Many of us have benefited from strong performances in the stock and real estate markets over the past decade, seeing significant increases in our wealth—so much so that some of us might be richer than we realize.
Those who invested in stocks and real estate between 2009 and 2020 have seen substantial returns. This financial success can sometimes lead to excessive spending and debt, which can be financially detrimental in the long run. It’s important to stay prudent and not let easy money lead to risky financial behaviors that might jeopardize our future stability.
The signs of being rich aren’t just about numbers. While having an income and net worth significantly above the median can classify you as rich statistically, richness is also a state of mind. It involves feeling secure and content beyond just financial metrics.
I remember several key moments when I felt truly wealthy. The first was when I bought my first home. Despite the initial financial strain, stability in my career made me feel secure in my investment. Later, when I left my corporate job with not just my expected earnings but also a generous severance, it reinforced my financial freedom. Another milestone was when my passive income reached a level that comfortably supported my desired lifestyle, allowing me to work less intensively. The most poignant was the birth of my son, which made all the hard work and financial planning feel incredibly worthwhile.
Understanding when you might feel rich can also be calculated through a simple formula based on your net worth to income ratio. For instance, once your net worth reaches about 20 times your annual income, you might start feeling truly wealthy, as this level of wealth provides significant financial security and freedom.
However, feeling rich isn’t just about what you have but also what you do with it. For example, Jeff Bezos, despite his immense wealth, chooses to invest in space exploration rather than addressing local issues. This choice might seem like hoarding wealth, but it’s also a reflection of personal priorities and goals.
Ultimately, feeling wealthy often comes from financial independence and the ability to help others. The more you give, the richer you feel. Investing in real estate is one way to generate passive income, allowing you to feel richer by earning money without active work. Platforms like Fundrise and CrowdStreet provide opportunities to invest in real estate passively, diversifying your income sources and increasing your financial security.
Remember, tracking your finances is crucial to understanding your true wealth. Using tools to manage your wealth and investments helps maintain oversight and ensures you can plan accurately for the future, adjusting your strategies to meet your financial goals effectively.
