class, I guess $5M is about right.
FIRE does account for bear markets, if done right. I do recommend researching FIRE more before critiquing it.
There’s also different FIRE paths. Lean FIRE, fat FIRE etc. Not all FIRE adherents plan on living in tiny homes, living off of $2k a month.
It’s funny that he criticize FIRE people that they have to watch their spending, but then immediately talks about how even Elon needs to watch their spending to be considered rich.
His goal of 20 million is in line with people who live in the Bay Area/tech bros and are willing to trade their life to hit that number. Then when they do, they no longer have health or time to spend it in an enjoyable way.
The goal of FIRE is not to be “rich”, but to have freedom and control of their time.
Money isn't what makes you rich, family is. Especially when your family has lots of money.
You can say that. But if you lose your source of livelihood, the countdown to losing your family has begun
@@recycle_your_moneynot in Europe or southeast asia. Places like that family is everything
@@frag0638 You have welfare. So the public is helping you put the family together. If there’s no welfare, no job, the sandclock begins.
Net worth is the most relevant criteria on defining wealth! 🎉
Absolutely
I _dishagree_ - Sean Connery.
Although in 2024 A.D. - for most people alive today - people who are also culturally far away from African culture -
For such people - from the outside looking in - net worth is the most important factor in defining material wealth.
I propose the following criteria- how many times your passive income is higher than your costs
6:00 The 10 year treasury currently yields 3.773%. Working in the past as a banker, then owning my own business, the advice i absorbed was always to use the 10 year treasury (x) 3 as a R.R.R., so 11.3%. Every real estate deal we have reviewed in the last couple years is way over priced, and does not have a projected return of any where near 11.3%. Good luck everyone
That seems like a high hurdle rate. Is that gross return, net of mortgage, or cash on cash?
Too much money is better than too little
Great video man. Time to expand business and make the right investments!
Depends where you live. Pretty sure 5 mil in west Virginia or Louisiana goes a long way.
Maybe we could simplify the definition to something like: 1% income earner perpetually with only returns on capital. This captures some of the key axes (pl of axis) of a rich/wealthy lifestyle, such as income based on capital, no requirement for labor, privileged standard of living. This is abstract enough to allow for differences in what rich means for different cost of living cities or locations and changes to value of money over time.
$3,000 dollars a month just covers overhead. You need roughly $4,500-$5,000 per month to just tread water. Reduce your wants and be realistic about your true needs. 😊
I would generally say that to be rich is to not need to make desperate dilemmas on a regular basis. You having the greatest asset of all, time and distance from problems so you can always make the best long term plans possible rather than being tossed around by short term fluctuations.
This doesn't exactly have a specfic dollar value attached to it but is far more dependant on the origin of your wealth and role within a society. For example, a relatively impoverished noble on the income side but is well liked within the surrounding community is insulated from many fluctuations (such as; lenders being more hesitant to send in the bailiffs, locals less incentivised to rob thier estate, local political strongmen finding it difficult to scapegoat them, and etc). Compare that to a far wealthier business owner that throws their weight around ,as they are known to do. Even minor fluctuations can hit them hard since people are actively looking for any casus belli against them.
To me, a life with nothing to look forward to work on, is hardly a life at all. I mean, you see how much these rich kids struggle with it, or how because the rich can buy everything they want... They want what they can't buy with money, and it's often evil.
Great video
Thanks
If you have 2 million and dividends pay you 80k to 90k a year thats decent depending on your age im 32
That’s good, but not rich. That income is a middle class lifestyle
This is what I watch when I'm high...
Yeah I'm dying alone.
Same bro
Nick, do you think that with fire movement getting popularity in 100 years the class system can be affected by it? With a new class of Old FI? Where there are generations of financially independent people
No I do not think it will be. You can't FIRE your way to true power.
Crushed my dreams in one video!!
Also age dependent factors in. My number at 25 was higher than now at 45.
Can we must invest enough and live passively with low expenses and have the investments keeep up with returns ?
Sooo….. from this, it seems like your wants determine your wealth. I know people that are perfectly happy whose only desire is to stay home and go out to eat once every other week. This is definitely a case by case, type of person thing…. But thank you for the video…. Something to think about
You are rich, if you can live a global top 1% lifestyle, indefinitely, off the income from your assets, without ever depleting them. That is $10K+ per month and US 30-year treasuries at 2% (low) means you need to have a liquid net worth of $24M to be rich.
$10k a month does not get you that lifestyle, not even close.
Fire people benefitted from the stock market going up during inflation though. And with improving efficiency in the economy, they are set to reap alot of the benefits. They may have to have more money than their original goal, but they are still closer to their goal than most other people are.
The 4% rule that most FIRE people use already takes inflation into account. The 4% rule works in all but the very worst scenarios.
