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The New Rich: How Much Money Does It Take?


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The New Rich: How Much Money Does It Take?

by Amy Fontinelle

Sunday, December 5, 2010

http://finance.yahoo.com/banking-budgeting/article/111448/new-rich-how-much-does-it-take?mod=bb-budgeting

What does it take to be considered rich in 2010? The old million-dollar standard seems defunct now that this amount is often touted as a minimum that should be saved for a comfortable retirement. Let's look at some recent attempts to pinpoint the new standard of wealth.

Movies

In the movie "Austin Powers," Dr. Evil, the villain frozen in the 60s and thawed in modern times, tries to extort the world's leaders. He demands $1 million, and they all laugh at him. Dr. Evil later figures out that he needs to ask for much more money -- $1 million just isn't a significant sum. The bad doctor later ups his demand to a suitably sinister $100 billion.

Another popular reference to our changing standards of wealth occurs in "The Social Network," a 2010 movie about the founding of Facebook. A conversation between Justin Timberlake's Sean Parker character and Andrew Garfield's Eduardo Saverin character goes like this:

Sean Parker: You know what's cooler than a million dollars?

Eduardo Saverin: You?

Sean Parker: A billion dollars.

The exchange occurs at a pivotal point in the movie when Facebook has proven successful but has not yet hit it big and the protagonists are considering the website's future. Parker's remarks seem to reflect the changing standard of wealth -- no longer is it enough to become a millionaire. Now it takes a billion dollars to truly impress the masses.

A billion dollars has also become the standard of great success at the box office. The highest-grossing movies of all time, "Avatar" and "Titanic" each made significantly more than $1 billion in worldwide box office receipts. So did "Lord of the Rings: Return of the King," "Pirates of the Caribbean: Dead Man's Chest," "Toy Story 3," "Alice in Wonderland" and "The Dark Knight."

Forbes' List

When Forbes first began compiling its lists of the 400 richest Americans back in 1982, just 13 of those people were billionaires. In 2010, every person on the list was worth at least a billion dollars, and the highest-ranked person, Bill Gates, was worth $54 billion.

Forbes' 2010 list of the world's billionaires includes a whopping 1,011 entries. Of those, 75 people are tied for last place with a net worth of $1 billion. These people come not just from the United States, but also from India, Turkey, China, Romania, Italy, Poland, Malaysia, Pakistan and other countries. And while a few familiar names grace the bottom of the list, like J. K. Rowling and James Dyson, many of these mere billionaires -- and even some of the richest people on the list -- are relatively obscure. You don't have to be a Warren Buffett or a Sergey Brin to find yourself at the top.

Books

A 2008 book titled "The Middle Class Millionaire" states that 8.4 million Americans have a net worth between $1 million and $10 million, including home equity. We can assume that many people have fallen out of this category with the decline in home values since the time the book was written, but the idea that you can be a millionaire, or even a multimillionaire, and still be middle class shows how times have changed.

There are numerous books for sale with "billionaire" in the title. Claiming to teach ordinary readers how to achieve ultra riches are these popular titles (to name a few) in the business and investing category: "Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor," "Think Like a Billionaire," "Become a Billionaire" and "Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth." Even top-selling children's books like "The Billionaire's Curse," "Mr. Gum and the Biscuit Billionaire" and "Billionaire Boy" make a billion dollars the new standard to aspire to.

Music

Travie McCoy's hit song, "Billionaire," describes what the singer would do if he had a billion dollars -- adopt lots of children, give away several Mercedes, revitalize New Orleans, and fix the recession, among other feats. The song spent 20 weeks on Billboard's Hot 100 chart, peaking at No. 4. Setting aside the fact that a billion dollars wouldn't come close to cleaning up after a natural disaster or ending a recession, the song sends the message that it takes a billion dollars if you really want to make a big difference.

Housing

A million dollars might not even buy you a house in one of America's top 10 most expensive cities for real estate, according to a September 22, 2010, MarketWatch article. The most expensive city on the list, Newport Beach, Calif., had an average list price of $1.83 million, while the least expensive on the list, Santa Barbara, Calif., had an average list price of $1.02 million for the period February to August 2010. And some surveys of wealth don't even include home equity in assessing people's net worth. The annual World Wealth Report defines high net worth individuals as "those having investable assets of U.S. $1 million or more, excluding primary residence, collectibles, consumables and consumer durables."

