Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
“I am indeed rich, since my income is superior to my expenses, and my expense is equal to my wishes.” – Edward Gibbon
This year — or maybe last — I became rich. Not Bill Gates rich or Jeff Bezos rich, but rich by my definition of rich: If you can maintain the lifestyle you desire without having to work, you are rich. If not, whether you are earning $15,000 or $400,000 a year you are still among the working poor.
This is not a new belief on my part. I have held it since the 1980s – the early 1980s shortly after I graduated from college. That was a time when I was hearing stories about stockbrokers in New York City losing jobs that paid $400,000 a year (in 1981 dollars) and reduced to living out of their cars within six months. I don’t know if the stories were true, but I remember reading them in the news. (Doesn’t say much for their credibility, does it?) But there were a lot of people, including coworkers, who were really into leveraged lifestyles back then. I could see it happening.
Even if those stories were myths, like most myths, they revealed a greater truth. It was not how much income someone received annually that defined wealth – it was how much of that income remained after expenses were paid. If the cash flow was sufficiently negative, you were not really rich. Even if the cash flow in was a monetary Ohio River, if the cash flow out were a monetary mouth of the Mississippi, you would end up broke at some point. You could go from a condo in Manhattan to the back seat of your car in six months if you were sufficiently feckless.
On the other hand, if your investments and passive sources of income exceed your expenses – assuming you like your current lifestyle – and you can reasonably expect that situation to continue? I consider that being rich. Think about it. You can buy whatever you want and your bank balance still goes up every year – even if you don’t go to work every day or even any day. Once you reach that point, the only utility extra income offers is as a bigger reserve against contingencies. And like any other possession, the utility goes down with every extra unit.
One example: I now live by myself. Owning a car had a great deal of utility. Having a second car – even without a second driver – has some utility, but less than the utility of the first car. The second car is a backup if the first one breaks down. But a third or fourth car has much less utility than the second car. The cost of extra insurance and maintenance may easily outweigh the value keeping those cars. (I am not Jay Leno. I don’t collect cars.)
At some point in the last two years, I achieved that status. I don’t have to work to maintain a lifestyle that makes me happy. I have no debts beyond a vestigial balance on my mortgage. I have enough savings to buy the luxuries I desire. (Mind those luxuries are small ones – a backup generator to maintain electricity when the power goes out, a rehab of the master bathroom, spending more time with my adult children.) I can pay my monthly expenses (including a monthly reserve for emergencies) and still have a positive balance from my non-earned income. I can travel as much as I want to, buy the books I want to keep, and afford the food I want to eat.
Nor does it mean I will always be rich. Stuff happens. There were Russian aristocrats, wealthy beyond imagination even by modern standards, who were impoverished by the Russian Revolution. There are no guarantees in life, only risk management. But for now, I am rich.
Admittedly my wants and desires are not extravagant. I don’t see the need to buy a new car every year. If my 12-year-old car is reliable enough to take me on the trips I want to make, that is good enough for me. If my subdivision is closer to Tennessee Avenue than to Boardwalk and Park Place, well, I like it that way. If what I can get makes me happy, why should I want more than that?
That does not mean I will stop working. I like working. I like the work I do. Even if I am rich, prefer not to be idle rich. For me, work adds meaning to my life. Even if I bank it all, the income adds to my financial cushion.
Knowing I am free to walk away from my job is liberating. I do not have to accept conditions I find improper. I am at liberty to do the right thing – even if it costs me my job – because I am no longer a slave to it.
F. Scott Fitzgerald was correct when he said the rich are different. Just not in the way Fitzgerald believed; soft instead of hard, cynical instead of trustful, or even that they believe they are better than others. Fitzgerald, despite the money he made, was never rich – he was always among the working poor, kin to the stockbroker who could not lose that $400K/year job without going bankrupt six months later. He never understood what makes the rich different. Not the money – the freedom.Published in