Worth Millions And Still Not Feeling Wealthy?

Do you feel wealthy?  Almost certainly the booming stock market has people feeling richer than ever, but according to a recent survey by Ameriprise Financial, the vast majority of American millionaires with between $1 and $5 million dollars don’t consider themselves wealthy.  Most of the surveyed millionaires consider themselves as having a “middle-class” lifestyle.  Only 13% of these millionaires consider themselves “wealthy” or “upper-class”.

Perhaps it’s because a million dollars doesn’t buy nearly as much as it use to — With $1 million and using the 4% rule, that’s only a safe withdrawal rate of $40k per year.  That’s not a lot of money, especially if you’re cautious about the 4% rule and prefer to use a more conservative “3% rule” or less.

That withdrawal rate is also lower than the average spending of a U.S. family, which spends around $60k annually (according to the U.S Census Bureau).

If you’re spending less than average, it makes sense that you’re not going to be feeling terribly wealthy.  You won’t be able to afford some of the stuff that an average American household purchases in an average year.

At the lower end of the scale, I totally agree with the survey’s findings — One million dollars isn’t going to have you feeling wealthy.  A million dollars is not going to afford you an extravagant lifestyle or even an average lifestyle.

But what about $2 million dollars or more?  Would you feel wealthy then?

Two million dollars is definitely more money to work with than $1 million.  It also means considerably more spending cash, even under conservative withdraw scenarios.  It’s a level of assets that should be able to afford an above-average lifestyle ($80k using the 4% rule).

Larger numbers of assets should also be able to afford equally large lifestyles:

millions of income chart

Simply put, most multi-million dollar households should feel fairly secure.  It totally depends upon the local cost of living of course, but on average those households should be feeling fairly comfortable.

So why aren’t these multi-millionaires feeling a lot wealthier than your average middle-class American?  Maybe it has something to do with their spending…


The Habit Of Under-Spending

Every time I see wealth surveys like this Ameriprise survey, I tend to get pretty skeptical.  After-all Amerprise is in the business of selling retirement planning to hard-working stiffs (like you and I).  This is Ameriprise’s bread and butter, and they definitely publicized this survey data for a reason.

Of course they’re trying to convince us we need their services.  In this case, the survey pushes the idea that multi-millionaires don’t feel wealthy because they lack a solid retirement plan.

But what if there’s more to all of this “feeling wealthy” stuff than just selling some overpriced financial plan?

For one, if you’re able to save a couple of million dollars (or more), the odds are good that you’re spending a less than average to reach that level of wealth.  It is possible to do this just by aggressively saving an average salary.

As individuals like myself and others in the financial independence community have show the world, if you save roughly half your salary for 15 years (or so) you can fairly easily reach $1 million dollars.

As you can guess, doing anything for 15 years is bound to form a habit.  That habit of under spending your income is how most folks reach multi-millionaire status.  It should come as no surprise that these millionaires are not going to feel wealthy when everyone around them is spending everything they earn.

Being wealthy is a perception as much as it is a number put on your bank account.  This perception of wealth frequently revolves around how much you spend.  While America’s multi-millionaires are prudently saving, their spend-thrift peers are living far more luxurious lifestyles — with nicer cars and newer clothes, the latest tech gadgets, and plenty of eating-out at restaurants.  Not to mention bigger houses and more luxurious vacations.

beach house
Is this what a wealthy life looks like?  Many people believe a luxurious lifestyle means you’re wealthy…

I have a few friends that live like this, and I definitely don’t feel very wealthy next to their level of spending.  I feel like I’m middle-class even though my assets are approaching $4 million dollars these days.

It stands to reason that many of America’s “single digit” millionaires fall into a similar situation — They’re frugal and saving, yet they don’t feel wealthy due to the frequent association of wealth being about excessive spending.


Market-Linked Assets

One other factor that might contribute to millionaires feeling a little less than flush, is the fact the most retirement assets are inexplicably linked to market prices, and thus highly volatile.

That $3 million portfolio today might be $2 million tomorrow if the market takes a big swing downward.  Everyone who invests in stocks should know that market volatility is a very real thing.  Market-based wealth is ethereal — it can come and go at a moment’s notice, completely out of our control.

