Rich People on Not Being Rich

Whenever I see a headline like “Do the Wealthy Think They’re Wealthy?” I know that the answer is going to be “no” and that I’ll be in for a treat when I start reading. Scott Leonard, a 45-year-old CEO of a wealth management company declined to tell Marketplace how much he earns but he says under the new fiscal cliff deal, his family would be considered wealthy, or earning at least $450,000 a year, which puts him among the one percent.

The Leonards recently sold their house to spend a few years with their three kids sailing around the world on a boat. “A 50-foot catamaran,” he said. “Four bedrooms with queen sized beds and everyone has their own bathroom. So it’s a good floating home for us.” I told him he was living the dream, and he agreed, but with an asterisk. “Living the dream,” he said. “And not wealthy.”

So if he’s not wealthy, what is he?

“I still think of myself as middle class, or upper middle class,” he said. “I certainly do not consider myself as rich or wealthy.”

Leonard expects us to roll our eyes at him, and explains that wealth is relative, but even so, I’m boggled by the idea that someone earning more than 99 percent of the country wouldn’t believe that he or she is wealthy, and that when President Obama talks about the struggling middle class, someone like Leonard, who is earning half a million dollars, would think, “oh, that’s me, I’m middle class.” I mean, does he believe that someone earning, say, $75,000 a year is lower-middle class?

Of course, as a counterpoint, Marketplace talks to a couple earning a combined $250,000 a year who do think they’re wealthy. Elizabeth, a private school teacher, says that may not sound like a lot to other wealthy people, but adds, “But when I look at the rest of the country I’m very, very fortunate.”

I think that’s a good way of thinking about things. Rather than compare yourself to people who have bigger boats than you, it might give you some perspective to think about people who don’t have boats at all.

Photo: Yorick_R

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46 Comments / Post A Comment

Trilby (#191)

I think one thing keeps these rich people “humble” is that they always know people way richer than themselves. Another thing is that, as their income rises, their expenses do too, and the luxuries they can now afford become necessities to them, so now they can only *just* afford the necessities.

jfruh (#161)

@Trilby Another thing is that, as their income rises, their expenses do too, and the luxuries they can now afford become necessities to them, so now they can only *just* afford the necessities.

Yes, this! This is the most infuriating part of these conversations to me. So often people who are in the top few percent of national wealth but not bazillionaire range will say “Oh, but I have to pay a mortgage on my Westchester home and send the kids to private school and make car payments on my BMW, so at the end of the day it’s not like I have a lot of disposable income, so I’m not RICH.” I do think a lot of people think of “rich” as meaning “I can drop thousands of dollars on a whim,” when often it means “I can pay for very high-quality versions of the things I use.”

questingbeast (#2,409)

@Trilby @jfruh Ugh, the phrase that drives me mad, that always appears in these things, is ‘there’s nothing left’- as in, ‘after paying for private schools and nannies and three cars and the mortgage, there’s nothing left over’. Well, that’s how it works: you get money and allocate it to the things you want/need that month, and then it’s gone, and next month you get more. Why do you need anything ‘left over’? (Unless you’re trying to build some sort of Scrooge McDuck gold pile, which I could sort of understand).

MuffyStJohn (#280)

@Trilby PREACH. Being rich means being able to afford the Westchester home, the private school, the BMW . . .

deepomega (#22)

@Trilby May I direct everyone once more to DeepOmega’s Golden Law of Finances. “If only I had an extra 100,000 a year I could get that 60 foot yacht and everything would be perfect!” And there’s also probably an element of “trying to be relatable” – like, rich people thinking that if they say they’re not rich, then they will be less off-putting to not-rich people.

szajic (#1,811)

Yeah, these articles can make for excellent hate-reading. I think the question ‘Do you need to go to work?’ is a pretty decent way of defining the upper limits of the middle class. Traders/lawyers/doctors/etc making six figures are obviously doing very well, but they can plausibly say that they still need to get up and go to work every day in the morning to pay their mortgages and kids’ college tuitions, fund their retirements, etc.

