Ten Tenets for "Arranging Your Rich" - Part 1: Rich is Relative

By Kate Luther on 19 February 2008 (Updated 22 October 2009) 12 comments

Paul Michael wrote a great article about the idea that "rich can be arranged" .

I liked that idea so much that I started looking at exactly how one starts the arranging process. And so, I asked myself, "how can I arrange my wealth today?" Not just ideas that would generate some money but more the approach itself. Does my outlook matter? Do I have a plan? Would it matter if I did?

After much thought and a Snickers bar, I realized that there are in fact some guiding principles to arranging your own wealth. Ten, in fact. Ten important "tenets" to keep you grounded and on track as you begin the "arranging" process.

However, being the wordy person I am, these tenets turned out to be much longer than I had anticipated, making for a rather lengthy read. So, to break things up and to give you something to look forward to, I'm going to post one a day. Think of it as a 10-day course to arranging your "richness" :)

Ready to get started? Here's Tenet #1:

Rich is relative.

A few weeks ago, someone got the bright idea to ask the political candidates to define "middle class". You can imagine the range of answers and if you accept them all, then middle class is anywhere from $25,000 to $200,000 a year (no specifics on number of family members or other variables).

And the truth is, they're all probably right. Most of the population sees themselves as being "middle class", even if their neighbors don't agree.

Why?

Because except for the really wealthy, most of us struggle financially in one sense or another. Maybe we can afford expensive cars and homes but we don't have much in the way of retirement and college funds. Maybe we enjoy many of the luxuries life has to offer but we're also ridiculously deep in debt. Maybe we just live in pricier neighborhoods or spend more in gas on our commute. Whatever it is, most of society is painfully familiar with the worry that comes with making ends meet.

Want to test that theory? Read Catherine Shaffer's post, Is Six Figures Really That Much ? and you'll see what I mean. Where one family struggles with a six-figure income, another family scoffs because they're making it on less than $50K a year.

Which means your "rich" isn't necessarily my "rich" and vice versa. But what it also means is that our definition of rich goes well beyond cold, hard cash.

Because after all, its not really the money that we want. Its what the money can buy. No one really drools about having a million dollars in the bank without thinking about the things they could do with that green.

Which means that "rich", is more than just having money, its also equally about being able to enjoy that money.

But the problem with money is that there just never seems to be enough to enjoy. Regardless of how much we make, we still seem to struggle.

Why?

With the exception of winning the lottery or inheriting millions from a long lost relative, most of us experience a short, slow growth. A raise here, a bonus there and over time, our income will grow from $20,000 to $30,000 to $40,000 in small, barely noticeable increments.

But so does our spending. And that's why your perceived "rich" will never quite be enough.

I'm going to date myself here but when I was all of 19, I got a job as an underwriter trainee making just over $13,000 a year. We didn't have a ton of bills, no mortgage, no kids, just a car payment and a stereo system we financed at one of those rent to own places (that's another blog in itself).

But while we weren't broke, we weren't rich either so I did some calculating. "If I could just make $20,000 a year," I told my man, "we'd be rich".

Well, guess what? $20,000 came and went but it was no big milestone in my financial life. Because by the time my big "rich" marker rolled around, I had increased my spending to match those annual raises. I wasn't rich... I was just living within my means and working longer hours to do it.

And there was the real sticker - not only was I not rolling in dough, but I was working harder and longer to achieve the same basic results.

And this is why rich is so relative. Not only do you need to define how much your rich is, but you also need to define the "richness" you'll expect to gain from your added wealth.

Want me to say that again?

Let's say you think that $100,000 a year would be your "rich". Ok, fine. But what do you have to do to make that $100K? Is it going to take more time out of your day? I mean, you could work three jobs and probably give your income a nice boost, but is it worth what you're giving up?

If you think that having more money means that you'll have more freedom to travel or take a cooking class or whatever it is you want to do, think again. In the corporate world, more income typically also means more responsibilities and you'll be expected to stay until the job is done. So, before you start following the almighty dollar, be sure that your strategy for arranging your rich doesn't require you to give up what little free time you have now.

Secondly, if you're going to shoot for $100,000, then you need to decide what that extra money will do for you. Remember, you're not likely to get it all in one lump so you need to be able to earmark those added funds so that they don't get lost in your day-to-day expenses. If you don't, you'll come to rely on the extra cash and you'll adjust your spending to match it. And that means that at the end of the day - like me - you'll be working longer and harder to achieve the same basic results.

The bottom line? If you want to arrange your rich, forget living within your means. Learn to live below them and learn to balance your net worth with your life's worth.

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Catherine Shaffer's picture

There's an interesting theme developing here. I immediately think of Nora's article on vision boards: http://www.wisebread.com/vision-boards-dream-big-play-with-pictures-and-...

It really points up that financial goals are not just numbers. Any number is a moving target, and the cost of living you might pay for that high salary can be surprising. Along with savings and investing goals, we need ideas for what we want out of life. I wasn't lying when I said my lifestyle is not lavish, even though the income is rather large. But I am very happy with what I have, six-year-old computer and all. I'm getting paid to do the only thing I've ever really done well, I have a wonderful family, and occasionally some new toys or neat experiences to build memories. It doesn't get better than that.

Then there's  Phillip's post: http://www.wisebread.com/you-can-be-as-happy-as-a-dane

The connection for me is that the misery of poverty isn't really about the number on your bank statement. It's the anxiety of not knowing if you have enough to get through the week, or getting a lot of calls from bill collectors, or the catastrophe of a major health problem with no health insurance, or just plain unfair things happening to you because you don't have any money or any credit.

