What’s the “magic number” that makes you wealthy?

Several years ago I asked a colleague “What do you need to retire?”

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His answer: “$5 million and playmates.”

Playmates?

What he meant was having enough leisure-time folks to hang out with during the day.

So, about the  “magic number” …

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According to the 2019 Schwab Wealth Survey, Americans believe it takes an average $2.3 million in personal net worth to be considered “wealthy.”

Millennials pegged the number at $5 million

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In a similar vein, the WSJ asked some millionaires the question: “At what magic number did you consider yourself wealthy?”

  • 25% of the respondents said it was $1 million to $2 million net worth
  • Another 25% said it said it was $2 to $4 million.
  • 15% said they needed $5 million to $10 million.
  • 4% (probably all New Yorkers) said they needed more than $10 million.

Average that out and it comes to about $2.75 million

* * * * *

Note that both of these studies measured wealth in terms of “net work”: the value of assets less money owed.

That’s the right way to do it.

These days, many folks  confuse “stocks & flows”

Rather that calibrating “wealth” by net worth (a balance sheet item) they measure it as income (obviously, an income statement item).

That’s measuring the “flow” … not the “Stock”.

Wrong way to do it.

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