Back in the day, the boomer generation didn’t have this issue.  They grew up in a world with Social Security and pension funds for the workforce.  That was considered a stable path to a decent retirement.  Workers could trust that their pension plan would deliver a secure retirement.  In return, workers were loyal and they tended to stay at one company for their entire career.

That was then, and this is now.

Today’s generation has a lot more to worry about when it comes to saving for retirement.  Most people now have to live with saving in tax deferred retirement accounts (401k’s and IRA’s) and hope for the best in the markets.  They choose what percentage of their salary to save, where to invest it, and then cross their fingers that those decisions will actually work out.

If they decide to hire a financial adviser, they also risk losing much of their wealth to the financial vampires.

Right or wrong, we’re on our own when it comes to making good retirement saving decisions.  This is one of the reasons why I believe the FIRE movement was inevitable.  The responsibility of retirement planning sits squarely on our shoulders.  Even multi-millionaires might not have complete confidence in their plan due to the extreme volatility of financial markets.

How much is enough?  What’s a realistic withdrawal rate for the future?  And what about social security?  Who knows how much of that money we’ll actually see once we finally become eligible for payouts in 25+ years!

It’s a situation that has everyone drawing a big question-mark about retirement.


Assets Locked Away

Another reason I believe people are feeling less than secure these days is because nobody has any money.  OK, that statement sounds a little crazy, so let me explain it a little further:  Even though single-digit millionaires might have a decent-sized net worth, very few people have liquid access to more than a million dollars at a moment’s notice.  Why?  They either spend it, or have it all locked away in real estate equity, 401k’s, IRA’s or other tax deferred retirement accounts.  Money that’s technically theirs, but they can’t touch it (easily) for decades.

Real estate in particular is a popular place to put money because people frequently believe it to be safer than the stock market.  So they buy a large house, and maybe some rental properties to “diversify”.  That’s great, and perhaps those rental properties even cash flow a little money… but accessing that equity quickly isn’t easy.

Investors forget that it can take considerable time to sell a building.  At least in my local area, the real estate market has slowed down a lot.  I have a neighbor that’s been trying to sell his house for 6 months now.  Yes, for six months his house has been sitting vacant!  There have been plenty of people looking at it, but no buyers.   I think he’s about ready to give up on selling it, and my guess is that he has $500,000 (or more) tied-up in equity in this house.  That sucks.

the best
Is most of your wealth tied-up in real estate equity or other illiquid assets?  Good luck accessing it when you need it!

My neighbor’s little conundrum just emphasizes the point — without access to considerable liquid assets, a job loss or other financial setback can be a major blow to most families.  The lack of access to our full financial resources probably keeps most people on-edge.


Sleeping Well At Night

Want my advice on how to feel wealthy and sleep well at night?  You need to start by discarding all the usual measurements of wealth.  Wealth isn’t the kind of car you drive, or how big your house is.  Neither does it have anything to do with how fancy you live.  Those are liabilities.  (Yes, your lifestyle is a liability!)

In my opinion, the easiest way to be wealthy is to have plenty of regular income from your financial assets (in the form of dividends, interest, or other regular payments) AND a significantly sized taxable portfolio — Assets that aren’t locked up and are freely accessible at a moment’s notice.

This is one of the reasons why I’ve always recommended that folks on the Road to Financial Independence start building a taxable portfolio once they’ve fully contributed to their tax deferred accounts.  You really want to have both kinds of assets — Assets behind the tax wall that will grow tax-free AND a taxable account to handle the here and now.

Both kinds of assets will help your growth your net worth, but only one will let you sleep well at night after losing a job.

For example, I sleep pretty well knowing I could easily pay my bills for 8 years without a single dividend payment.  Or, I could simply decided to pay off my mortgage, should the desire arise.

I might live a middle class lifestyle, but I still feel pretty wealthy.  To me, that’s what real wealth is:  The freedom to not worry about money.  I have money I can access right now (should I need it), and assets that provide me with a decent income even if the markets decide to tank … for a decade.

You see, real wealth isn’t about what lifestyle money can buy.  Real wealth is the freedom and security your assets can provide.  Knowing the difference between the two is key to building a truly wealthy lifestyle.

So sleep well my friends… and dream the dreams that only real wealth can provide.

[Image Credit: Flickr]


41 thoughts on “Worth Millions And Still Not Feeling Wealthy?

