What level of income makes you rich?

According to the US Census Bureau, the median income in the United States is a little more than $70,000 a year.

There is a considerable range of results around the median, so it may help to break things down further into percentiles.

DQYDJ has a good breakdown of the data showing the bottom 10% of earners, the bottom 25%, median, top 25%, top 10% and top 1%:

You can also see these breakdowns by age:

These numbers can give you a good sense of where you stand in terms of earnings, but as the old saying goes, where you stand is a function of where you sit.

Income is obviously different from wealth. It doesn’t matter how much money you make, if you don’t save any of it, you’re not really wealthy.

The person who makes $40k a year but only spends $30k and saves the rest is building wealth. The person who earns $2 million but spends $2.5 million without saving is not actually wealthy.

But there is a perception that a high income makes you wealthy, and perception is often reality when it comes to how people think about their finances.

There are a number of factors that determine how you feel about your income level.

Where do you live. Your family situation (single, married, children, etc.). Your consumption level. The relative income and wealth of those around you. Cost of living.

It also doesn’t help that there has been a move to the extremes when it comes to income levels over the past 50+ years. Pew Research compared the breakdown by lower, middle and upper class between 1971 and 2021:

The good news is that more people are now in the upper income bracket. The bad news is that more people are also in the lower income bracket.

The strange thing about having more people in the upper income bracket is how unhappy many of them seem.

Earning a little more than $200k a year puts you in the top 10% of all wage earners in the entire country. It seems pretty good to me.

Yet someone living in Manhattan or San Francisco who makes that much money might try to argue that that kind of salary only puts them in the upper middle class, not the wealthy elite.

And even those who are objectively wealthy may find it difficult to be satisfied with what they have in places teeming with rich people.

There was a story in New York Magazine last month that profiled people in New York City who are wealthy but don’t feel like it based on their peer groups:

“It’s crazy how rich you have to be in New York to live comfortably, just comfortably,” she says, a little out of breath, as she runs to a meeting. “There’s this very subtle heartbreak that maybe people have made better life choices than you and their houses are bigger and they’re happier.”

It’s understandable to feel inadequate in a city that houses some of the richest people on the planet. But here’s the kicker for the person quoted here:

The crazy thing is that this friend, at 45, not only has an apartment in the city, but a weekend house outside – one that she bought with earnings from her successful career and enjoys with her partner and children. She’s happy, yet she’s undeniably worn down from trying to stay that way in a city where exorbitant wealth — two-nannies-and-a-driver wealth, spring-break-in-St.-Barts wealth — is everywhere. “If you find yourself in your 40s still living in New York, still hustling, still striving, there’s a part of you that’s completely down and a little bit uncomfortable,” she says.

This person is definitely rich, but they don’t feel rich because their benchmark is people who are even richer and more successful.

No one should feel sorry for wealthy people who are unhappy, but it makes sense why that is the case. The research on happiness shows that the more often you compare yourself to others – good or bad – the less happy you are.

In today’s world, comparing yourself to others has never been easier. And there will always be people who are richer, smarter, more successful or better looking than you.

Rich is a subjective term, so there is no right or wrong answer to the title of this blog post. There are plenty of ways to live a rich life that have nothing to do with income or the amount of money you have in the bank.

The problem with using any number to judge yourself by is that once you get there, you’re likely to move the goalposts or find it unsatisfying.

Lack of income or wealth can certainly make you unhappy, but after a certain point they are not guaranteed to make you happier either.

All I really read this week was a book about my flights to and from Chicago. It is called The Good Life: Lessons from the World’s Long Scientific Study of Happiness. I thoroughly enjoyed it.

I’ll have some thoughts on that next week as it relates to what actually makes us happier.

Michael and I discussed income levels and much more on this week’s Animal Spirits video:

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Further reading:
Perfect is the enemy of good

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