Jeff Rusinow Definies Wealthy

So, what’s the best definition of being wealthy?

Having serious money means being able to pursue your passions and championing the causes you believe in—travel, philanthropy, interaction with amazing people, health improvement… whatever—on your timetable. It means you get to schedule your priorities instead of having to prioritize your schedule.

I mean, that’s a fantastic situation to be in, don’t you think? Being able to go out there and explore and enjoy this magical planet on your own terms. If you’re healthy and happy, how could it get any better than that?

Of course, having money doesn’t buy happiness or love, and it doesn’t buy good health. But I can’t overstate the glorious buzz that financial freedom provides. It is a magical thing.

One more thing, which is sort of icing on the cake for becoming wealthy: you can define yourself earlier in life than other people can. For many, having this opportunity to ascertain one’s business and personal legacy more on your own terms is a true measure of success.

Here are my definitions of ‘enough’ money based on reaching certain thresholds. These levels assume no or very little annual income from working, and again, apply only to funds that are ‘working’ for you (that is, money that is clearly an investment throwing off a dividend or some kind of desired appreciation):

1. $500,000 (X 5% = $25,000) – If you’ve paid off your house, and don’t want a second one, have some pension and Social Security coming in, and are really OK with living a somewhat frugal life that doesn’t involve a lot of travel, then I suppose one can argue that this is ‘enough’. But I’d argue spending $25,000 – $50,000 a year to live is cutting it tight.

2. $1 million (X 5% = $50,000) – It was that many years ago that being a millionaire was a big deal, and it was the classic threshold for insuring a nice retirement. But those days are long gone unless you’re very good on a budget. Of course, it all depends on what your needs are, and how much travel and fun you want to have outside your immediate home. And, of course, it depends on how much insurance you want if you get sick in old age and need a lot of care.

Of course, if you’re one of the millions of households in the U.S. that is in this category, you can still work to supplement the requirements of your Nut. But the main takeaway here it that having a million dollars in the bank working for your retirement isn’t what it used to be.

3. $2 million (X 5% = $100,000) – While the number of households with a net worth in excess of $1 million, not counting primary residences, dropped to a five-year low in 2008 to 6.7 million from a record 9.2 million in 2007, there are still a lot of people in the U.S. who fall close to or into this category. It’s a great, blessed place to be, and it sets you up for a very comfortable retirement, with proper oversight and an attention to staying on a budget.

4. $5 million (x 5% = $250,000) – Obviously, having $5 million in the bank working for you is terrific! But is it enough if you have high expectations of living large? It sure is if you assume you’re never going to get divorced (the assumption here is that you’re married and share these assets with someone else), and that you’ve got great long-term disability and catastrophic health insurance, and you’re OK with a limit of two residences.

Look, at $5 million, you’re rich. Only about 840,000 households in the U.S. have a net worth in excess of this amount.And if you’re pretty careful, everything should work out just fine. But if you plan on spending a lot of money during the later innings of your life, you can’t afford any major screw-ups. For example, during the global financial crisis of late 2008-2010, most people’s liquid asset portfolios plummeted 30-40%. For almost everyone, it was a significant setback. So just to be clear, if your net worth is $5 million and you have a major screw-up, you’re no longer in this highly coveted club of being able to spend a hell of a lot of money enjoying your life and hopefully being very generous to the people and charities important to you. You need to regroup.

5. $10 million (x 5% = $500,000) – Cut to the chase, having $10 million at work providing the funds for your retirement puts you in a better position if you ever get divorced. There’s a lot of cushion there to support a lot of family members, travel a lot, and weather a tough, long-term global economic crisis. Or having a major, expensive long-term healthcare issue to deal with.

6. $15 million (x 5% = $750,000) – Having $15 million in a liquid asset portfolio is the threshold, in my mind, to consider purchasing a fractional ownership in an executive jet or renting Giorgio Armani’s yacht for a week to celebrate your 60th birthday, or buying and donating 20,000 acres of critical wildlife habitat in Central America through The Nature Conservancy if you’re so inclined. Fifteen million dollars is a huge amount of money.

7. Over $20 million (x 5% = $1,000,000) – If you have $20 million, you’re in a very exclusive crowd. About one out of every 10,000 people in the United States has this sort of net worth. If you are in this group, congratulations!