  • July 21, 2019 at 3:44 AM

    I recently posted about a Schwab survey that said it takes $2.3 million dollars to be considered wealthy in America, according to the respondents. It’s true that being a millionaire doesn’t mean what he used to because of inflation, but 2.3 million dollars is a lot of money.

    “Being wealthy is a perception as much as it is a number put on your bank account.”

    That line from your post says it all. People need to stop looking at what others are buying, what kind of cars they have, and just focus on living a happy life. They’re in a constant struggle to try to get bigger, better, faster, and more. The reality is, almost all Americans are stinking rich as compared to literally billions of people around the world. They need perspective.

    • July 22, 2019 at 9:07 PM

      Well said Dave! Everyone could use a little more perspective! 🙂

    • April 21, 2021 at 10:50 PM

      I am worth about 6.3 Only about 1mm in retirement cash ,balance in rental property. I do not feel wealthy. Drive a 1998 van. 2 kids and 2 college tuitions. Same modest house for 30 years.

  • July 21, 2019 at 3:54 AM

    Capital growth makes you wealthy, but it is cash flow that determines whether you feel wealthy.

    Home equity, age restricted pensions, and the like don’t help pay for the groceries when we’re in the line at the check out.

    • July 21, 2019 at 5:37 AM

      You’re right, having a high income now makes me feel wealthy, but I can see that changing when I retire.

      I too have locked most my money away in retirement accounts since my company allows for mega backdoor contributions so I have very few liquid assets.

      As far as home equity I am looking into a home equity loan at 4% which allows less wealth to be trapped.

      • August 17, 2019 at 10:46 PM

        My uncle semi retired at 50 with $80k. He bought a beautiful modular home (cash for $50k), in a gated community in Florida. His old Jeep is paid for and now cuts grass in his neighborhood making enough to pay his groceries, utilities and health insurance. He lives a peaceful life, wanting for little. He’ll begin collecting SS next year to add to his monthly income. He’s happier than folks I know with millions. It really upsets me when I hear so many scare tactics from financial advisors in the media. You don’t need a massive stockpile of ones and zeroes to find your Nirvana. Live within your means and it’s all possible.

  • July 21, 2019 at 7:12 AM

    I definitely don’t feel wealthy (net worth about $1.2M). I absolutely feel we’re in an extremely blessed financial position, but I don’t consider us rich by any means.

    With us now being FIRE, we have enough to live a very normal life, but I’m still watching every penny we spend. I feel like when you’re wealthy, you don’t need to do that – you can spend much more freely.

    — Jim

    • July 22, 2019 at 9:10 PM

      To some extent, I think your right. When you’re wealthy you don’t have to worry about pinching pennies as much. You can still act frugally of course, but don’t need to pay as close of attention.

      That said, frugal habits die hard, and I’m sure there’s many self made multi-millionaires that still watch the pennies… just out of habit. 😉

  • July 21, 2019 at 8:17 AM

    I’ll always be very cautious with our spending regardless of how much we accumulate. Most of our money is tied up in retirement accounts. Our house is paid off so we’re thinking of getting an equity line to have access to funds for an emergency.

    • July 22, 2019 at 9:11 PM

      That’s good for an emergency, but remember that home equity loan or line of credit is still a loan. You’ll still pay interest on money that’s technically yours, but locked-up.

  • July 21, 2019 at 9:43 AM

    I’m not really working at present besides some part time work that pays $4k a month and may dry up anytime. After tax investment portfolio is $3M and total net worth is around $5M give or take but I don’t feel wealthy – just middle class.

    Chalk that up to high international school fees ($30k per child per year), a new baby (son) that was just born and other one time expenses. I’m sure over the long run it will work out just fine but I do feel a little bit of cash flow anxiety due to a lot of expenses right now and hence the drive to work part time. We don’t have a car at present and are “borrowing” our secondhand 13 year old Honda City that I sold to an ex-colleague and I’m trying to put off a new car purchase for as long as I can until fresh cash flow improves. I continue to hold accumulated dividends in the after tax account for reinvestment.

    You also have the added cash flow of Mrs Tako’s job so that is very helpful too.

