According to Greek mythology, King Midas loved money so much that when given the chance to have one request granted by the gods, he chose to have everything he touched turn to gold. Things did not go as he expected. It seemed great initially, but Midas realized his mistake when he tried to eat, and his food and drink turned gold. Hugging his daughter was a catastrophe. Fortunately, it ended well, as the god Dionysius told him how to get rid of this “Midas Touch.”
Thousands of years later, the question of what makes someone wealthy is as relevant today as it was in ancient Greece.
What is wealth, really?
A dictionary definition of wealth is something along the lines of “An abundance of valuable material possessions or resources.” Put another way, “having more than enough to do what you want when those things require money.” But does that capture the essence of wealth?
According to the latest Modern Wealth Survey conducted by Charles Schwab, well-being, rather than money, is the leading measure of wealth for adults in the U.S. today. Among the 1,000 surveyed, roughly 48% said they already feel wealthy even though their average net worth is $560,000, which is only about a quarter of the $2.2 million they think others need to be considered “wealthy”! For many people, feeling wealthy is not the same as being rich.
When asked to describe what being wealthy means to them, 40% of the survey respondents said “well-being” compared to 32% who said “money” and 26% who said “assets.” This description is a significant change from 2017, when the top response was money (27%). Why the change? Did the COVID-19 pandemic alter how people think about wealth, or is this simply a function of time passing? More Gen Z-ers are now participating in these types of surveys and tend to value experiences over large investment portfolios…at least at this point in their lives.
“Wealth consists not in having great possessions, but in having few wants.” – Epictetus
Does “wealthy” mean having more than others?
Does it help us to feel wealthy when we know we have much more than the average person? There is a big difference in what “average wealth” means across different countries, and we need to look at what we mean by “average.” As this graphic shows, average wealth in the U.S. is the second highest globally, after Switzerland. That might be challenging if you have to be far above average to feel wealthy. If we look at median wealth (the midpoint, with half of the population above and half below), the U.S. doesn’t even break the top 10. If that’s your “yardstick,” you may already be wealthy. If feeling wealthy is based on comparing yourself to others, what does that mean?
Sources: The Visual Capitalist and the 2023 UBS Global Wealth Report
Feeling wealthy at different stages of life
Based on many conversations we’ve had with clients over the years, we know how people look at wealth changes as they move into different stages of life. When you have young children and are hitting your stride in a demanding career or building a business, you may save and invest but do not have enough spare time. In that sense, you would probably trade money for more time to do what you please. As we age, health-related wealth becomes more meaningful – are you healthy enough to enjoy what you want to do?
In our view, feeling wealthy is primarily about whether or not you have enough money to do what you want to do while you are still healthy enough to do it. Unfortunately, based on that definition, many people don’t know whether they are wealthy. Why? Because they haven’t identified the specific things they want for the future. We don’t often carve out time to take a step back to see past the day-to-day and contemplate what would be the most fulfilling in the long term. And it’s tough to know whether you have more money than you need until you get specific regarding your desires and how much money they require.
“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” – Ayn Rand
Fear of Running Out
Many people know about F.O.M.O. (Fear of Missing Out), but it’s also essential to understand F.O.R.O. – the Fear of Running Out (of Money). This fear is a real affliction, even for wealthy people by almost any measure. It often stems from a fear of being a financial burden in our old age. Will we be able to afford the medical care we need, possibly round-the-clock attention, without having to move into an adult child’s home, imposing on them and disrupting their lives? How much could that cost if a high level of care is required for many years? Finding out can help you to cope with F.O.R.O.
F.O.R.O. also comes from a concern that we won’t be able to leave the inheritance that we would like for our children. This fear can be a big issue for people with a good amount of wealth but not billions. For those who have just enough to meet their own needs in retirement, leaving anything to their children is a “bonus.” But people who have accumulated a certain level of wealth often worry they won’t leave “enough.” Identifying what “enough” means to you can help address your F.O.R.O.
Many people sacrifice current pleasures for fear that they won’t have sufficient funds to pay for medical care or leave that desired inheritance. We emphasize enjoying your money while alive, but F.O.R.O. looms large. We recommend working with a qualified financial advisor to calculate whether the fear of running out is justified based on your assets, spending, and future aspirations.
“Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations.” – Tim O’Reilly
Can money buy happiness?
Popular wisdom has long held that more money did not make people happier beyond a modest level of income—roughly $75,000, according to a 2010 study by Nobel Prize-winning economist and psychologist Daniel Kahneman. Accounting for inflation, this would equal about $100,000 today. A more recent study by Kahneman and co-author Matthew Killingsworth refutes that, saying that having a larger income is associated with greater happiness for most people. “The exception is people who are financially well-off but unhappy…if you’re rich and miserable, more money won’t help,” according to Killingsworth.
When people equate wealth with status and prestige, money interferes with happiness or believe wealth means power and control. If this is part of your belief system, accumulating money can become your highest priority, even if it means neglecting almost everything else in your life – including your health and your family. This approach makes financial planning challenging, and it interferes with enjoying life because no amount of money is ever enough.
“Money never made a man happy yet, nor will it…The more a man has, the more he wants. Instead of filling a vacuum, it makes one.” – Benjamin Franklin
Our philosophy is that money is about bringing value to life. Being wealthy is not about amassing some dollar amount; it’s about living comfortably, which is defined differently for everyone. At the core, it’s about being able to pursue what you want to do without fearing your money will run out throughout your lifetime.
Gold Medal Waters will help you understand what financial resources you need to live the kind of life you want, which is essential in determining your true wealth.
Disclosure: Advisory Services are offered through Gold Medal Waters, a Registered Investment Advisor. This post and material presented are for informational and illustrative purposes only, and do not constitute investment advice and is not intended as an endorsement of any specific investment. As is such, this material is not client-specific, we make adjustments in individual portfolios based on each client's financial plan, income needs, risk tolerance and total asset allocation. Interactive checklists are made available to you as self-help tools for your independent use and are not intended to provide investment advice. While Gold Medal Waters believes information derived from third-party sources to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability in regards to your individual circumstances. Investors should carefully consider the investment objectives, risks, charges, and expenses associated with any investment. The information discussed is not intended to render tax or legal advice. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Investing involves risk including the potential loss of principal, and unless otherwise stated, are not guaranteed. Past performance does not guarantee future results. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Consult your financial professional before making any investment decision.
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