I’m FIRE, except I have higher goals than most other FIRE people. The people he’s talking about in the video are the ones trying to live off of the bare minimum to retire, so they will essentially always live very frugally. My final goal is $23k in monthly spending power. I currently have enough for $15k a month, I estimate we have another 5 years. Anyone trying this needs to remember that earlier you start, the easier it will be and to keep putting money in no matter what the market is doing. The 5 years or so are frustrating because the number isn’t growing much, but damn you’ll be shock by how much it goes up after that.
personally i consider rich to be the ability to live an upper middle class life off of returns on investments and asset appreciation... so i'd say about 200k off of returns, let's assume a 5% return yearly it may be low but it accounts for inflation, so i guess 40 million?
Agreed, but 5% of 40M is 2M. You're right about number needed, but $200K living money per year isn't rich.
Your math is bad. 5 % of 4 million is 200,000
@@Mike-Snoducky Thanks for the correction
@@Mike-Snoducky lmao i can't beleive i missed that thanks for correcting 😭
@@AFNick true, embarassing mistake haha
$10m networth is wealthy. $30m is UHNW. Greater than $100m is generational wealth
I am rich. I moved to mexico and now my expenses are about 2 to 3 % of my net worth. My expenses are cover by Soc sec so I only touch my savings to give gifts to my kids.
That’s the great way to define if one is wealthy!
“What’s your number”
“More 😏”
😂
This is too complicated.
“Rich” is a multiple of what you earn right now…..not more than 35X in America. Ultra rich is 100X or so.
If you are living a certain way now, rich is when you don’t have to work to do so….
I’d disagree that ‘rich’ simply means maintaining your current lifestyle without having to work. That’s more ‘comfortable’ or ‘safe’
It makes more sense for ‘Rich’ to mean what you said, but with the addition of ability to GROW wealth without working rather than simply maintain a lifestyle with stagnant wealth. I’d argue that the capability to live luxuriously if one so chooses is a requirement to be classified as ‘rich’ too. I don’t think you’re ‘rich’ if going on two extra holidays would bankrupt you lol
@@ForWhatIsAMan I hear you.
I use this because people work as hard as they can to live how they want to live while working. People having these conversations tend to be capable of EARNING more than most - but they are not “rich” in my view because they have to work.
The point is being able to live like that WITHOUT working.
You don’t need to have more money if you can have the money you have now without working.
This is why a lot of old money doesn’t “look” rich. They live where we live. Budget like we do.
But I am up early for work and they are not.
Pick whatever is a “good” lifestyle for you, figure the income needed before tax, and multiply by 35. If you have more than that you can safely give it to charity.
@@WealthScientist I could agree with that fully if you just added ‘while growing your wealth sufficiently to keep up with/outpace inflation’
@@ForWhatIsAMan 35x will grow way faster than inflation.
1 divided by 35 = 2.8%.
I could build you a portfolio that generates 3% in dividends to live on. That portfolio will grow by 3-6% a year on top of that.
You can leverage it a tiny bit that will not matter, and every 0.5% added return is one sixth of your cost of living.
Make sense?
All you have to do is get that much, and anyone like me or the person on this channel can execute that strategy with ETFs. Globally diversified.
You can even invest in stocks yielding 6-9% that go up 0-3%, and have a much safer financial picture forever and ever.
I don't care about wealthy by your definition. No way to I want or need 500k a year to spend.
If you have more modest spending habits it makes is easier to retire early
What do you think about the amount of people relying on the stock market and crypto?
I’ve noticed that so many people view investing as the new get rich quick scheme and so they put all of their money into something they have absolutely no control over, rather than investing in their own businesses.
See my video on financial nihilism and the stock markets being a casino for thoughts on this.
@@AFNick Great video
@@jamm_affinity Thanks
Hmmm business owners don’t have complete control either. “In 2023, 18,926 businesses in the United States filed for bankruptcy, which is an average of almost 52 per day.”
I’ll take my chances with long term investing in the S&P 500 or Russells 2000 over 25+ years
This was interesting. I've enjoyed your videos. I'm single. I've had a vasectomy no kids. I live in a low cost of living area. I have a paid off duplex living the one unit rent. The other one out I feel like with the economics of that and then when I hit a million dollar net worth besides the rental property I should be pretty much set for life. I live a pretty lower middle class lifestyle. I grew up upper middle class but I like freedom more than money and status
Your idea of freedom is loneliness
Getting a vasectomy before even Having 1 child is kind of different
@@bigdog4166 I knew growing up I did not want kids. I grew up pretty affluent and I knew that I couldn't emulate that. Plus I really don't want the responsibility and stress of having a child. I saw how a lot of people just use children as fashion accessories. I've seen a fair amount of people where their lives just end up in divorce and loneliness. Anyhow, they may have children but their kids may just hate them and want nothing to do with them. Later in life. What creates more loneliness having and losing or never having it all?