    Take care,


    • July 22, 2019 at 9:13 PM

      Heh, that might be true if I ever saw any of that cashflow… but unfortunately that’s not the case. 😉

  • July 21, 2019 at 11:56 AM

    Excellent Points Mr. Tako regarding our own perception of wealth.

    I too have a nice size net worth but in my mind I play doomsday scenarios such as if a bear market hits what will happen to my retirement and brokerage account values (which comprise about 40% of my net worth at this time).

    The rest of my net worth is tied up in real estate (syndications) and although it provides nice cash flow now, it is illiquid if I need access to the capital.

    I also don’t count my primary residence in the net worth component that makes me feel wealthy. Even though it is a fully paid off home, unless I sell it (which I really don’t want to) I wont be able to access money from it in a way that would still make me feel wealthy

    • July 22, 2019 at 9:16 PM

      I hear you. So many folks have a huge percentage of their net worth tied up in real estate (most of which doesn’t cashflow very much). If they ever lost a job for 6 months they’d be in big trouble.

      To me, that’s not wealthy at all.

  • July 21, 2019 at 12:12 PM

    Having cushion and free time is what makes me feel wealthy. Knowing that I could take a few hundred dollars and a few days to visit a friend in need without losing sleep over it is powerful. Being able to be generous with others without checking my spreadsheets is freeing. It took a long time to get to this point (the two comma club), so some of our habits are ingrained – even as millionaires we still shop at Walmart every week and love it 🙂

    • July 22, 2019 at 9:17 PM

      Nothing wrong with that Kim! Frugal habits aren’t bad no matter what your net-worth is! 🙂

  • July 21, 2019 at 1:15 PM

    Mr. Tako –

    Couldn’t agree more. Building the taxable account is key, as that (as of now) is liquid and, if you’re a dividend investor, provides a consistent and (usually) growing income stream/cash flow.

    Well-said and great points. Thank you for sharing!


  • July 21, 2019 at 1:47 PM

    So true! My net worth is just north of $1M (mostly illiquid). Feel I’m living a lower class lifestyle. I save for those things I truly want, and get them, eventually. Everything else gets saved. In about 10 years, this will change, and for today I watch what I spend.

    I agree with you about why I’m saving. I am not seeking wealth for it’s own sake, I am seeking security. I want to feel fairly secure I could handle most of the bumps on the road of life. That will come in time.

    So, even $4M won’t make me feel much better? Oh well, will do what I can, as I can, and hope it will be enough for that next bump I know is coming my way.

    Thank you for this information.

    • July 22, 2019 at 9:19 PM

      Start to build a little liquidity and some income from your assets. It doesn’t have to be a lot, but it certainly helps things feel a little less tight. 😉

  • July 21, 2019 at 7:08 PM

    I don’t feel wealthy, but it’s okay. I don’t think you need to feel wealthy to be happy and enjoy life.
    Maybe when we get to $5 million, I’ll feel wealthy. I doubt it, though. The goal probably will keep moving.
    IMO, financial security is much better than feeling wealthy anyway.

    • July 22, 2019 at 9:20 PM

      As mentioned in my post, I view them as essentially the same thing! 😉 True wealth *is* financial security.

  • July 22, 2019 at 10:17 AM

    It all comes down to cash flow. If you’re spending a ton you won’t ever feel rich… you may look rich though. That seems to be the false image that the society is creating with social media.

    • July 22, 2019 at 9:21 PM

      I think you can have plenty of cash flow and still stealth-wealth it. This makes me feel pretty wealthy. I don’t show it off, but I have some pretty decent financial resources.

      Society and all that “showing off” can go take a hike!

  • July 22, 2019 at 5:07 PM

    I don’t have a million bucks yet, but I still feel wealthy. Like Dave from Accidental Fire, I’ve traveled to enough third world countries to see what poverty really looks like, i.e., no help from the government and probably little to no help from anyone else. That alone makes me feel wealthy. When I compare myself to others who are ultra-wealthy, I realize I’m not wealthy. Sometimes that bothers me, sometimes it doesn’t. The reality is that I have a very nice life that I enjoy, and having oodles of wealth won’t change that. Having the ability and willingness to live a good life well below my means is empowering and even liberating. Maybe that’s where the true wealth is for those of us in this FIRE community.