Professional Sports

A 2009 Forbes article, "The Most Valuable Teams in Sports," reported that as recently as 2003, not a single professional sports team was valued at $1 billion. But 2008 saw 24 teams worth $1 billion or more. Soccer's Manchester United topped the list at $1.8 billion. Despite the recession, Forbes' most recent list has 25 entries: joining Man-U are 19 NFL teams, MLB's New York Yankees, and four other soccer teams.

The Bottom Line

For many people, having a net worth of $1 million or even $100,000 still seems unattainable, yet these days neither of these figures is likely to impress anyone unless you attain them at a young age. Of course, even then, you'll be competing with the legacies of Bill Gates, Michael Dell and Mark Zuckerberg, all of whom were multimillionaires or billionaires before they turned 30.

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I will never consider $250,000 rich and especially in place like New York where cigarettes are $14.00 per pack.

Speaking of which, does anybody want to start bootlegging cigarettes to New York with me? I can get them for $50 a carton (Marlboro) here in Shreveport. We could easily sell them for $100 per in New York....so....If I bought 1000 cartons I could unload them and make a cool $50,000

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I could easily retire with a million bucks. You just can't be an idiot but you wouldn't live in need either. i could do pretty swell off the interest.

Even if I had money, I could not imagine living somewhere where the cost of living was so high.

5% interest a year on $1 million is $50,000 a year for life. That's easily doable. Someone who has a million dollars and can pull 5% interest a year doesn't have to work a day in their life.

To the OP, I've never considered $250k to be rich. In fact, I reject qualitative concepts like "rich" and "middle class" because they are so fuzzy and subjective. Someone who makes $250k is in the upper 2% of income earners in this country. There is absolutely, positively, no way that anyone can make a credible argument that the upper 2% is "middle" anything. Yet most people that make that amount would call themselves "middle class".

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I could easily retire with a million bucks. You just can't be an idiot but you wouldn't live in need either. i could do pretty swell off the interest.

Even if I had money, I could not imagine living somewhere where the cost of living was so high.

Anyone could. The issue, of course, is what you do with that income (and, relatedly, what it takes to earn that amount -- student loans, cost of living which tends to be higher in urban areas where higher paying jobs are, etc.).

Someone who makes $250K per year could live very, very well in Macon, Georgia. That same person living inside the perimeter in Atlanta would be living anything but large.

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5% interest a year on $1 million is $50,000 a year for life. That's easily doable. Someone who has a million dollars and can pull 5% interest a year doesn't have to work a day in their life.

To the OP, I've never considered $250k to be rich. In fact, I reject qualitative concepts like "rich" and "middle class" because they are so fuzzy and subjective. Someone who makes $250k is in the upper 2% of income earners in this country. There is absolutely, positively, no way that anyone can make a credible argument that the upper 2% is "middle" anything. Yet most people that make that amount would call themselves "middle class".

First, no one directed it at you, so whatever you consider is certainly welcome to the discussion, but it's not as if you have to defend anything. I didn't attribute a position to you.

Second, as I said above, that depends entirely on where one lives. You can call them "upper income earners if you like," but when they live in a house smaller and older than mine that costs twice as much and has taxes that are (literally) 3 times on that house, their cars, etc. what mine are, and their local school is so horrible they have no choice but to put their kids in some private school (and I'm not talking Westminster or Pace -- even a small parochial school is around $3K per year, per kid) they don't really have any more disposable income than I do.

And I'm anything but wealthy or "rich."

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income =/= wealth. there are numerous sources available that show that the average american millionare has an annual income of 80-100k per year.

i believe more in the robert kiyosaki theory that wealth is not some arbitrary number that one has, it's the state of having enough passive income to live on.

there are many wealthy people who make under 100k per year.

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First, no one directed it at you, so whatever you consider is certainly welcome to the discussion, but it's not as if you have to defend anything. I didn't attribute a position to you.

Second, as I said above, that depends entirely on where one lives. You can call them "upper income earners if you like," but when they live in a house smaller and older than mine that costs twice as much and has taxes that are (literally) 3 times on that house, their cars, etc. what mine are, and their local school is so horrible they have no choice but to put their kids in some private school (and I'm not talking Westminster or Pace -- even a small parochial school is around $3K per year, per kid) they don't really have any more disposable income than I do.

