6 min read
Aug 23, 2022
- Copied link to Clipboard!
Have you ever wondered how much money it would take for you to be considered rich or wealthy? While people may have different definitions of wealth, it is commonly thought of as having great material resources or assets. Read this article to learn what is considered wealthy and what experts recommend to help you build your wealth.
![How much to be wealthy | Average net worth | Ent (4) How much to be wealthy | Average net worth | Ent (4)](https://i0.wp.com/www.ent.com/globalassets/education-center/article-hero---wealthy-in-colorado-1440x646.jpg)
LESSON CONTENTS
What is considered “wealthy”?
What does it mean to be wealthy? To some, wealth may be a quantifiable number like a person’s net worth or income. To others, wealth may relate more to their values. Being wealthy may mean less about the dollars and cents and more about a person’s freedom and opportunity to pursue the things that they value in life.
Whatever your definition of wealth may be, it’s usually related to money in some way. To be wealthy, you need to have enough money so that you’re not living paycheck to paycheck. You should be able to cover your living expenses and financial obligations, plan for the future and spend on the things you value.
So how much money is enough? How much do you need in your bank account to be considered wealthy?
According to the 2022 Modern Wealth Survey conducted by Charles Schwab, the average net worth of an American to be considered wealthy is $2.2 million. They also reported that to be it takes a net worth of $774,000 to be considered “financially comfortable.”
In Colorado, it was surveyed that the average net worth of a wealthy person in Denver is $2.3 million, while it takes a net worth of $671,000 to be considered “financially comfortable.” This number may change depending on where you live in the state and what the local cost of living is.
How to measure your wealth
If you’re trying to measure your wealth, you can use the following methods.
Net worth
Net worth is one of the most common ways of measuring a person’s wealth. You can calculate your net worth by adding up all of your assets and subtracting your debt and liabilities.
Your assets may include things like your retirement accounts, stock market investments, cash in your checking and savings accounts, businesses and real estate.
When calculating your debt and liabilities, look at things like credit card debt, personal loans, student loans, car loans and any other debt obligations.
There is debate on whether or not you should include your primary residence and mortgage in your net worth calculation. In most cases when determining wealth, it is not recommended to include the value of your primary residence in your net worth. However, it may make sense to include any increase in value from the original purchase price.
For example, if you originally bought your home for $300,000 and it’s now worth $400,000, you could include $100,000 in your assets.
When looking at net worth, it is also important to consider your net worth by age. It may not be fair to compare someone who is in their twenties to someone who is older and has had more time to earn, save and invest.
Income
Another metric that people use to compare and measure wealth is annual average income. Having a higher income can help a person build wealth because it gives them a greater ability to save and invest in cash-flowing assets which can help compound wealth over time.
Income can include wages you earn from a W2 job, investments, business/self-employment and side hustles.
In Colorado, the median income of individuals and households in 2020 were $36,934 and $75,231 respectively.
To be wealthy in Colorado, you need to earn significantly more. It was reported that the minimum you need to make to be in the top 20% of earners was $143,596 with the average income being $249,285. To be considered in the top 5% of earners, you need to make at least $440,000.
How to grow your wealth
While not everyone wants to or needs to be rich or wealthy, building your wealth can help you improve your quality of life, stress less about your personal finances and make you more financially resilient when times are tough.
Use these strategies recommended by experts to help you build your wealth.
Pay yourself first
One of the best ways to save more money and build wealth is to learn the concept of paying yourself first. This means that when you get paid or receive money, you prioritize putting money into your savings account.
One of the biggest mistakes that people make when it comes to their personal finance is thinking they’ll just save whatever is left over after they’ve paid their bills at the end of the month. By prioritizing saving and paying yourself first, you are more likely to stay on track to your financial goals.
Spend your money on buying assets
Many wealthy people will also prioritize buying cash-flowing assets over buying luxury goods. By buying assets like real estate, businesses and other investments, you can increase the number of income streams you have. This will allow you to save and invest more which will, in turn, increase your net worth.
