Are You Rich?

Reflection of the Week

Are You Rich?

Happy Friday, everyone!

As we wrap up the week, let’s dive into a topic that often sparks curiosity, self-reflection, and sometimes even a bit of discomfort: net worth. It’s the financial barometer that provides insights into our overall economic well-being. However, as we explore this realm, remember the sage advice: “When you compare, you always lose.”

In my recent review meetings, the question of net worth has been a recurrent theme.

Understandably, people want to gauge how they are faring compared to others. It’s a natural instinct, but it’s essential to tread carefully in the world of comparisons.

The Washington Post’s recent report sheds light on the distribution of net worth across America, revealing that the middle half of Americans fall between $27,000 and $659,000. Additionally, 8% of households find themselves in the challenging territory of a negative net worth.

To gain a more nuanced perspective, let’s take a closer look at the net worth benchmarks. Here’s the net worth of households richer than:

  • 25% of the country: $27,000
  • 50% of the country: $193,000
  • 75% of the country: $659,000
  • 90% of the country: $1.9M
  • 99.9% of the country: $62M

Age, of course, plays a crucial role in this financial narrative. The New York Times offers a calculator that allows us to determine where we stand relative to our peers in the same age group. It’s a valuable tool in understanding the wealth landscape personalized to our life stage.

Delving deeper into the nuances, the NY Times Calculator highlights some intriguing insights:

  • Societal imbalances are more pronounced in wealth than in income. A family in the 95th percentile of net worth nationally possesses 25 times more wealth than a family in the middle, unlike the fourfold income difference in a similar income percentile scenario.
  • The concept of the rank gap, as explored by economists Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins, reveals stark racial disparities. A black family at the 50th percentile of wealth has a rank gap of negative 30 points, implying that the typical black family is as wealthy as a white family at the 20th percentile. This disparity persists even among wealthier black families.

It’s crucial to emphasize that these numbers aren’t intended to instill shame or judgment. They serve as signposts, helping us understand where we currently stand and where we might aspire to go. As you reflect on your financial journey, let’s focus on progress, learning, and setting realistic goals rather than being ensnared in the trap of unwarranted comparisons. After all, wealth is just one aspect of a fulfilling life, and the accurate measure of richness extends beyond monetary metrics.

Questions of the Week

  • Do you know your Net Worth?
  • Where would you like to be?
  • What step can you take today to head in that direction?


Reminders of the Week

Year-End tax forms (1099-NEC, W-2, etc) are due by next Wednesday. Make sure to get them out!