    • July 22, 2019 at 9:23 PM

      Definitely something to think about! Thanks for sharing this idea Katie! 🙂

  • July 22, 2019 at 6:44 PM

    I live in NYC. It is hard to feel wealthy in such an expensive city.

    For a family of 4 living in Manhattan, I believe it takes $480,000 per year to live an upper middle class lifestyle and around $1.1 million a year to live an upper class lifestyle.

    In order to generate enough cash flow to support just the upper middle class lifestyle in a high cost of living city such as New York, a net worth of $10 million plus is needed. No wonder it is hard to feel wealthy with less than $5 million.

    • July 22, 2019 at 9:25 PM

      Yeah, that’s unreal. It’s so unhinged from what everyone else’s reality is. Like another world.

      I suppose if you make huge bucks that $10 million dollar net worth might be a possibility, but it sounds crazy large just to live what I consider a “normal” American life.

  • July 22, 2019 at 9:49 PM

    This was a great read after we just passed a net worth of $1m. We definitely don’t consider ourselves wealthy, but the net worth plus a solid plan have us feeling financially secure. A big part is we cashed out the equity from our primary residence by downsizing – I think you’re absolutely right that liquidity matters to the “feeling.” I think we’ll feel wealthy and totally secure around $2m, but we’ll see.

    Of course, since my wife and I both work in public education we also feel very lucky since we see what so many young families are dealing with these days. Definitely no complaints with where we are.

  • July 27, 2019 at 6:15 AM

    What a great post Mr. Tako!
    The insight you provided on wealth being locked away via retirement funds or in the house you live in,(that doesn’t generate cash flow) is a key point on how counter it runs against those who want to achieve Financial Independence early.
    I’ve recently changed my thinking or lack of from just putting as much money into my retirement funds and relying on the stock market to instead putting the minimum 401K match with my company and then investing the rest in taxable liquid assets (dividend stocks/indexes/rental properties) that I can use now.
    Keep up the great work and helping to build a financially educated community.

  • July 28, 2019 at 4:54 AM

    My problem with 4 million being “wealthy” is that the need for an esoteric new medical therapy might cost you 2 million. Or more. And insurance ain’t going to cover it. I understand the chances are small for needing something like this. But the indications for $$$ are growing, in ten years perhaps some of us might need something $$$, for Parkinson’s or ALS or Alzheimers. https://www.wsj.com/articles/a-2-million-drug-is-about-to-hit-the-market-11557221401

  • July 28, 2019 at 6:24 AM

    Excellent article and I was in the same boat and didn’t feel totally “free” of money worries until I hit 8M (not sure why that number finally put me over the hump) so can definitely understand the article and comments. Recently crossed 10M and although I have no money concerns definitely don’t consider my rich as no private planes/boats/vacation homes in my future 🙂

    Here is a bit more about my story if anyone is interested.


  • July 28, 2019 at 4:12 PM

    As an older person, I totally get this. I own a number of rentals, have a substantial inherited IRA plus my own, and money in taxable accounts. I hold enough cash in the inherited IRA to cover 4 or 5 years of RMD’s, so no need to sell in a typical downturn. My IRA’s continue to grow. I collect income from two modest pensions from stints at two different government agencies plus now I collect Social Security. The sum of the three annuity income streams covers the majority of my expenses. Capitalizing that sum at the 4 percent SWR yields a number in the seven figures. That’s money I didn’t have to save. I hold six figures of cash in bank accounts (remember the rentals?)

    By most people’s standards, I am rich. And I have more legs than a spider supporting the retirement income “stool.”

    However, my parents grew up during the Depression. They watched their parents lose assets and jobs and struggle. Their family financial situations were not secure. For them, there was no amount that provided a sufficient safety factor. Along with the financial education, I got the fear and worry from them. Is there ever “enough?” What disaster is around the corner that will destroy what I have built? Can I survive the next Great Depression?

    I don’t feel rich. I feel relatively well insulated. Living in Silicon Valley, I know a lot of relatively young people with compensation that totals $300-$500k a year. Many of them “spend rich.” Others are socking the money away and will retire early as multi-millionaires. Not sure crossing the 8 figure mark will change anything for me. Enough highly compensated young and middle age folks investing high percentages of their income will move the cut off point of “rich” higher. Those of us that are “rich” today may not be so rich tomorrow as a result.

