By Dr. James M. Dahle, WCI Founder
As I write this (back in December) I have been thinking about “feeling rich” lately. (I know, I know, nobody likes the word “rich” because it reminds people of the phrase “filthy rich.” Substitute “wealthy”, “comfortable”, or “financially independent” as you see fit if it makes you feel better.) Stephen Nelson got me thinking about it at first, which his excellent Thanksgiving blog post (which was apparently somehow inspired by something I wrote.) He pointed out that:
But to me, the really interesting element of Dr. Dahle’s essay is not that he’s become rich through hard work and intelligence, common sense and good luck. No, the interesting part to me is that Dahle feels rich. He feels wealthy.
What’s weird about that? Well, a couple of things. Many people with high incomes and impressive net worth don’t feel rich or wealthy. Even though they are. And then often people with high income or high wealth feel (mostly) stressed. Or financially insecure. Or like runners in a rat race.
Dahle, to his great credit doesn’t feel this way. And with an eye toward the Thanksgiving holiday, I’d like to suggest three reasons why I think this is maybe the case.
Then, I got to experience these “many people” myself on a Bogleheads forum thread. It starts with the original poster stating:
I'm 53 years old, have ~$8 Million in various mutual funds, stocks, ETFs, bond funds. House is almost paid off with no plans to move. Three kids to put through college. Living in the San Francisco Bay area in a house valued at about $4 Million, and all this does not make us feel wealthy with a net worth over $14 Million (including a rental house). We live a simple lifestyle with no expensive vacations or large expenses.
As if that wasn't bad enough, one of the replies said this:
I have a net worth of over $30 Million ($9 Million real estate and $21 Million stocks/bonds/cash) and no debt. I'm 51 years old and I would like to retire but I am not yet confident in doing it…. I'm not sure its enough.
I couldn't resist leaving a reply to each of them, hopefully taken in the spirit in which it was intended. I hope you can see why the way they feel is nutso. If not, this post is for you. There is a lot of truth in the axiom that “Rich is always twice what you have.” I've found that to be true in my life and I bet you have too. So, assuming we are rich, what can we do to feel rich? Let's make a list.
#1 Get Rich
Well, the first thing you need to do before you can feel rich is to get rich. There are a lot of well-meaning folks out there who say “rich is a state of mind,” “we're all rich compared to the starving African refugees,” and the like. That's all true of course, but if you're a reader of this blog with a net worth of $50,000, I think you would be well-served to NOT feel rich, because your financial situation is actually rather precarious, even if that puts you in the richest 1% of people who have ever lived. So the first thing you probably ought to do to feel rich is to get rich. Even Mr. Money Mustache, one of our generation's most hyperfrugal folks, waited until he had a high six-figure portfolio before declaring himself financially independent. I think that's a pretty good benchmark for our society. If you haven't hit a net worth of half a million yet, I think you probably ought to get there before worrying about feeling rich.
#2 Insure Against Financial Catastrophe
Wealth can be ripped away from you very quickly in certain situations. You can insure against many of these situations pretty easily and inexpensively. So make sure you do so by purchasing disability insurance, term life insurance, professional liability insurance, personal liability insurance, and property insurance for your expensive property. Minimizing (I suppose you can never truly eliminate) it can help you to feel richer.
#3 Recognize the Power of Anxiety
Despite not going into psychiatry, I might be an expert in anxiety. I would guess that fully 1/3 of my clinical paycheck comes from anxiety. I see an endless parade of patients with nothing serious causing their chest pain, abdominal pain, headache, dyspnea, paralysis etc. The mind-body connection is very real and very powerful. We should all be in awe of it. We should also realize that we are not immune to its effects. Consider the $30 million guy above. He WANTS to retire. He has enough to retire in an amazingly comfortable way in any city in the world (although of course perhaps not every neighborhood in the world.) Sure, he doesn't have his own airport and jet, yet he doesn't have the confidence that he has enough. Now, I suppose it is possible he just has an incredibly high burn rate, but more likely, there is some anxiety at play here. One huge downside of becoming rich is that you have something to lose. The homeless dude on the corner has nothing to lose. He's not worried about creditors, or a house burning down, not being able to work, or burning through his nest egg by age 80. But the solution to anxiety isn't accumulating more money. That just makes you the richest guy in the graveyard. Hearses don't have trailer hitches.