And I'm anything but wealthy or "rich."

if someone lives somewhere that is too expensive for them then they should move. sure that person may have to drive more to work, but it's not like it's impossible to live well in the metro atlanta area for 250k/yr.

no matter how much money a person makes if they spend it all at the end of the month they still have nothing.

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if someone lives somewhere that is too expensive for them then they should move. sure that person may have to drive more to work, but it's not like it's impossible to live well in the metro atlanta area for 250k/yr.

That ignores the reality that higher paying jobs tend to have much longer hours. Most neurosurgeons don't work 35-40 hours a week. So a 1.5 hour commute on top of the hours they work means no free time. You either live close to where you work or you have no life. So they choose to pay more for the house and live close to the job.

And I didn't say it was "too expensive for them." I have SOME disposable income. My point is I don't make enough to be considered wealthy, and neither does someone who makes twice what I do and has to live intown.

no matter how much money a person makes if they spend it all at the end of the month they still have nothing.

No doubt about that.

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That ignores the reality that higher paying jobs tend to have much longer hours. Most neurosurgeons don't work 35-40 hours a week. So a 1.5 hour commute on top of the hours they work means no free time. You either live close to where you work or you have no life. So they choose to pay more for the house and live close to the job.

And I didn't say it was "too expensive for them." I have SOME disposable income. My point is I don't make enough to be considered wealthy, and neither does someone who makes twice what I do and has to live intown.

No doubt about that.

dave i wasn't talking about you or your situation. of course every situation is different and i was speaking in general terms.

1.5 hour commute? c'mon now, that person doesn't have to live in athens or macon. there are places 10, 15 miles further outside the perimeter that are much more affordable to live in.

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dave i wasn't talking about you or your situation. of course every situation is different and i was speaking in general terms.

1.5 hour commute? c'mon now, that person doesn't have to live in athens or macon. there are places 10, 15 miles further outside the perimeter that are much more affordable to live in.

I wasn't either, for the most part -- I'm not a neurosurgeon, and I live well outside the perimeter.

My commute is 1.25 hours (one way) as it stands now. And that's 35 miles from the office. Can you get closer than that and still have good schools? Sure. For what I paid for my house? Not really. You're getting upwards of $100K-150K more than I paid just to get to East Cobb, Roswell, etc. for a comparable house, and mine's modest for the neighborhood. Gwinnett is closer by the mile, but not so much by the minute. I haven't looked for housing lately, but honestly, if I moved somewhere, I'd be looking at Roswell. In normal traffic, that's a 45 min. commute.

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income =/= wealth. there are numerous sources available that show that the average american millionare has an annual income of 80-100k per year.

i believe more in the robert kiyosaki theory that wealth is not some arbitrary number that one has, it's the state of having enough passive income to live on.

there are many wealthy people who make under 100k per year.

I consider myself wealthy because I live within my means and I only notice I am piss poor when something happens like you need money for a car repair or home repair.

Looking back, i realize growing up we were what you would call extremely poor. We grew up in a house with no indoor bathroom and ate a lot of beans and potatoes. But you know, I did not realize it at the time because mama and daddy always managed to put food on the table, I didn't know we were poor.I considered the friends I had with inside bathrooms to be richer, but I didn't think they were much better off than us. We didn't need or want many toys because we had our friends to play with and the woods to play in.

Sometimes I get depressed because I get to thinking I am one emergency away from being homeless but then I think I still have it so much better than many people right now.

I lost ten bucks last week and was quite down because honestly, the wallet was thin. I made myself feel better tho by reminding myself that there are people worse off and maybe one of them found that 10 dollar bill.

A million aint what it once was, no. But if someone can't live off of it they have a problem, IMO.

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I consider myself wealthy because I live within my means and I only notice I am piss poor when something happens like you need money for a car repair or home repair.

Looking back, i realize growing up we were what you would call extremely poor. We grew up in a house with no indoor bathroom and ate a lot of beans and potatoes. But you know, I did not realize it at the time because mama and daddy always managed to put food on the table, I didn't know we were poor.I considered the friends I had with inside bathrooms to be richer, but I didn't think they were much better off than us. We didn't need or want many toys because we had our friends to play with and the woods to play in.

