How much would it take for you to feel rich?
$100,000 a year? $250,000 a year? $25 million?
We’ve always thought that feeling wealthy was subjective. But we never knew how subjective: Three recent studies indicate that the wealthiest among us don’t think they’re loaded enough.
- First, a Gallup study showed that about three in ten people in households making more than $250,000 annually don't realize that they are "upper-income."
- Second, a Fidelity Investments survey determined that more than four out of ten American millionaires do not feel wealthy.
- Lastly, a study conducted by Boston College’s Center on Wealth and Philanthropy among the über-rich found that the majority of those who have more than $25 million do not consider themselves financially secure.
We can sympathize to a certain extent. Depending on where you live and how big your family is, it is sometimes true that households with $250,000 still have to plan carefully. (But they shouldn't forget that they are in the top 2% of American households.)
However, among multimillionaires who make an average of $78 million—including two billionaires—“most do not consider themselves financially secure; for that, they say, they would require on average one-quarter more wealth than they currently possess,” said The Atlantic Monthly.
Why do the insanely rich feel poor? There are a few reasons for this extreme financial dysmorphia.
The Allure of the Middle Class
In the Gallup survey on taxes, 67% of those from households making $250,000 or more thought their taxes were too high. But when asked about "upper-income people," only 38% of this same group said upper-income people paid too much in taxes. This means at least three in ten from households making $250,000 or more did not realize that they are upper-income.
One reason might be what this New York Times blog post calls “the Middle Kingdom effect.” This group knows they make more than the poor, but they also see people who are much wealthier, particularly in the media. They therefore conclude that they are in the middle, and therefore middle-class.
You can buy food, but not appetite; medicine, but not health; soft beds, but not sleep; knowledge but not intelligence; glitter, but not comfort; fun, but not pleasure; acquaintances, but not friendship .... —Arne Garborg
The Stress of Retirement
The rich may also not appreciate their literal good fortune because of a universal worry: retirement. In the Fidelity survey, the 42% of millionaires who said they did not feel wealthy were, on average, closer to retirement, so they were likely feeling the stress of maintaining their lifestyle without working.
Keeping Up With the Joneses
As the moneyed ascend the food chain, they begin to fear that “friends” want more than just friendship, so they begin hobnobbing with others on Easy Street. But if you merely have $25 million and are vacationing with a family swimming in $50 million, not only are they twice as well-off—they have an extra $25 million to toss around. And you will feel the need to keep up.
Craving a Higher High
The affluent might also not be content because of our pesky human tendency to adjust to what we have. If you’ve been flying in your private jet with the gold seat belt buckles for the last decade, it’s no longer exciting. In fact, it feels downright old.
We splurge for the boost we get (learn how to do it right). But if life is just one opulent luxury after another, then that becomes normal, not special. That’s why your parents worried about “spoiling” you as a kid—too many indulgences will spoil all the rest.
It's a basic principle that people spend what they earn, no matter how much it is. According to the book Richistan, in 2004, a fifth of households with $1 million to $10 million in assets spent all their income or more.
A common scenario: a 20-something corporate lawyer buys an apartment with her first-year savings. Whether or not she likes her job, she has to stick with it in order to pay the mortgage and buy furniture. Year after year, as she makes more, she doesn't put all the extra earnings into the bank—she gets a new car, a vacation timeshare, etc. All these require her to stay in her job to afford them (the "golden handcuffs"). It's a vicious cycle: more income feeds a pricier lifestyle, which requires more income.
Super-size this story-line, and it's plausible that a millionaire with three homes and four cars can actually feel financially strapped.
What Money Can't Buy
While all these factors contribute to the warped view the rich have of themselves, we think something more fundamental is at play.
In the Boston College survey, many of the multimillionaires were not only insecure about their wealth. They were also insecure about some of the foundational needs of life, such as love, career—even self-worth. For instance:
- Love: It sounds cliched, but it's true: The well-to-do often wonder whether they are loved for themselves or for their money. The Atlantic Monthly writer says disclosing one's wealth during dating seems "as fraught as telling your date you have herpes.”
- Career: Those born into money (dubbed by Warren Buffett “the lucky sperm club”) don’t have to do what most people do—work. A job not only fills one’s days, it provides a feeling of purpose and a measure of success. But often, wealthy people who work are seen as taking away jobs that others need or as putting on a charade.
- Self-worth: Heirs are born under the shadow of their parent’s triumphs. Many spend their lives wondering whether they’ll achieve anything on their own.
At the end of the day, the rich probably don’t feel rich because of the things money can’t buy.
Tell us: What does it take for you to feel wealthy or secure? Is it having a certain amount in the bank? If so, what amount? If not, what is it?