#4 Know Where You Stand
One thing that will help you to feel wealthier is to know where you are actually at. Knowing your net worth, your required spending level, your desired spending level, and your “enough” level, and having some sort of plan to arrive at that level removes a great deal of worry and anxiety. Lots of people are anxious about their financial situation and should be because they have no plan.
#5 Hang Out with a Different Set of Jones
The Jones have a bigger tube
We are social creatures. We cannot but help comparing ourselves to those around us. That includes at work, at church, with social groups, with family members, and in our neighborhoods. Thus it is with feeling rich—if you are richer than most of those you are around, you will feel rich. If you are poorer than most, you will feel poor. Buying the least expensive home in a nice neighborhood might be good to maximize real estate appreciation, but it is also likely to lead you to feeling poor. It might not feel entirely comfortable being around those with less income and less net worth than you, but I can guarantee it will make you feel wealthier! If your friends take vacations to the local state park and you can go to Belize once a year, you'll feel wealthy. If your friends vacation four times a year in Europe, your trip to Belize isn't going to seem very glamorous in comparison. If $14 million doesn't feel like “enough” in Silicon Valley, move to Reno and buy ten houses similar to yours in Silicon Valley.
#6 Give Money Away
You didn't become wealthy by frittering away money. Mathematically, giving away money, even to a qualified charity, isn't going to make you any richer. You might get 45 cents off your taxes for every dollar you donate, but you'll still come out behind. However, there is a subtle message you are sending to your psyche when you give away money- “We have enough.” That subconscious message will permeate your life and cause you to be happier, feel less anxious, and feel wealthier.
#7 Live on Much Less Than You Earn
Another great way my wife and I have discovered to feel rich is to live on much less than you earn. As our income has grown to that of the average physician, to that of the average specialist, and beyond, we have saved more and more money and given away more and more money. Are we spending more of that extra income? Sure, but there is still a monstrous (and increasing, even after our much higher tax bill) gap between what we are earning and what we are spending. That gap provides a lot of financial security and makes us feel wealthier. If you are living paycheck to paycheck (as many high-income professionals do) it's pretty tough to feel rich.
#8 Limit Fixed Expenses
Another behavioral trick we've used is to limit fixed expenses. Mathematically, the best way to maximize your net worth is to maximally leverage your life- always borrowing whenever possible at low rates and investing the difference at higher rates. However, when you have all that debt to service it increases your fixed expenses. We are not afraid to blow ridiculous amounts of money on one time purchases and trips, but when we add on a recurring expense, it gets hawk-like scrutiny. Like living on much less than you earn, having very limited fixed expenses allows you to dramatically downsize your spending in the event of income loss or other economic event without going hungry.
#9 Volunteer
Like giving money away, volunteering your time helps you to focus on others, rather than yourself. When you're trying to figure out ways to help others, you're not worrying about your own problems. Happiness studies are very clear that volunteering your time makes you happier. Plus, when you volunteer you are generally working with people who have much less than you do (not only because most people have much less than you do, but volunteer organizations tend to serve the most unfortunate.)
#10 Travel Internationally
There is nothing so useful to reset your perspective as traveling internationally. While it is nice to see Rome and Paris, that's not what I'm talking about. Go trek in Nepal, hike to Mayan ruins in Guatemala, walk on a beach in Fiji, and explore Peru. If you are like most, you will feel very wealthy, very quickly.
Hopefully, these tips will help you to feel more wealthy, whether you have “enough” yet or not.
What do you think? Do you feel rich? Why or why not? What have you done to help you feel rich? Comment below!
Great list. Another way to feel rich is to express gratitude. By spending time thinking about and appreciating what you do have, you’ll be less inclined to think or worry about which you don’t have. This will increase your happiness and perspective on how rich you are.
I agree. I tend to get caught up in the day to day hectic nature of life and business and forget about some of the positives.
