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The perfect level of 'rich'
Here's how a teacher, a banker, a writer and a business owner define it.
June 8, 2005: 11:06 AM EDT
By Jeanne Sahadi, CNN/Money senior writer
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What's your perfect level of wealth (excluding your home)?
  $500,000
  $1 million
  $5 million
  $10 million
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NEW YORK (CNN/Money) The notion of "rich" is frequent fodder for headlines. In the past month alone we've learned:

  • The number of millionaires in the U.S. grew 21 percent last year.
  • The alpha-male career of the moment is hedge fund manager, a job in which Mr. Alpha can make tens of millions of dollars a year.
  • And the gap between the ber-rich and everyone else -- including the run-of-the-mill rich -- is wider than ever.

In a column I wrote two years ago, various wealth experts weighed in on the question, "How rich is rich?"

For most of us, though, the definition is a moving target.

You might think six- and seven-figure incomes suggest "rich," but that's not necessarily the case. For her book "The Secrets of 6-Figure Women," Barbara Stanny spoke to women who made anywhere from $100,000 to $7 million a year. But less than a third had a net worth over $1 million excluding their homes. Of those who did, few said they felt rich.

Since the definition of "rich" depends largely on your social and professional circles, where you live, what really makes you happy and how much financial responsibility you have, it's likely your own ideal level of wealth will differ from the next guy's.

A New Jersey public school teacher I spoke to couldn't put a number on her perfect level, but it likely exceeds the wishes of a New York investment banker who emailed me saying he'd like $10 million to $15 million in investable assets, excluding real estate.

Like a lot of people, the teacher said she would like to have enough money so that she'd never need to worry about it again and could help her friends and family financially. But she also would like to give $1 million a year to St. Jude Children's Research Hospital, as well as start a stem-cell research foundation.

The investment banker figured that with $10 million to $15 million, he could net between $250,000 and $300,000 a year. That would allow him to pay for taxes, maintenance and upgrades on a $2 million home, pay for his two kids to go to private school, college and graduate school, and free him to pursue entrepreneurial or charitable opportunities that might take awhile to become profitable. It also would allow him to bequeath "a sizable but not overwhelming estate" to his heirs.

An executive at another investment bank said she would like a net worth of $5 million. That would free her from working 8-to-8 for the money, fund her retirement and allow her to pursue her passions. Among them: fly a single-engine plane around the world; climb to the highest peaks on each of the seven continents (she has four to go); and sail from Maine to Key West to the Caribbean.

A freelance writer living in Illinois and a co-owner of a family business in North Carolina expressed more modest needs.

The writer, who just accepted a full-time writing job, would like enough money to afford him much greater professional freedom. He'd like to do more literary writing on his own and to be "very, very selective about the work I'd take," he said. He'd also like more flexibility and money to travel.

He figures that would be possible if he had enough money to generate $100,000 a year. (Assuming a 5 percent average annual return, he'd need at least $2 million, if he doesn't want to eat into principal.)

The small-business owner, who has two young children, said she and her husband would like enough to invest now so that they would no longer worry about, among other things, being able to pay for their children's college educations or to fund their retirement.

She figures an additional $1 million on top of their current savings would do the trick. But if she had more, she'd like to use it to fund research to find a cure for multiple myeloma.

The extra cushion also would mean she wouldn't work as much overtime or spend so many late nights worrying about the business. That would free her to do more of what she'd really like.

"It all means having enough financially to have simple things (and) to spend time with family," she said.

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Having money and being mature about money are not synonymous. To read about the five signs of money maturity, click here.

Jeanne Sahadi writes about personal finance for CNN/Money. For comments on this column or suggestions for future ones, please e-mail her at everydaymoney@cnnmoney.com.  Top of page

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