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That may be an indicator of high income, but not an indicator of wealth. The two are not the same.
so is net worth the definition of wealth? part of my confusion seems to be whether or not wealth is a synonym for net worth. in that case, someone could earn millions a year, spend millions a year and not be wealthy (if wealth = net worth).
so is net worth the definition of wealth? part of my confusion seems to be whether or not wealth is a synonym for net worth. in that case, someone could earn millions a year, spend millions a year and not be wealthy (if wealth = net worth).
That's why, as stated previously, it's impossible to determine wealth on income (earned, passive and portfolio) alone; one needs to know assets as well as liabilities. That said, income is an asset; it's common sense it plays into the bigger picture in determining the likelihood of wealth (especially relative to porfolio and passive income) and especially in comparison to someone with a low-income. The person with a high income has a net worth which is growing substantially each month (all other things being equal, at face value); the low-income person does not. Of course, 'high income' has to be defined specifically as well.
That's why, as stated previously, it's impossible to determine wealth on income (earned, passive and portfolio) alone; one needs to know assets as well as liabilities. That said, income is an asset; it's common sense it plays into the bigger picture in determining the likelihood of wealth (especially relative to porfolio and passive income) and especially in comparison to someone with a low-income. The person with a high income has a net worth which is growing substantially each month (all other things being equal, at face value); the low-income person does not. Of course, 'high income' has to be defined specifically as well.
The confusion in this thread relates to the colloquial use of the term personal income which is often incorrectly used to describe someone's revenue. Income is revenue minus expenses. This reinforces the concept that individual or household expenses and liabilities must be identified and included in any analysis of wealth. As previously noted there are plenty of households that earn substantial revenue but do not make any attempt to control expenses.
This reinforces the concept that individual or household expenses and liabilities must be identified and included in any analysis of wealth.
Except - no one is speaking to an analysis of wealth; the thread is 'how to tell if someone is rich'. Of course there are people who spend more than they earn; it's a point that goes without saying (despite the fact there are numerous people who feel the need to continue to say it, lol).
The point remains - one simply can't tell someone is 'rich' by appearances or even if they are told by someone in a dive bar they are, lol (as a previous poster indicated).
so is net worth the definition of wealth? part of my confusion seems to be whether or not wealth is a synonym for net worth. in that case, someone could earn millions a year, spend millions a year and not be wealthy (if wealth = net worth).
Yes, I would say wealth = liquid net worth (i.e. not including the value of the house you live in).
Part of the problem with "rich" is it's a vague term. And the terms rich and wealthy are used interchangeably by financially ignorant journalists in the mainstream media.
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Originally Posted by mysticaltyger
Yes, I would say wealth = liquid net worth (i.e. not including the value of the house you live in).
Part of the problem with "rich" is it's a vague term. And the terms rich and wealthy are used interchangeably by financially ignorant journalists in the mainstream media.
I disagree. If someone owned a 10 million dollar home and owned several buildings worth 2 billion I certainly would not discount those.
People who own that much have ways of getting cash if needed, often at very good terms the rest of us cant get.
It may not surprise you and people in your circle, but it does among the populace at large, many of whom assume there's a magical income level out there that's impossible to outspend.
It may not surprise you and people in your circle, but it does among the populace at large, many of whom assume there's a magical income level out there that's impossible to outspend.
I'm not referencing anyone's circle. People overspend, especially those in the middle to upper-middle class who want to appear more wealthy than they are. It's why auto leases have become so popular; doing so allows people to 'buy' more car than they could if they were financing it or purchasing it outright as they essentially are only financing part of the cost. A person who is more wealthy (who has a high income consisting of portfolio, earned and/or passive) wouldn't be leasing a car (or taking a loan on one) in the first place. While it's not impossible to outspend a much higher income, it's simply not as likely (or the person wouldn't have investments from which they receive portfolio income in the first place).
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