Spend, save, and give. All three matter. When I have felt we were putting too much emphasis on the saving is when we got out of balance in knowing we have enough. Spending a little more and giving more, especially anonymously or randomly, have always helped get us back in balance.
Great List. My net worth is around 0 right now and my income should jump dramatically in a year. So I am not doing 1, 7, or 10 right now, but I feel incredibly rich thanks to the other points and the fact that I have a plan to build net worth over the next several years. I think those two other posters you mentioned would feel rich if they had a plan to retire. Knowing what you need to live the life you want provides security just like the insurance you mention.
We watched Lion the other day and that reminded us of how rich we are. Learning about the third world can help to feel rich even when you can’t afford to go there ( it probably helps that my wife and I have spent significant time in other countries).
Excellent list across the board. I’ll add one, although it’s somewhat similar to your #5.
#11: Stop making comparisons. There will always be someone with More. I may have a few million, but those Bogleheads have $14 million and $30 million. They might feel inadequate knowing an heiress who has $100 million, and she’s jealous of the tech startup guy with $500 million who wants to be Mark Cuban with his $3 billion, and he wishes he had as much as Zuckerberg, Gates, or Buffett.
Focus on what you have and what you need, and not on what someone else has, or you’ll never feel rich.
Best,
-PoF
I think this is an excellent point. No good can come out of comparing.
“Poor man wants to be rich, rich man wants to be king. A king ain’t satisfied until he rules everything”…..Bruce Springsteen
Comparison is the thief of joy.
Teddy Roosevelt
I second this notion. Maybe that’s why most of us learn from our parents not to talk about our salaries or how much money we have. The comparisons are bound to leave some feeling small especially depending on the circle you’re in.
Thanks, Jim, both for the compliment and for expanding the discussion of how we can feel rich.
Fortuitous timing for this blog post for me. This past weekend, I went to a party for the parents of the senior class of my son, who attends an elite private school. We have not socialized much with this group much over the years, but we wanted to catch up with some people as high school was winding down. It was a long time since I have felt so un-rich.
There were many couples there with multigenerational wealth, often compounded by marrying well and making intelligent financial moves over the years. Lots of old money, so to speak. But more than the actual wealth itself, I recognized in their faces the absence of concern, the lack of being hassled, and the freedom from the stress/anxiety of being a doc that I see in my physician colleagues when I meet them in the halls of the hospital (or out of work in social functions) and when I look in the mirror everyday.
These truly rich people are often running businesses that they have nurtured and love, they make their own schedules, they travel where and when they want, and the answer to no one. They do business with whom they please. They do not make hundreds or life-or-death decisions every day and do not have to deal with druggies and moochers, 90 year olds trying to “check out”, or clipboard nurses. And they do not talk about retirement–why would they?
I do not envy their cars (or planes), mansions, jewelry, or their money, but I do envy that they enjoy a level of professional independence and freedom that I will never experience so long as I am a physician.
These are TOOS people. Top-out-of-site. self-actualized.
Vagabond, this is a great observation. One issue that I struggle with is that I am in a position to create multi-generational wealth. Now that debt is almost gone–and keeping expenses low–I can put a mil in the bank every 3 years if I keep working full tilt. If that mil doubles every 7-10 years…. On the one hand, it is selfish to cut down and barely work when I could set up my child and child’s children for life; on the other hand, we have “enough” and spending time being a dad is worth a lot. There is likely no wrong answer, eventually I hope to realize that.
I hear you. I don’t quite have that earning power, but could put away a million every four years. I used to think I would keep working and end up with $10 million-plus and a withdrawal rate in the neighborhood of 1%. http://www.physicianonfire.com/10million/
I’ve decided to slow down instead.
Cheers!
-PoF
A quote I have heard is: “If you want to make your kids lives tough, then make it easy for them”.
Would you have wanted wealth handed to you? If not, then why do you think your kids would want it? I understand giving kids opportunities and education, but why would you want to give them more money. A much more valuable and precious resource is time.
It also takes one generation to create wealth and then two generations to destroy it.
