How Much Money Do You Need to Be Rich in America? Let's Find Out
How much money is enough in this day and age? A burning question that is extremely difficult to answer. However, we have decided to do the analysis. The answer can depend on various factors, like what's your type of job, where you live, what is your standard of living, and things like that. But no matter which field you belong to, everyone has a goal, and taking steps to meet your financial goals is something you must do.
What income is enough to make you ultra-rich?
While determining an exact bracket can be very difficult, one can measure and analyze their current income in specific ways.
As per a data report for FY 2019, an income of $540,009 per year puts you in the top 1% category set by the Internal Revenue Service (IRS). So yes, going by this data report an annual income of around $500,000 will make you pretty rich.
What is the average income of a rich person in America?
This is again, extremely subjective. However, going by the IRS standard, $45,000 a month will make you considerably rich but it is still not enough for you to make it to the top 1%. For that, you would need around $68,277 monthly. To reach that number, one needs to think outside the box and do more than a 9 to 5 job.
A general tip to boost your income
There are many ways to become rich other than just getting a 6-figure job. First of all, one needs to realize and utilize the power of compounding. If you save $500 a month for forty years assuming an interest of 7%, then you will already be a millionaire by saving only $240,000. Compound Interest is so very magical!
Secondly, you avoid debt. Every dollar you invest in something you simply don't require is pulling you further away from your goal. Avoid debt, and turn to investing.
Another great piece of advice is the simple 15% of salary isn't your present self's money, thumb rule. While determining how much you should save is difficult to tell, many financial experts say that it depends on your age.
Other tips to boost your income are to work on your skills and broaden your horizon. In today's digital age, learning something is just a click, and a small session your making up your mind away. The world is changing at light's speed and with AI becoming a threat to jobs, it's important to sharpen your skills and improve your prospects.
Another thing, steer clear of lifestyle inflation. This is when your expenditure rises parallelly with your salary. Resist the urge to upgrade all the time, instead invest for your future self and remember, always upgrade only when it's sustainable.
Rich vs. wealthy
While rich is somebody who can lead a very comfortable life and has the freedom to indulge in anything and everything they want at any time. Wealthy on the other hand has way more than that and is more focused on building their legacy and expanding their portfolio.
Someone who has $1 million of liquid assets is usually known as a high net worth individual, someone who has $5 million or even $10 million can be considered a very high net individual and someone with more than $30 million can be called ultra-high net worth individual. This is how normal investors and financial experts view things. For an average American around $774,000 is enough to lead an ultra-comfortable life and around $2 million dollars to be considered wealthy.