Catherine Shaffer

Wise Bread Contributor

Kate Luther's picture

I agree, Catherine... I make less now as a freelancer than I did when I was climbing the corporate ladder, but I'm working from home and writing for a living, which has always been my passion so how can I complain about that?!

As long as we're living comfortably - meaning we can pay our bills, enjoy a few perks now and then and handle those emergencies that come our way, I'm pretty content.

I think that's really what most people are looking for. Its not the money - its what we think the money can do for us.

Kate

Guest's picture
Gladys

I'm sure the article had great points to make, but I couldn't get past the giant spelling mistake in the headline and sprinkled throughout the text. I kept looking for tenants or rental agreements throughout your article.

Hint
tenet: a principle, belief, or doctrine generally held to be true
tenent: misspelling of tenet or tenant

Kate Luther's picture

How right you are, Gladys...thanks for the catch... I guess my fingers just got ahead me and obviously my spell-check thought I knew what I was doing :)

Guest's picture

This post echoed one of the first parts of Your Money or Your Life. We tend to define "enough" as "more than I have now". I thought I would achieve financial goals when I got a great job somewhere, but I realized that my path to financial freedom lies through steady savings and living below my means. It will take several years if not a decade, and it largely lies in prioritizing what is important to spend money on and what is not. A job is something you do so that someday you don't have to go to one rather than the be-all and end-all of existence. A lot of people fall into the trap of establishing their lifestyle then figuring out a way to pay for it later. Personally, I have been doing fine but I could have done a lot better if I had remembered better savings strategies.

Kate Luther's picture

Don't feel bad - I'm sure most of us look back and wish we had learned some money lessons sooner - I know I did!

And you're right, jmacdaddio - a job is something you do so that someday you don't have to. We tend to get caught up in "making the big bucks" but then we don't plan for the days when those big bucks aren't rolling in anymore.

I haven't read Your Money or Your Life but I'll definitely add it to my list!

Guest's picture

Kate,

You will love that book! I thought it was excellent up until the very end... you'll know what I mean. You can read through it fairly quickly. For me and probably for you I think it will awaken ideas that you already had within.

Guest's picture
Minimum Wage

I scoff at all of you because I live on minimum wage with student loan debt and high medical expenses.

Myscha Theriault's picture

 I spent most of my early career being broke  in an expensive area with a lousy paying job and yes, student loan debt.

In the end though, it broke down to two choices for me. I could stay in a similar position and struggle until some undetermined amount of time, working myself into an early grave with multiple jobs and multiple bosses. Or, I could go overseas, live tax free, have my living expenses paid and have myself on track in just a few years. Oh, and I could have a quality of life while I was doing it.

There are definitely sacrifices that have to be made, and yes it can be hard to find the time to research options when all your free time is spent at a second job just to make ends come together. But in the end I could spend sleepless nights worrying about a solution that would never come within my current situation, or I could be sleepless yet in control if I used that wake time to figure out what my options might be to get out of the debt (money and time) that I was in.

You also mention health, and I'm sorry you're burdened with issues in that regard. Feeling great is a huge asset when it comes to solving these types of problems. While overseas job options and living aren't for everybody, have you considered the option? Many places have free health care as well.

In the end, you may find you still want to come back home to the states (it sounds like that's where you are, so I'm just making the assumption - my bad if I'm wrong). I definitely wanted closer access to family as they age. So I made that one of my financial goals to be stable enough to function in a stateside economy. Its more expensive here, to be sure.

Anyway, I'm not trying to be judgemental here. Just offering some perspective. I hope things work out for you.

 

Guest's picture

I actually do dream of having money in the bank...not to spend, just to have. To me, that's what being rich is. It doesn't matter how much you make if it simply gets handed off to someone else at the end of the week or the end of the month or the end of the year. Being rich means having a large lump of cash squirreled away because you simply don't need it. I try my darnedest not to increase my spending when raises and such come around because I want that money in the bank. The good things in life really are free...it's the bad stuff that requires cash.

Guest's picture
GatorRay

Very interesting posts by everyone. I think we are overdue for some re-defining of many terms and attitudes. How great is your standard of living if your high salaried, highly taxed job pushes you into all kinds of stress related illnesses, maybe an early grave? In America, it seems that society sometimes pushes us to see joy and satisfaction in life as always around the corner: after the next raise, after the next acquisition of whatever "stuff" we currently do not possess.

I know I'm writing capitalist heresy here, but sometimes we can find greatest satisfaction in things that cost nothing but are priceless.

Guest's picture
Something to Think About

It is not just America, but labour laws and (even higher) taxes (than another commenter believes the high salary folks are hit with) make the choice for the employee in many European countries. Elsewhere, where the laws and taxes are more moderate, people tend to make the same choices.

I know, I came to America, landed a position with a Fortune 500 and worked my way up to well over $100K compensation, with bonuses. In return, it required 50-70 hour weeks, and ever higher hoops to jump through. Then came downsizing. I was hit, and was very disappointed with the company. Then I come to realize that I have saved plenty so I don't really have to worry so hard. Only in a place like America can this happen!!!

So, Kate, you are absolutely correct. If you want to make that kind of income, so that you can build a sizable nest egg, there is a price to pay. It will take lots of work. A simple 9-5 job is not going to cut it, not anymore. You will have to put in that kind of effort either working for a company or as an entrepreneur. Those internet billionaires (Yahoo, Google, Facebook) are really just lucky guys, the right place at the right time, with the right idea. I'm not talking about them. The rest of us have to work our butts off to make it to the point we don't have to worry about the costs of living.

As for rich is relative...agree. Mankind proved a long time ago that we only need a cave to live in. Anything more is really a want...McMansion and BMW anyone?