But if you go all Romancing the Stone on us and sail around the world in a yacht for a few years with your family, you’re not middle class by any stretch of the imagination.

Sean Lai (#559)

@szajic Nah, a great deal of wealth inequality these days accrues from working income – your investment bankers, your CEOs, etc. The mere fact that people work for a living shouldn’t preclude them from being considered wealthy.

Also, stuffisthings is tearing it up in this thread. There should be an option to like a post twice.

szajic (#1,811)

@Sean Lai I basically agree with your opint, but I think there’s a difference in kind between, let’s call them high earners and the one percent? That’s why I said ‘need to go to work’ not just ‘go to work’.

I-bankers and CEOs who are making millions don’t need to work, they could already easily retire and be rich for the rest of their lives. Their work is aimed at furthering massive wealth accumulation rather than trying to meeting their liabilities and their family’s future needs, which (if they have any sense at all) should already be taken care of.

themegnapkin (#444)

@szajic I’ve heard the acronym “HENRY” – High Earners Not Rich Yet – to apply to people in this category. It’s completely plausible that someone (cough – lawyers) takes on a crippling load of debt, lands a high-paying job, but isn’t taking home very much after paying the loan bills. Income is part of it, but net worth is relevant, too.

szajic (#1,811)

@themegnapkin Yes, this. A young doctor or lawyer just starting out should end up rich by the end of their career if they don’t spend on their money on status symbols, but they’re not now, and may well be scrimping while they’re paying off their big loans.

Actually, the focus on income when talking about wealth drives me nuts. The amount of money a person makes over one year, 1/40th or 1/50th of their working life, is not a good indicator of how rich they are (and by extension, how they should be taxed). And of course, plenty of very rich people have almost no non-investment income.

Sean Lai (#559)

@szajic I get what you mean in general, and no one would disagree that there’s a difference between someone living on their passive income and someone who ‘must’ work for a living. But for one, the rich who merely live on their passive income is actually a pretty small proportion of the rich, and for two, as discussed elsewhere in the thread it becomes difficult to sort which expenses are ‘necessary’ and which are the result of being rich.

A wealthy doctor might consider his mortgage on his house, his kids’ tuition, and so on to be merely taking care of his family – and rightly so! – but these are also signifiers of wealth.

I also find arguments related to cost of living frustrating for this reason, unless it’s a discussion of people so poor that they are trapped living in a high cost urban area by a lack of wealth. If you live in a wealthy city like San Francisco, you are not ‘less rich’ by virtue of having a higher cost of living – you’re paying for the privilege of living in a wealthy city.

themegnapkin (#444)

@Sean Lai as someone who lives in a less desirable but cheap place, that argument — that high cost of living = less rich — drives me nuts. My income goes farther here *because* it’s a less desirable place to live.

It’s always so interesting to see how people perceive their wealth. If I made $250,000 a year, I would feel wealthy too! I make way less than that and I feel wealthy already. I’m able to mostly do what I want, when I want to (while paying off loads of student loans…), even if means saving for a bit. That’s pretty damn exciting to me!

ThatJenn (#916)

I do wonder where the cutoff is between middle and upper-middle class and then again at the divide between upper-middle class and wealthy. My mother and her partner make somewhere in the range of $200,000-250,000 per year, and basically consider themselves on the low end of wealthy – they definitely do need to keep working, but they know they’ll be able to retire and they get to take nice vacations and be free from a lot of worries. My partner and I, together, made about $70,000 last year, and while we felt really good about that, and were free from a lot of our previous financial difficulties (from when we were earning about half that, when we got together), I definitely wouldn’t call us wealthy – but maybe we were upper middle class because we didn’t worry about paying for health insurance or making our mortgage/car insurance every month? I don’t feel especially well into the “upper” category, but maybe that’s just because I’m still paying down the debts I accrued when making less?

