What Does RICH Mean?

I saw an interesting article about mortgage delinquencies in the U.S. and there were some interesting tidbits of information in the report.  Overall, 1 in 12 people in the U.S. are at least 30 days past due on their mortgage.  Even more surprising was hearing that 1 in 7 mortgages of greater than $1,000,000 are past due.  This means that mortgages of more than $1 million are far more delinquent than mortgages under $1 million.  The media tells us that “the rich” are bigger defaulters than “the rest of us.”

My first thought was that the facts in the article had to be wrong.  I mean, are “the rich” (they are called that in the article’s headline) really not able to pay their mortgage.  After, they ARE rich, aren’t they?   That’s when one of my pet peeves (the use of the word rich in an improper context) reared its’ ugly head.  In the media and in politics, we often hear about “the rich” and that made me do a little thinking…………What does RICH really mean?

As a financial planner, I have been trained to think about rich meaning that someone has a substantial net worth.  Assets – Liabilities = Net Worth.  When your net worth is over $1,000,000 you are technically a millionaire.  That’s how “rich” is defined in my eyes; it’s all about net worth.  If you have ever read “The Millionaire Next Door” by Thomas Stanley, you will see that most of the millionaires in this country are people like you and me who wake up, go to work, and live within their means.  They aren’t flamboyant spenders.  Most of their neighbors would be surprised to learn that they live near “rich” people.

In contrast, “rich” as defined by this article, the media in general, and by politicians in both major parties, deals with income levels.  If a person earns $200,000 per year, they are rich.  Even if they spend $250,000(!) and have a house in foreclosure.  They aren’t rich.  Our culture, where expensive cars, jewelry, and big houses give the impression of success and wealth, has shifted the true meaning of what rich means.  Rich is not having a big income.  I have done serious debt counseling sessions with people who have had incomes over $500,000/year, I have seen professional athletes file bankruptcy, and I have seen factory workers retire at 55 years old with a paid off house and over a million dollars in liquid assets.  Of those 3 scenarios, who really is the rich person?

My bottom line:  When you see a headline talking about “the rich,” question what the writer means.  If you want to see your net worth, check out this financial organizer.

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