Don’t overspend
Overspending, especially on items that you don’t need, can hinder your ability to build wealth. As you continue to increase your income, try to avoid spending more money on increasing your lifestyle, also known as lifestyle creep.
For example, if you get a new job that pays significantly more, you don’t need to buy a larger house or a new more expensive car. Instead, you could use the extra money to increase your savings rate or contribute more to investments.
This isn’t to say you shouldn’t reward yourself for your hard work. The key is finding the balance between spending on things you value and saving for your goals and building your net worth.
Protect yourself against losses
We’ve all seen stories of people who get rich and then suddenly lose it all. This loss could be caused by a variety of different reasons but making sure you have downside protection is key. As they say, getting rich and staying rich are two entirely different games.
One of the simplest ways to protect yourself against losses is to make sure you’re properly diversified. Diversification is important because it spreads your risk across different assets to make sure one event doesn’t have too great of an impact on your portfolio.
Be strategic with debt
Knowing how to use and manage debt is a very important financial skill. Debt, if used correctly, can be used to improve your wealth. Debt should be used for things that can provide value in the future, such as to pay for education or to buy assets.
It's extremely important to pay off the debt that has high interest rates so that you don’t erode your wealth through interest payments. Missing payments or carrying too high of a balance can also negatively impact your credit score.
Improve your financial literacy
Many successful people will attribute their success, in part, to having a learning mindset. The same is true for money and personal finances. The more you can learn and become financially literate, the easier it may be to understand your finances and build wealth.
Learning about money through free resources, or asking experts and professionals can help you make better financial decisions. Use these tips to help you build your net worth and hit your financial goals.
Related Resources
View All
9 min read
Financial Advice for College Students Who Just Graduated
Congratulations on your recent graduation! As you move from the campus to the career world, getting savvy about your finances is more crucial than ever. At first, financial planning and money management seem daunting. However, with the right approach, they become empowering tools for building a secure and prosperous future.
This guide delivers practical financial advice for college students stepping into their professional lives. Whether it's managing student loans, budgeting your first salary or saving for your dreams, these finance tips for college students can set the foundation for a prosperous and balanced life ahead.
Start Lesson
9 min read
The Best Budgeting & Financial Tips for Young Adults
Financial freedom is not just about having wealth—it’s about having the control and flexibility to pursue your dreams. It means making choices that aren’t dictated by financial constraints and living a life you value. Achieving this level of independence requires a solid foundation in financial literacy.
The following financial tips for young adults, from budgeting to investing, empower young adults to navigate the complexities of the current economy with confidence.
Start Lesson
7 min read
Navigating Finances Among Friends
In today's interconnected world, it's not uncommon for friends to come from different financial backgrounds or have varying income levels. While these differences can enrich our relationships with diverse perspectives, they can also present challenges when it comes to planning activities or splitting expenses. In this article, we'll explore practical strategies for navigating finances among friends, ensuring that everyone feels included and respected regardless of their financial situation.
Start Lesson
7 min read
Incorporating Philanthropy into Your Financial Plan
In today’s world, the spirit of giving is as resilient as ever. With individuals and organizations supporting numerous causes, philanthropic financial planning has become crucial to wealth management. Recent statistics shed light on the generosity of Americans. According to the Giving USA 2023 report, individuals, bequests, foundations, and corporations donated $499.33 billion to U.S. charities in 2022, with 64% of this amount ($319.04 billion) given by individuals.
Incorporating philanthropic planning into your financial strategy is not just about making a positive impact; it’s also about aligning your financial goals with your values.
Start Lesson
10 min read
Understanding Money Psychology
Money psychology studies our relationship with money, influencing how we earn, save, spend, and invest. So, why understand the psychology of money? Because money, in its essence, is not just a currency or a tool for exchange. It's a lens through which we view our security, success, and, sometimes, our self-worth. Our financial decisions are seldom purely logical. They are deeply intertwined with our emotions, upbringing, and societal influences. Recognizing and acknowledging this can be the first step toward financial empowerment.