  • July 29, 2019 at 10:31 AM

    Nicely laid out. Feeling wealthy should simply mean not worrying about money. I think sometimes, especially if you are aware of how up and down a person’s finances can be with the market and life’s elements, it’s easier said than done. Also, we can simply feel wealthy by just thinking of the less fortunate.

    On another note, I noticed you wrote that your mortgage is not paid off, but it can be. May I ask why you continue to hold a mortgage?

    • July 29, 2019 at 3:31 PM

      The math tells me it’s far better to hold a mortgage and invest the capital in higher returning assets. For the last decade this has worked out nicely, but should the mathematical relationship fail to hold true, then I can easily pay it off thanks to this strategy.

  • July 29, 2019 at 1:44 PM

    Well said and a great discussion. When I passed the $1M net worth mark, I felt wealthy at the time. Most folks on the planet won’t ever achieve it. But, after further educating myself and focusing on a 30 year retirement budget, the $1M didn’t make we feel wealthy at all.

    I felt I still “needed” to work, whether I liked what I was doing or not.

    What does make me feel wealthy today is the freedom to wake up everyday and do whatever it is I wish with my time, on the vast majority of days. I started working for myself decades ago, but needed the “work” income until recently. For me, recurring revenue makes me feel wealthy. My wife and I don’t spend money foolishly and we are ardent savers. If I stop working, I’ll save a lot less but all the bills will be paid for more than a decade. I’m fairly confident I’ll be able to create more recurring revenue streams during that decade to keep us going comfortably.

    I truly believe education fosters the confidence you need to feel wealthy; whether you have millions or not. You can get by on a lot less “working/job” income once you know how. But, you do need to be educated about money to do that. I’m not a finance guy, but I spent a considerable amount of time educating myself on finances, etc. It paid off and that education makes me “feel” wealthy today. I no longer determine whether or not I’m feeling wealthy by looking at my net worth.

    I look at the freedom I have and I realize I’m blessed; healthy, wealthy, and wise. Again, great read – enjoyed it.

  • August 9, 2019 at 12:06 PM

    I love how you tactfully integrate statistics and your own story into this article. It makes for a really interesting piece.

    I agree with your definition of rich – never needing to worry about money.

    I also agree with a concept you mentioned at the beginning. If you are comparing yourself to others and the average family spends $60,000 or so, it will be hard to “feel” wealthy. Comparison is a psychological beast. I’m trying to beat it. Becoming a blogger in the personal finance space helps while at the same time beats me down (so I’m breaking even:).

  • September 2, 2019 at 7:26 AM

    The fire movement to me is more akin to Stoicism or Buddhism in that one can find ways of being content without material objects. The accumulation of wealth is an outcome of a lifestyle as opposed to some structured way of obtaining material happiness at a later date. The people who ultimately embrace the lifestyle have no troubles shifting to independence because they never leave the lifestyle, they carry it with them and the reserves accumulated last. My assets have no bearing on my happiness and I don’t try to do any sort of comparisons to other people. Too many unhappy people who own yachts!

  • December 5, 2020 at 4:03 AM

    Oh, one more thing to add. With respect to feeling rich. At an asset level of ~$10mm, a blended simple return of 5% means adding $500,000 to NW annually. And I’ve certainly experienced a better overall return than that in most years even accounting for cash holdings (1% returns) and assuming an inflation-type return on r.e. holdings.

    The point I’m leading to is that when your assets can generate more passive wealth creation than your earned income its a very interesting psychological transition point… that’s when you really start to say “hmmm….” What exactly does it mean and how should I feel about that? I’m not quite sure yet, still stuck on “hmmm,” LOL.

    Lastly, I’m a big fan of the Millionaire Next Door series though I would also note there are some glaring inaccuracies and feel-good tell the reader what they’d like to hear biases, especially in the first books. I know plenty of flashy, big-spending millionaires, especially in the higher-income ranges, which the author grudgingly acknowledges in his later books. But, true to the MND profile, most multi-millionaires I know are not flashy and actually pretty down to Earth folks.

    At any rate, I’m happy to state that my NW is 3 times greater than the Millionaire Next Door calculator tool that tells you what your NW should be for a given income and age. So, I’m a proud under-spender!


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