I should say, I feel decidedly “comfortable.” But when my partner just now took an hours cut that will remove about $10,000 per year from our household income, I knew we would definitely feel it. So… does “comfortable” mean “upper-middle class” by definition? And obviously this is affected by where we live – in a relatively cheap area of the country.

@ThatJenn Usually when defining “middle class” we take the median income and work from there. I would consider a pretty broad definition to be the middle three quintiles, meaning the 3/5 of the population centered on the median income (60% of the country being middle class seems a bit of a stretch to me, but if this is what people believe so be it). By that definition “middle class” would be between $28,000 a year and $105,200 a year for a two-person household.

The problem with this definition is that a couple who both worked minimum-wage jobs would be considered middle class, which seems not quite right. But if we narrow the range, we have to also to lower the top amount, or else hopelessly distort the definition of “middle.” The exact middle quintile (20%) would be between $47,400 and $70,100 for a two-person household, which sounds reasonable to me.

Households earning more than $250,000 are in the top 1.5%. There is no stretch of math that will make me believe that’s middle class.

Even above $92,000 a year (for a typical American household of 2.5 people) you are talking top 20%. Is the top 20% part of the middle? Would we use this definition anywhere else in our lives?

(ETA: The last part’s not a dig at you, but at the people who are perverting our discourse to imply that six-figure incomes are in any way a normal part of American life.)

@stuffisthings Wow, I knew my household was way above the national median income, but not that we were in the top 20%. I thought we were upper-middle class (I used the term “rich,” but jokingly) but we’re way better off than I realized.

Of course “class” still has connotations beyond income, even here in the States. I wonder if people consider themselves “middle class” because they weren’t born into a family with a large fortune.

ThatJenn (#916)

@stuffisthings Those numbers make a lot of sense to me on just a “feelings” level, too. I feel like I’m somewhere near the top of the genuinely middle class right now, though not quite as close to the top of the range of people who call themselves middle class; I feel like my mother and her partner are wealthy. I agree that $28,000-$105,000 is way too big a range, though I guess if we really do want to lump the majority of the country into “middle class,” then fine?

Though of course, as stated elsewhere, cost of living where you live makes a big difference. Our very comfortable lifestyle in Gainesville on $70k/year would not be nearly as comfortable in the DC area where my mother lives. I mean, we could probably live a similar general lifestyle, but only if we were willing to majorly downsize our living arrangements. But then again, both of our jobs would probably pay notably better if we lived there, too.

@ThatJenn Yeah there are some huge regional variations. In a lot of the country, the ~$50,000 median household income buys a house, a car, and maybe a state college education for your 1.5 kids. What irks me about finance professionals, though, is that New York is NOT a high-wealth city like D.C. The median household income in MANHATTAN is $47,030 — meaning 50% of people earn LESS than that. (Median household income in D.C. is almost $60k)

ETA: Though both cities are hugely unequal, of course. Don’t want to downplay that.

ETA: But when 1/2 the population of your city lives on 1/10th of your income, it’s hard to argue you NEED that much money and not a penny less…

@cuminafterall Yeah it’s funny because in England “middle class” is usually self-applied with some reluctance and a bit of self-loathing. Most people would prefer to think of themselves as “working class” — which actually can be broadened to mean “people who survive on a wage or salary, rather than from passive income” without completely distorting the literal meaning.

questingbeast (#2,409)

@stuffisthings Well, the most recent survey of British attitudes on class said that three quarters considered themselves middle class, a quarter working and none upper. ‘Class’ was always mostly to do with how you got your money, rather than how much you had. But traditional working-class jobs (mining, manufacturing, farm work) have pretty much gone, and at the other end there are fewer ‘upper-class’ people who can live their whole life without working. So ‘middle-class’ is so broad as to be fairly meaningless.