Giving your kids too much money is a sure fire way to ruin their lives.
What specialty are you in? People act like that kind of earning power is no longer possible in medicine.
the other difference that I think is present between people like us ( those who are the first in their family to become wealthy) and the “old money” or multigenerational wealth folks is that we often have this nagging fear ( at least I do !) of “taking a step back” and becoming un-wealthy again ( and that’s despite of all your rational mind’s pleas of such an event being very unlikely, with all your diversification, rebalancing, frugality, asset protection etc. in place).
@VagabondMD
“They do not make hundreds or life-or-death decisions every day and do not have to deal with druggies and moochers, 90 year olds trying to “check out”, or clipboard nurses. And they do not talk about retirement–why would they?”
Great quote.
VagabondMD, I have stood in your shoes and understand what you are writing. I’m wondering if you are employed, or own your professional business. I ask because as a self-employed physician, I have a lot of freedom to make the choices you see bringing calm to the lives of the people at that function. On the other hand, I work with a lot of employed docs in other specialties, and they have anxiety behind their eyes that I do not.
I am a partner in a private practice radiology group. I have been on IR call every other weekend for 21 years (except when a senior partner had a string of serious illnesses at the end of his career, when I had three six-week runs of 24/7 responsibility). Oh, and from 2008-15, I was the head of the group.
While the compensation has been decent, the freedom from hassle has been minimal, and the pressure unrelenting. The really rich do have problems, no doubt, but seem to have more control of their lives and their circumstances.
Wow. It certainly sounds like you work hard for your compensation.
Great post I am reminded of a time when a car represented freedom, now being independently wealthy is freedom. You can within some constraints do anything, or nothing. No management to bother you, few constraints, that is freedom.
Perspective and life circumstances definitely play a role in feeling rich. I grew up with absolutely nothing, at times lived at the salvation army and lived on food stamps. Today, I am 38 and have a net worth close to $1.7mill so compared to the people who have known me the longest I am rich, but having moved up a few economic classes I don’t feel we are rich yet, We definitely know people with more than us and that is ok we don’t care. Today, we are very comfortable and know we are fortunate and by definition wealthy but I’d say we are rich when we have $5 mill in assets with no debts.
I really love the focus on giving and charity. I had my first introduction to FIRE by a guy who came to speak to a club of mine in college. He said wealth wasn’t determined by the amount of stuff you had or how expensive it was. Wealth simply meant living beneath your means. So technically people of nearly any income level could be defined as “rich.” And TV millionaires could be considered “poor.” This was a new line of thinking to me at the time, but over the years I’ve found there’s so much to it.
“Poor man wants to be rich, rich man wants to be king. A king ain’t satisfied until he rules everything”…..Bruce Springsteen
Bruce Springsteen might be remembering a classic children’s story. I occasionally read a story to my kids called The Fisherman and His Wife. Hopefully, they can learn this lesson early. It’s the same message: some people keep wanting more not matter what they have.
https://www.youtube.com/watch?v=5SOqJgbo1nc
Great list! Appreciate the comments on “multi-generational wealth” – but it could be that you could model “multi-generational happiness” for your kids by showing them that “enough is enough” and that you stepped off the hedonic treadmill when you wanted to…
Charles Dickens, David Copperfield- Mr. Micawber’s recipe for feeling rich:
“Annual income twenty pounds, annual expenditure nineteen pounds, nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
As a retiree, feelings about being rich become much simpler. I keep a monthly record of how much I spend over the years (excluding income tax); not detailed, but noting large or exceptional items. I compute the amount of inflation-adjusted cash that I will have available to spend each year (after income tax) until (say, age 100) when the principal goes to zero. Needless to say, I compute the annual available spend under various scenarios, including a reasonable worst case scenario. Comparing the actual spend with the computed available spend scenarios tells me how rich I am, and whether I should (can) be spending more or less.