Sometimes I get depressed because I get to thinking I am one emergency away from being homeless but then I think I still have it so much better than many people right now.

I lost ten bucks last week and was quite down because honestly, the wallet was thin. I made myself feel better tho by reminding myself that there are people worse off and maybe one of them found that 10 dollar bill.

A million aint what it once was, no. But if someone can't live off of it they have a problem, IMO.

i too grew up poor and am still poor but trying to better myself. i look at income as a tool and nothing more.

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I wasn't either, for the most part -- I'm not a neurosurgeon, and I live well outside the perimeter.

My commute is 1.25 hours (one way) as it stands now. And that's 35 miles from the office. Can you get closer than that and still have good schools? Sure. For what I paid for my house? Not really. You're getting upwards of $100K-150K more than I paid just to get to East Cobb, Roswell, etc. for a comparable house, and mine's modest for the neighborhood. Gwinnett is closer by the mile, but not so much by the minute. I haven't looked for housing lately, but honestly, if I moved somewhere, I'd be looking at Roswell. In normal traffic, that's a 45 min. commute.

you bring up an excellent point regarding the school system. now it seems like you almost have to send kids to a private school, well at least once they get to middle school age. my kids aren't that old but some of the stories my babysitter tells us about the local high school are downright scary.

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First, no one directed it at you, so whatever you consider is certainly welcome to the discussion, but it's not as if you have to defend anything. I didn't attribute a position to you.

Second, as I said above, that depends entirely on where one lives. You can call them "upper income earners if you like," but when they live in a house smaller and older than mine that costs twice as much and has taxes that are (literally) 3 times on that house, their cars, etc. what mine are, and their local school is so horrible they have no choice but to put their kids in some private school (and I'm not talking Westminster or Pace -- even a small parochial school is around $3K per year, per kid) they don't really have any more disposable income than I do.

And I'm anything but wealthy or "rich."

I was just clarifying that I was offering my opinion on the matter. Didn't take it personally.

You're right about place of residence being a huge factor, which is why I think taxes should be scaled according to cost of living. That said, someone with $250k has more options than most people in terms of commuting. With a few exceptions (mega city where affordable housing is 2 hours outside of the city), living in those expensive urban areas is mostly a lifestyle choice. There are cheaper options available for most people in that income range. Not all of them, but most of them.

Poor people making $10 an hour find ways to live in those expensive inner-city areas. Someone with $250k can manage just fine.

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you bring up an excellent point regarding the school system. now it seems like you almost have to send kids to a private school, well at least once they get to middle school age. my kids aren't that old but some of the stories my babysitter tells us about the local high school are downright scary.

I don't. I just have to live halfway across the state from where I work :(

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Poor people making $10 an hour find ways to live in those expensive inner-city areas. Someone with $250k can manage just fine.

They also have tiny, cramped slum level housing, high crime and crappy schools. I'm talking about maintaining a middle class existence (base level of education, a decent nice house -- NOT a mansion, and safe streets and neighborhoods). Do you think poor people making $10 an hour have that in the inner cities?

Certainly not here, they don't.

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5% interest a year on $1 million is $50,000 a year for life. That's easily doable. Someone who has a million dollars and can pull 5% interest a year doesn't have to work a day in their life.

To the OP, I've never considered $250k to be rich. In fact, I reject qualitative concepts like "rich" and "middle class" because they are so fuzzy and subjective. Someone who makes $250k is in the upper 2% of income earners in this country. There is absolutely, positively, no way that anyone can make a credible argument that the upper 2% is "middle" anything. Yet most people that make that amount would call themselves "middle class".

Where are you getting 5%??? My jumbo CD at the bank is at 3%, and it's a teaser rate.

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Where are you getting 5%??? My jumbo CD at the bank is at 3%, and it's a teaser rate.

Ever heard of the stock market?

I made 35% interest in 9 months off of WHX Whiting Trust because I was able to time the swings in the stock following dividend payments. And I know literally nothing about investments. My retirement account has pulled 20% each year for the past two years. Anyone can get 5% return on their investments, and most people can get much more.

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