@questingbeast That’s too bad — I always liked the idea that being middle class was something to be slightly ashamed of (while being upper class was pretty much unspeakable). Maybe I hung out with too many lefties.

questingbeast (#2,409)

@stuffisthings Oh no you’re right, there’s definitely a fair bit of that sort of jokey attitude to it, in a cultural sense- ‘ugh, Waitrose-and-Pizza Express-and-espresso machines, SO middle class’. I just meant, I don’t think that necessarily means people don’t consider themselves middle-class.

OK one last thing: To put those “top 20%” numbers into context, only 30% of the U.S. adult population has completed a bachelor’s degree, while about 12% never finished high school. College-educated salaried professionals — which is what many people imagine the “middle class” to be — are still more of an elite than a representative example of the American workforce (as you might expect if everyone you know is a college-educated salaried professional or is likely to be in the future).

r&rkd (#1,657)

@stuffisthings
Am I recalling correctly that about another 25% have partial completed a bachelor’s degree? Which is really a terrible waste and another thing that we should address!

@josiahg Sorry I had my stats slightly wrong there, edited to correct. But yeah there about 60% of people listed as “some college” which I believe does not include those who’ve completed an associates degree.

pjmorse (#2,978)

@cuminafterall Indeed. Some of these people say they’re not rich because of class, which is still a dirty word in the USA. I believe Paul Fussell noted that there is, regardless of what people say, a class distinction between those who work for their money and those who live on inherited wealth. Even if they are rich, those who need to work feel poorer.

Trilby (#191)

I lived from paycheck to paycheck for years, and only started to make what I consider a good living in the past 2 years. I am not wealthy, I make a little over 100K and have just one rather large “child” to support, but I have come to the conclusion that the ultimate luxury is being able to afford your bills. It’s a great feeling to live within your means.

deepomega (#22)

@Trilby Making a little over 100k puts you In the top 20% of household income in the US. And that’s HOUSEHOLD income – if you have a partner of some kind you’ll be higher. Just saying!

“Oh me? I’m just eating this brioche like any other middle-class French person.” — Marie Antoinette

Megano! (#124)

Wealth is not THAT relative guy. :/

themegnapkin (#444)

@Megano!
But listen to his reasons!! “Leonard acknowledges that he has a good life, and a certain amount of peace of mind. But he says that financial security has only come after years of insecurity and deep debt while he was building his business. ‘We haven’t saved what I wish we would have for our kids’ college,’ he said. ‘We’re not putting away the money that I would like us to for retirement.’ Leonard says when it comes to that kind of long-term planning, he still feels ‘behind the eight-ball.’”

WaityKatie (#1,696)

Not to get all woo-woo hippie style here, but I kind of pity people like that, because it sort of points up the fact that stuff doesn’t lead to happiness. You can have a crapload of stuff and the financial security that comes with that, and still spend your life not appreciating what you have and being envious of people who have more. Whereas I consider myself wealthy in many ways, despite the fact that anyone looking at my debt to income ratio would be like, “you’re pretty broke.” I mean, I have everything I need and I get a lot of enjoyment out of life, and so what if I’m in debt and can’t buy a house? I’d rather not have stuff and be able to enjoy life than spending it frantically questing to get more money and more stuff and then still be miserable at the end of it. I guess the point is, you can be miserable in any situation.

r&rkd (#1,657)

@WaityKatie
Hey there, poor young people! You know all the those older people with money who say they would give it all up to be young again? Work hard, and someday you can be just like them!

That is to say, you are spot on.

WaityKatie (#1,696)

@josiahg I guess the trick is to be rich and also appreciate it, but then you can appreciate what you have at any income level, and getting rich probably requires a lot of effort, so.

charmcity (#1,091)

I heard this story, and found the teacher’s perspective interesting; she seemed aware of people on both ends of the wealth spectrum, whereas the catamaran guy talked only about people who were richer than his family. The teacher also mentioned helping her kids pay for college in a way that indicated she clearly wasn’t committed to covering 100% of the cost no matter what. I did wonder what her spouse did for a living, since private schools aren’t paying their teachers $250k …

deepomega (#22)

To be fair, if they were really rich they’d be traveling around the world in a FLYING yacht. Ocean-bound yachts are so last-century.

honey cowl (#1,510)

Everybody else who commented is way smarter & more eloquent than I, but I just need to register the fact that this guy’s household makes nearly 10x what my household does and he thinks he’s middle class? What?