It’s not about feeling rich, it’s about being satisfied, appreciating that most of us in medicine have been blessed with large incomes, and learning how to give to others is gratifying. There is so much income inequality in the United States that most people would kill to have a job where you are practically guaranteed a good income, it’s rare to get fired, and you get so much respect and so many opportunities. I have retired at age 60 deciding that I have enough to support myself and the family, feel rich enough, and would regret working till I died unexpectedly and not enjoy life or not be able to do the things that I can both afford to due and have the physical ability to do at this age. Learn to live life to it’s fullest and appreciate that being the wealthiest person in the cemetery will not make you feel more fulfilled.
A surefire way to feel rich is to set a reasonably luxurious yearly spending goal (say $80,000 per year) and amass 33x this amount of invested assets ($2.6 million in this example). If you commit to maintaining this lifestyle, you will never run out of money and will always feel rich. Figure out how much is “enough” and leave it at that.
Live Free, MD
I would say that is a good plan to reach FI. I don’t think it is “surefire” way to “always feel rich” though. At least it hasn’t been my experience. Money gives you some freedom and options, but not a continuous state of bliss by any means. It also isn’t certain that you will “never run out of money.” History tells us many surprises can happen.
I guess it depends on your definition of “feeling rich”. Personally, if I didn’t have to work (for money) ever again, I would feel as rich as I could ever desire. Everything else would just be excessive. If you don’t set a definite goal, then you will always chase after more money and it will never be enough.
Good article. “Rich” seems like a pejorative that most wealthy people want to avoid. The ones that get there by scrimping and saving don’t feel rich because they live very frugally. #3, 4, 5 and maybe 7 seem to be pretty common issues among people who should otherwise feel great about their net worth.
Although I think its absolutely ludicrous to be scared of retirement with an 8 figure net worth, I can totally believe why they would think that way. I have a former partner who’s net worth is probably in the $30M range but his annual burn is about $1M, probably $8M of it is in the various homes he owns…so you can see that he is not FI by the 4% rule standards (close, but I sure in hell wouldn’t feel comfortable!). Now it would be easy peasy for me to trim the fat for him but who am I to say that 5 country club memberships and multiple homes are not necessary, maybe to him that is what brings him his happiness. Reality is that he is probably just fine, as there is a lot of meat on the bone to trim if/when necessary.
I think the moment I felt “rich” is when I crested the $5M liquid mark with zero debts a few years back. Sure I was financially independent with my $80-$100k annual burn rate (which seems lavish to me), but having the cushion to flex your life up or down temporally for cool experiences is what did it for me from a financial perspective. From a life perspective I’ve felt rich for a long time because I’m generally pretty damn happy.
I don’t feel rich yet but July will be the end of my second year of practice, no consumer or school debt paid off 300k in student loans, bought a house at about .65x yearly income and putting extra towards that. I have retirement plus brokerage of about 270k now. While I don’t feel rich I certainly don’t have a lot of worry and with continued savings rate > 50% I think I’ll end up pretty well off even with modest projections.
For me feeling rich is when you stop thinking about money.
When you have stability and leave comfortably below your means.
For me rich is passive income 1.5x my annual expenditure. If without working I can live comfortably while having enough left over to reinvest, give to charity etc., then I’m rich!
Great list! There were a few here that I hadn’t thought much about. Thanks for sharing. I agree with some of the other commenters that expressing gratitude is a good addition. As you show here, it’s not just the numbers since many people don’t feel rich or financially comfortable despite the fact that the numbers clearly show they are. It’s really a mental transition from scarcity to abundance.
Understanding investments and long-term returns versus withdrawals can give you more confidence in your numbers. But spending more, especially on others, both in time and money, can ironically help you feel like you have more money. The small actual financial cost is far outweighed by the feeling of having excess money that this can provide. It’s a bit irrational but that’s because we aren’t perfectly rational creatures.
Perhaps I am rich. I am retired, have investments and Social Security that pay my (somewhat frugal) bills. I have some money for large unexpected things as well. I never considered myself to be rich because I think about the cost value equation in almost every purchase. The rich have so much income that they don’t have to be concerned too much about that. So maybe rich to many, not rich to me.
I think that its a really great article in order to feel rich and not to be shy. It helped me to stop thinking about money all the time.