@@LennoxroadpoeI knew I never wanted kids. I knew I never wanted that commitment. I got it in my thirties. I thought about it a lot through my teen years and twenties
Nick, perhaps your view is a little skewed from working in finance being around wealthier people 😉. IMO rich starts at 2million. At 5% that’s a passive income greater than 90% of people. But that’s just the start. If you can get past 2mil you’re good. This is an amount an educated professional could achieve in a lifetime if they were smart. Now that would still mean you live an upper middle class life and wouldn’t want to burn cash. An interesting way to think about how these numbers come about has to do with how much one could expect to earn from working.
For instance at your number basically no working professional doctor/dentist/lawyer would earn more than the interest on 20 million. This is where you get into existential crisis mode for a host of reasons. If you are lucky enough to be in a profession that pays well work is not just about money it’s about keeping your mind active. I know several people who could retire but choose not to, not because they enjoy working but because they like being productive. In fact many people retire and go back to work. Curious to hear your thoughts.
More people make $100K than you think (especially after factoring in dual income households). Rich doesn’t mean retiring on a comfortable middle class income (that’s what a $2M nest egg does unless we get major rate cuts), rich means an affluent lifestyle without having to work. That’s a much larger hurdle to climb.
That’s what rich is. Having the spending power of someone working a high powered profession or greater without having to work.
@ thank you for the reply. I understand a little more now what you mean. Thanks
18:54 1 in 12,000 Americans, bro. Not 1 in 1200… that would be 0.1%, not 0.01%
A little less 0.2% of Americans are what qualify as rich, by the definition of this video. That's one in 600
@@AFNick fair enough, but I got the “0.01%” figure from you in this video. You said “0.01%, which is 1 in 1000”
Just thought I’d clarify that 0.01% is 1 in 10,000
@@AFNick Is it really true that as many as 0.2% of Americans have 20M or more? That actually sounds extremely common…
There were ~600,000 Americans with that level out of around 330M when I recorded this. The number is likely higher now due to inflation and GDP growth. Top 1% of net worth is $11.6M
@@AFNick yeah man, 300,000 Americans out of 330M still isn’t 0.2%
It’s 0.02%
You’re just a figure off there
But more importantly, I’m motivated (and shocked) at how common that level of wealth is. Holy moly. I would’ve thought 3-5M put someone in the top 1%
$500,000 a month or $20 million
A net income of no less than $10,000 a day
I'm 43 and have $450,000 and no house. So I guess I'll never be wealthy 😞
It’s not over yet. Depending on your life circumstances and risk taking capacity, you’ve got plenty of opportunity to still get there.
Bali
Just move to Russia, Belarus, Thailand, Vietnam, China, Mexico, do some easy job, buy an apartment there and rent it out, live off of your money
I'm a 64 year old self employed carpenter , lucky to make 45K definitely not rich 😮
Maybe not, but who cares? That's a decent amount for someone your age. If you keep adding to it, you'll be in good shape in a decade.
I don't want to become wealthy. Would like to get to middle class someday though.
Lol, why not. That's like saying I don't want great health, I would just like to have okay health.
When I can buy a Focke Wulf FW 190 I'll think myself rich 🤔
5% return on assets ?!?! Anything over let’s say $5m, if you’re not able to manage >10% in aggregate, you’re stuck in the wrong investing model. Our money “at rest” is doing 5% and that’s just reserve capital, collateralize that to finance syndications CONSERVATIVELY in the 14-18% range, first lien bridge loans at 12%+ Not only that, with enough capital position you’re collecting fees/points/commissions on trading your own deals. People stuck in the stocks/bonds portfolio allocation models can’t begin to define rich or wealthy.
u can ball with 200k a yr ? wtf this guy talking about
But why not?
In belgrade yeah, not in London or SF though
Dude I love your logical take on issues.
As someone with a 6M net worth I find this video highly problematic and insulting
Why?
@@AFNick Because it took me over a decade of hard work during my best years, sleepless nights, literal anxiety attacks that I had to take medication for, as well as incredible luck and right timing to get here. and you're like "lmfao unless you have 25 million you're broke". I mean I agree with this video, it's just so depressing.
@@deliciousvegans4505 Wealth is a spectrum; its not as simple as saying that having $20M is broke (it for sure is nowhere near broke). You're definitely financially successful (top 1.5% in NW), but the cutoff line has to be somewhere. I'm building a business myself and totally get the struggle of the grind that you had went through earlier, so I get it.
My definition of rich is being able to have a $1M per year lifestyle while living solely on interest payments/returns of investments. $6M is a major milestone, and it's worth feeling satisfied about. Congrats on all your success.
Haha. All atheists here. Bro show me the money …. I don’t care how much money you have in your bank account; by that standard you will be money rich and in everything other category poor. How sad that kind of mindset is.
If someone has impressed money they can afford a better physical condition, more kids, more experiences and have less psychological stress. Religion is cope for lacking material success which is why Christianity spread amongst the losers of Roman society like slaves and the poor