WaityKatie (#1,696)

@Lauren Always Be (social) Climbing!

Stina (#686)

@Lauren Oh, I’ll be even less eloquent: Shut up Scott Leonard. You’re wealthy. Shut up.

This is…interesting. I just don’t get how this person can’t admit that they are wealthy. Don’t they remember being in their 20s thinking “If I could just make 60 grand a year, I’d have it made.” And if they never had that thought, then they must have come into adulthood having that much money or at least having the expectation of making that much soon (ie. a college degree or something), which indiciates a certain amount of financial privelege. So either way, you have to admit that you’re quite wealthy dude! You have either way exceeded your own expectations, or you have never really had to worry about money.

EM (#1,012)

So much of this is the weird disconnect with how everyone else lives. I grew up in a very lovely upper-middle class home with professor parents, but when I was young I thought compared to my friends we were poor, because they all had vacation homes and we didn’t, or because they went to Europe for the summer and we went to Hawaii, or because my mom wouldn’t buy me $200 jeans. In my little microcosm I was only aware of relative wealth.

Am I saying these rich people are ignorant like a 12-year-old? Yes.

sarrible (#1,545)

I think if your job has the word “wealth” in it, you’re wealthy.

WaityKatie (#1,696)

@sarrible I remember the first time I met someone whose job was in “wealth management” or some such, and I was like, WHAT?!? HOW IS THAT A JOB!!?! CAPITALISM MUST END NOW!!!

(Actually I still kind of think that.)

For around 20 years, I lived in Calif., in one of the top three wealthiest counties in the nation. I never met any single person who considered themselves wealthy. Even the couple who hired me to take care of the grandmother, and who had her living in their villa inside a 17 million dollar ranch. Even though the husband was unemployed, and when he was bored, he would do things like buy a helicopter. (For which he had to design and build a heli port.) Ah to be so rich and yet so “Un-wealthy.”

PicNic (#3,760)

I grew up with an extremely poor single mother who often couldn’t afford to pay the bills or buy food for herself after buying some for me. A ringing phone would stress us out because it could be another bill collector, or the landlord to evict us. When we came home from work we’d cross our fingers to see if the lights were still on and not having heat or electricity in a bitterly cold New England February was not uncommon.

So, sometimes as an adult when I casually throw some organic chicken in my shopping cart, or am able to pay ALL of my bills on time, or can buy the good quality name-brand version of something – I feel stupidly rich and lucky.

Other times – when I see my student loan debt reaching out for years and years, or I see how run down and crappy my apartment is, or how faded my black work pants are… I think what I make in this city makes me poor-ish. Never actually poor, but lower middle class, maybe. or upper lower class. “getting by usually” class. (full disclosure: $53k pre-tax/Boston. Rent $1,100)

Also – I feel kind of bad for this guy/his clients that he is in wealth management but can’t manage his own wealth since he apparently has no college funds for his kids or retirement set up for him and his wife. That is totally insane to me!

@PicNic I didn’t grow up poor but have been struggling all my adult life (moved out of my parents’ house 18 years ago) and I can relate to everything else you said. Also, I feel rich when I can buy new clothes, which is something I rarely do. I live in a NJ suburb of Philly and make 30-33,000 depending on how much my boss has cut back my hours. My rent was 650 when I lived alone. (Now I live with my self-employed boyfriend whose income is sporadic.)

I don’t understand how this guy is in wealth management either! My lower/middle middle class parents managed to pay for my college and my brother’s on a much lower income!

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