American ideas about what it takes to be wealthy have changed steadily over the years, and have been greatly impacted by the COVID-19 pandemic. Even what guides people’s economic decisions is changing dramatically, according to Schwab’s 6th Annual Modern Wealth Survey.
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To determine what people think your net worth should be considered “wealthy” and how much money people think you need to be “financially comfortable” We also explored how people prioritize spending and what drives those decisions.
What is “wealthy”?
The Modern Wealth Survey collected responses from 1,000 adults between the ages of 21 and 75. According to those surveyed, to be considered “wealthy” in 2022, they need an average net worth of about $2.2 million. In 2021, survey respondents will take a net worth of $1.9 million.
More interestingly, when asked what wealth will look like in 2020, people answered $2.6 million. However, this was pre-pandemic. The average net worth, which people consider a sign of wealth, dropped from $2.4 million in 2018 to $2.3 million in 2019, reaching that high just before the pandemic. But COVID-19 seems to have a direct impact on how people view wealth, or what is considered “wealthy” in the United States.
What is “economically comfortable”?
When we asked what it takes to be considered “financially comfortable,” responses followed a similar pattern. In 2018 he started at $1.4 million and in 2019 he decreased slightly to $1.1 million. Unlike wealth, however, respondents seemed more conservative about how much money they needed to be financially comfortable just before the pandemic. According to an early 2020 study, the average net worth is just $934,000.
By 2021, respondents have made a significant shift in the amount of money they believe they need to be “financially comfortable.” Those surveyed said that an average net worth of $624,000 is good enough to consider in that bracket. In 2022, the amount rises again to $774,000 as the economy begins to recover.
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What does money mean to Americans?
The survey also found that Americans are reassessing what money means to them personally. Of the respondents, 42% said money meant “freedom,” 23% said it meant “flexibility,” and 18% said it meant “opportunity.”
People are not only taking a closer look at what money means to them, they are rethinking how they spend it. As Schwab reported, 82% of his respondents said that “personal values play an important role in how they manage their finances.” And it’s not just about money. 73% say their personal values guide their life goals more than they did two years ago.
Nearly 70% of those surveyed said they strongly or somewhat agree that spending money to support causes they care about is a key priority. When it came to personal values, putting others first was paramount, including doing what was best for our children and family, environmentalism, and sacrificing others.
how to build wealth
The numbers show how much people think they need to be considered wealthy, but they don’t answer the question of how to get there. Yes, but the only way to truly grow your nest egg is to pay off your debts and invest in your future.
Wealth-building strategies include buying an S&P 500 index fund, investing in rental properties, and starting a business. Additionally, most experts agree that employer contributions to sponsored retirement plans should be maximized. Not contributing to the fullest is like missing free money.
Finally, if you’re new to investing but want to grow your capital now, consider opening a Roth IRA. A Roth IRA allows you to increase your tax-free income and access tax-free withdrawals. Although the benefits are exponential, any investment always has potential drawbacks and limitations. As with any investment strategy, it is in your best interest to consult a financial professional or advisor before starting.
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