Do the wealthy think they're wealthy?
The tax code may put high earners in the top bracket, but they don't always agree that they are rich.
The fiscal cliff deal leaves Congress with a lot of unfinished business. It also leaves us with an ongoing debate about just who is rich or wealthy. Is it families making at least $250,000 a year? $450,000? And what do those people think about being labeled wealthy?
To begin to answer those questions, I spoke to two people who would each be considered wealthy under at least one of the definitions that’s been bouncing around recently.
Everything is Relative
Scott Leonard, age 45, is the CEO of Trovena, a wealth management company based in Southern California. Talking about personal finances is pretty taboo in the U.S., so it wasn’t surprising that when I asked him how much he makes, it was a little uncomfortable -- for both of us.
He said he’d rather not get in to specifics. I stumbled around awkwardly asking for a “ballpark figure.” He told me that under the new fiscal cliff deal, his family would “definitely be considered wealthy.”
In numerical terms, that means that this year, Leonard and his wife -- who's a full time mom -- made at least $450,000, or more than 99 percent of the rest of the country. The Leonards recently sold their house to spend a few years with their three kids sailing around the world on a boat. “A 50-foot catamaran,” he said. “Four bedrooms with queen sized beds and everyone has their own bathroom. So it's a good floating home for us.” I told him he was living the dream, and he agreed, but with an asterisk. “Living the dream,” he said. “And not wealthy.”
So if he’s not wealthy, what is he?
“I still think of myself as middle class, or upper middle class,” he said. “I certainly do not consider myself as rich or wealthy.”
If you're starting to roll your eyes, don’t worry. Leonard expects that.
“I'm sure I've already been put in to some little typecast role by the people listening to this,” he said. “And they're either going to agree with what I'm saying or they're going to think I'm a lunatic.”
But he has his reasons. Leonard acknowledges that he has a good life, and a certain amount of peace of mind. But he says that financial security has only come after years of insecurity and deep debt while he was building his business. “We haven’t saved what I wish we would have for our kids' college,” he said. “We’re not putting away the money that I would like us to for retirement.” Leonard says when it comes to that kind of long-term planning, he still feels “behind the eight-ball.”
He says he feels less wealthy than a government worker who could retire at age 50 and expect a $40,000 pension each year. And he definitely feels less wealthy than the clients he works with as a wealth manager, who don’t work for a living and live off their investments.
Wealth is relative, says Leonard, and in the world that he lives in, “you look around -- there's always someone who's got a better seat at the basketball game. There's always someone doing something that you can't do. You don't really think of yourself as wealthy.”
Elizabeth is a teacher and lives with her husband, who works in advertising, in a town near Los Angeles. They make around $250,000 a year. Elizabeth didn't want to use her last name, because she was afraid to offend the parents at the private school where she teaches. “I'm sure for some students I'm not the paragon of wealth,” she says, comparing herself to families who pull up in Bentleys and Mercedes. “But when I look at the rest of the country I’m very, very fortunate.”
But is she wealthy? “Absolutely,” she says.
“The worries that I do have that are related to money are things about ‘Am I saving enough for retriment?’ or ‘What kind of college education will I be able to help my child to afford” she says. “They’re relatively luxurious things to be worrying about.”
And regardless of how Elizabeth and Scott Leonard each define themselves when it comes to wealth, the one thing they seem to agree on is the idea that wealth ultimately means being free from worries. In fact, Leonard named his boat “Three Little Birds,” after that Bob Marley song. The one that goes “Don't worry about a thing. 'Cause every little thing is gonna be all right.”
So when would you consider someone wealthy? The Wealth & Poverty Desk asked people to finish the sentence: "You know you're wealthy when..." See their answers and add yours here.