Start Lesson
13 min read
Managing Money Personalities
Navigating our finances becomes more manageable when we understand the factors influencing our decisions—our money personalities. Ent Credit Union has developed a comprehensive Money Personality Quiz to uncover the intricate details of our financial behavior. This guide delves into the essence of money personalities. Below, you will discover, understand and identify your unique money personality and learn important strategies to improve yourmoney management.
Start Lesson
6 min read
Spring Cleaning Your Finances
As the flowers bloom and the weather warms up, it's not just your home that could use a good spring cleaning – your finances could benefit from a thorough review too! At Ent Credit Union, we believe that financial well-being is an essential part of a happy and stress-free life. In this article, we'll guide you through the process of spring cleaning your finances, ensuring you're on the path to financial success.
Start Lesson
6 min read
Introducing the Flex CD
In today’s ever-evolving financial landscape, finding secure and rewarding ways to build wealth is essential for a stable future. Traditionally, savings accounts have been a reliable source of interest income. However, if you want more bang for your buck, Certificates of Deposit (CDs) may be a better option.
Certificates of Deposits (CDs) are time-bound deposit accounts where you agree to deposit a certain amount for a fixed period. In return, your financial institution guarantees a higher predetermined CD interest rate over that period. CDs offer higher interest rates than standard savings or money market accounts since you agree to lock up your deposit for a specific term.
Start Lesson
8 min read
Unlocking Financial Harmony: Smart Strategies for Couples
Managing finances as a couple can be both rewarding and challenging. While shared goals and dreams create a strong foundation, differences in spending habits and financial priorities can sometimes lead to discord. In this article, we'll explore practical financial strategies designed to strengthen your relationship and secure your financial future. Whether you're newlyweds or seasoned partners, these tips will help you navigate the journey of financial harmony.
Start Lesson
5 min read
Choosing the Ideal Savings Account for Your Grandchild
Are you searching for the best investment for your grandchildren? Providing for the next generation is an aspiration shared by many grandparents. As the world changes and opportunities for financial growth abound, understanding the best way to secure your grandchild's future is paramount.
Whether it's education, homeownership, or simply a head start in life, the choices you make today can have a lasting impact. Let's explore the ideal savings and investment options to make the future brighter for your grandchild.
Start Lesson
15 min read
Building Your Emergency Fund: Tips and Strategies
Life's unpredictable nature guarantees that, at some point, we'll face unexpected challenges. These unforeseen events often come with a financial cost. To navigate these rough waters, an emergency fund is crucial. Let's delve deeper into what constitutes an emergency fund, why it's pivotal for financial well-being, and how to effectively build one.
Start Lesson
13 min read
The Undeniable Benefits of Joining a Credit Union
Credit unions are member-owned financial cooperatives that offer banking services to their members. Credit unions are not-for-profit institutions owned by members, unlike banks, which are for-profit organizations designed to benefit shareholders. Credit Unions primarily exist to serve their members, who are also their owners.
Credit unions offer several benefits. Starting with the structure,credit unionsare democratic. Each member has an equal vote regardless of how much money they have in the credit union. Therefore, the union's policies reflect the interests of the membership. Members typically join based on a common bond, such as working for the same employer, living in the same geographic area, or being part of the same church or social group.
Credit unions provide financial services like banks, including loans, savings and checking accounts, credit cards, andonline banking. However, due to their member-oriented objectives, they have several service advantages compared to banks. These credit union advantages include higher savings rates, lower fees, and a more personalized customer service experience. Credit unions stand out in prioritizing member needs. Here's a comprehensive look at how they set themselves apart in the financial sector.
Start Lesson
Next Lesson : Adjusting for Inflation: Adjusting Your Budget with Gas Prices Rising