Wealth is both subjective and ever-evolving. The level at which someone is perceived as wealthy varies widely depending on who you ask. Some may think wealth is based purely on income, while others use a broader financial picture — including aspects such as assets, savings and liabilities.
You might think if you don’t fit a particular definition of wealth, wealth management is not meant for you. But the truth is that wealth management is valuable for a variety of financial situations, and its definition is expanding to include a more holistic view of what people value most.
The Differing Definitions of Wealth
Although the specifics of what makes someone wealthy varies from person to person, some baseline ideas are common to the majority of people. According to our survey, 54% of U.S. adults believe you’re wealthy when you have a net worth of $1 million or higher.
That benchmark is a high one, as a household net worth of $1 million is eight times the median net worth of U.S. households and would put you into the 88th percentile of wealth for households nationally — meaning 88% of U.S. households have a net worth less than $1 million (according to a 2019 Federal Reserve survey).
Income wise, most consider an annual household income of $300,000 or higher wealthy. If you fall into this category, that puts you in the top 2% of U.S. households.
It’s All Relative
While a majority agree on these thresholds, beyond that, perceptions of wealth are often relative to your own net worth. For instance, those with a household net worth of at least $100,000 are nearly two times more likely to consider $1 million wealthy, compared to those with a household net worth of less than $100,000, who tend to have a lower threshold for what they’d consider “wealthy.”
If you’re like most, you probably don’t consider yourself wealthy, even if your earnings and assets fit what most people consider as the definition of wealthy. When asked to name a net worth minimum for wealth, 87% state an amount higher than their own, even if that figure would make them wealthy by most people’s standards.
The New Wealth
Factors like persistent income inequality, mounting student debt and a steady increase in daily costs of living all contribute to the common perception that wealth is out of reach for most people.
But what was considered wealthy a generation ago is not the same now. Rapidly changing dynamics make obtaining wealth more accessible.
For instance, the pandemic has impacted many facets of our lives, especially how we think and talk about money. With soaring home prices and widespread unemployment, the wealth gap widened for many. But at the same time, investing apps and robo-advisors have made investing more accessible to more people at varying income levels than ever before.
A lack of generational wealth may also be seen as a barrier to access to wealth. You may feel as if your background prohibits you from ever “getting ahead” and achieving wealth. While no financial plan works for everyone, investing can help you begin building generational wealth for your children and beyond.
What’s more, people are beginning to redefine wealth in a way that more closely fits their lifestyle and values. These days, wealth doesn’t have to be confined to just your bank account balance or how much you have in your 401(k). People are taking a more holistic view of wealth — and time, freedom, health and power are all factors beyond the financial that can make you feel “rich.”
The Path to Your Own Personal Wealth
However you define wealth, you can take steps to invest in your financial future and pursue your individual goals.
In the past, you may have considered working with a professional financial advisor as a necessary part of growing and managing wealth. Yet you might be intimidated by the prospect and think a relationship with an advisor is cost-prohibitive for your budget.
But today’s advisors aren’t strictly the formal, buttoned-up kind that typified the industry in generations past. Modern financial advisors are more approachable and relaxed while still providing excellent and valuable information and guidance to help you pursue your financial goals.
Still, should you decide to go it alone, numerous online resources can help you manage your wealth. The pure magnitude of information available on the internet has democratized financial know-how in a way never before thought possible. Although this also means taking great care in where and from whom you’re getting information, it’s nevertheless helpful to have readily available “finfluencers” sharing their expertise far and wide via social media and podcasts.
Redefine Wealth Your Way
You can take charge of your financial future and shape your own individual definition of wealth. During our The New Look of Wealth digital conference, we heard from top experts in the fields of wealth building and wealth management about strategies to help you pursue your dream goals.