How Do You Know If You’re Rich? (2024)

Ask people on the street what they consider “rich,” and you’ll likely get several different answers. Driving a sports car? Owning avacation home? Not having to work for a living?

If you could ask in other parts of the world or even in other eras, the answers might range even wider. Remember “If I Were a Rich Man” fromFiddler on the Roof?In his poor, czarist Russian village, Tevye’s idea of wealth included little more extravagant than a yard full of fowl.

Even in today’s United States, there’s no one right answer. Not only do community perceptions vary, but people can achieve the same living standard with less income and assets in places where costs are lower.

So, areyourich? While the answer is—by definition—subjective, data can give you some hints. Here are a few ways to approach the question.

What do rich and wealthy mean?

While people may use the terms “rich” and “wealthy” interchangeably, there can be a slight difference. We tend to use the word “rich” to refer to anyone with a lot of money to spend, even if they’ve gained it recently. On the other hand, “wealthy” more often refers to affluence that crosses generations.

Either way, if you wonder whether you’re rich or wealthy, you’re generally looking to measure what you have against others in your community, region or country. Two guideposts can help you compare your status with others’: yournet worth(what you own minus what you owe) and yourincome.

Test 1: Compare your net worth to others’

One way to define being rich is having a high net worth. Clearly, to be considered rich, you’ll need to have more assets than other Americans. But how much more? What net worth is considered wealthy? And who’s doing the considering? These are among the subjective details we can’t pin down. But a little math can show you where you fall on the wealth spectrum.

Your net worth

Your net worth is the value of all your assets (real estate, vehicles,bank accounts, investments, valuables, etc.) minus all your debts (mortgage, student loans, car loan, credit card balances, etc).

For example, say the value of all your assets is $250,000, but you also have $150,000 in debt. This would mean a net worth of $100,000. You can use anonline calculatorto help figure out yours.

The average American’s net worth

When comparing your wealth to others’, it’s common to think in terms of averages. According to theFederal Reserve, in 2019 the average American household had a net worth of $748,800. (The Fed updates its consumer data every three years.)

Does that mean the typical American is three-quarters of the way to millionaire status? Not really. Remember that an average includes billionairesandthose below the poverty line—andthe nation’s wealth gap has been wideningfor decades. When a few households at the top own massive amounts but many more own very little, the average ends up skewing higher.

A more meaningful gauge than the mean (average) may be themedian—the midpoint amount, with equal numbers of households having more and less. Indeed, the Federal Reserve notes that as of 2019, the median U.S. household net worth was $121,700. Those below that line—the bottom 50% of American families—held just 1% of total wealth. (Fully 13.4 million families in this group actually had anegativenet worth—they owed more than they owned.) On the other hand, the top 10% of families (each with a net worth of $1.22 million or more) held 76% of the country’s wealth.

If your net worth is above the median, that means half of Americans have less wealth than you. That may not necessarily translate to being “rich,” but it’s a good sign.

Of course, what’s considered rich depends on many factors, including location. For example, based on the 2019 data, rural Americans have a median net worth of $90,400, while those in cities have $126,000. Does this mean urbanites are richer? Not necessarily, when you consider that the cost of living—particularly real estate—tends to be higher in urban areas. After all, home value can be a major component of net worth, but a four-bedroom, $250,000 ranch in Manhattan, Kans., may be nicer than a four-room, $1 million apartment in Manhattan, N.Y.

Test 2: Compare your income to others’

Another factor in figuring out if you are rich is how much money you make each year. Did you earn more than average?

How much more than average income would be considered “rich?” One common indicatoris being in the nation’s “top 1%” of earners. According to theEconomic Policy Institute, those include Americans who earn at least $421,926 a year—but their average annual income is far higher: $1,316,985. This large spread is due to megamillionaires and billionaires, whose stratospheric earnings skew the numbers.

Your income

How do you find out your total earnings for comparison? Check your gross income on your federal tax return. This amount refers to every dollar you earned from all sources—paychecks, investments, Social Security benefits, side gigs, etc. (If you file a1040 with the IRS, this number is on line 9. If you’re married and file jointly, your and your spouse’s incomes will be combined here.)

The average American’s income

According to the Fed, the average before-tax income for a family in 2019 was $106,500. (Again, the huge incomes of the highest-earning households pull up the mean.) By contrast,medianfamily income (the national midpoint) sat at a much more modest $58,600.

And it’s still all relative. If “rich” means having more than your neighbors, you could feel rich earning much less in a town where most people work at the local hospital or warehouse than if you lived in Silicon Valley, where millionaires are, well, a dime a dozen.

Written byCasey Bond

Casey Bondis a seasoned personal finance writer and editor as well as a Certified Personal Finance Counselor®(CPFC). Her work has appeared on HuffPost, Business Insider, Yahoo! Finance, MSN, Forbes, The Motley Fool, U.S. News & World Report, TheStreet and others.

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