Never Enough? Why the Rich Feel ‘Unwealthy’

Being a millionaire just ain’t what it used to be. Once viewed as the ultimate milestone in wealth creation, millionaire status is losing some of its luster, at least among the wealthy of this country. 

Almost half of all new millionaires in the world in 2021 were American, according to a Credit Suisse global wealth report. Last year, the same annual study showed 24.5 million Americans had crossed the million-dollar line.

Yet they don’t necessarily feel more financially secure than the rest of us. 

According to recent research from Edelman Financial Engines, very few people consider themselves wealthy in the current economic climate – even millionaires. 

The firm conducted a survey of more than 2,000 Americans, including an oversampling of affluent respondents (with household assets between $500,000 and $3 million), and found less than one-third of millionaire respondents reported “feeling wealthy.”

What’s more, fewer than half of all millionaires (44%) felt “very comfortable” about their finances. Also, roughly four in 10 (41%) affluent respondents said they felt less “financially secure” than they hoped to be at their age of life the same. A majority of respondents (57%) said they would “feel wealthy” with $1 million in the bank, yet that wasn’t the case among the wealthy. 

Most affluent respondents (53%) said they would require over $3 million to feel the same, highlighting the gap in perception. (What’s more – one-third (33%) of affluent respondents would need more than $5 million!)

This article will look at the forces behind this satisfaction deficit among the wealthy. It will consider how rising inflation and psychological factors influence perceptions as wealth accumulates and consider advice from financial advisors on how to shift focus to what matters as your net worth grows to new highs. 

Increasing Costs

Money is only as valuable as what it can be exchanged for. Recently prices have been rising for all manner of products and services, with the consumer price index surging to levels not seen in over four decades. With relentless inflation eating away at Americans’ bank accounts and a shaky stock market threatening their portfolios, many feel they’ve got to have a lot bigger nest egg before they can comfortably retire.

“Many of the higher net worth and affluent families I serve are generally aware of the “4% rule” and understand that $1 million or even $3 million today is not worth what they thought it would be when they started saving 25 years ago due to the effects of inflation,” said David E. Barfield, CFP, Financial Planner at Datapoint Financial Planning. 

“A couple earning $250K annually, for instance, may look at their $3 million portfolio and realize that it can only ‘safely’ sustain around $120K per year in retirement withdrawals based on the “4% rule,” he adds.

Matter of Perspective 

Yet, sometimes a number is just a number. Growing more money for the sake of it can be fueled by irrational psychology and can be hard to break.

Many millionaires really do have enough to support even an extravagant lifestyle, yet they still cannot step away from earning and saving more. It’s vital to focus on the correct metrics.

“There is a behavioral component… many who have diligently saved for 20-40 years have a strong habit. Trying to unwind that habit at a certain net worth number is extremely difficult,” says Ian Weiner, CFP and owner of Bespoke Wealth Solutions. 

To step off the hamsterwheel, it’s vital to focus on the correct metrics.

“The problem with setting a net worth goal is that it really focuses on the wrong thing,” Weiner adds. “You don’t live on a net worth, you live on the income that is created.”

For others, it’s about who they compare themselves to.

“We don’t feel financially secure because of what renowned psychologist Robert Cialdini calls, ‘Contrast mis-influence,'” says Jonathan Bird, CFP and financial advisor at Farnam Financial.

“Our collective attention is pointed towards celebrities and social media influencers who are always portrayed with a higher standard of living than ourselves – private jets, expensive jewelry, etc.,” he says. 

“There’s good news though – if you point your attention to the global population you’ll start feeling rich. If you have income of $60,000 USD per year, you’re in the richest 1% of the global population.”

A cursory glance at the “How Rich Am I?” calculator can give you an idea of how you compare to the global average. For a look at how your net worth compares within your own country (or others abroad), there is the World Inequality Database or the OECD’s Compare Your Income tool. 

Getting Advice 

At the end of the day, not knowing what to do with your fortune is a good problem to have. There are no more pennies to save, just lifestyle changes to make. Most financial advisors are experienced in guiding the wealthy to make the most of what you have.

“One of the challenges I see regularly with my pre-retirement clients, especially those who have done a great job accumulating over the years, is in making the transition to decumulation,” says Barfield. “Taking money out of a portfolio one has spent decades building can be extremely difficult, even traumatic.”

“Developing an ongoing relationship with a financial advisor can help alleviate the stress of spending down assets and running out of money,” he added. 

For others, it’s about switching focus from money to time.

“The most effective way to help clients stop moving the goalpost is to help them cherish their accomplishments,” said Cecil Staton, Founder of Arch Financial Planning. “In addition, they need to understand what risks they’re going to take by continuing to accumulate more wealth. Typically, this includes working longer, which uses more of our most scarce resource, time.” 

Others may need to look deeper and ask themselves what they really value. 

“Clients will often redefine what they want and it’s part of my job to help them understand their values and make decisions based on those,” says Mike Hunsberger, ChFC, CFP, and Owner of Next Mission Financial Planning. 

“If they say they value spending time with their kids or grandkids but then are contemplating buying an expensive car that they’ll have to work additional hours to pay for, I want to have that discussion. Did what’s more important to them change?”

Whether it be the changing economic reality at the macro level or the changes in lifestyle at the individual level, one thing is clear – being a millionaire is not a guaranteed solution to life’s financial well-being. To genuinely feel wealthy requires not just growth in our bank balance but the development of our mindset so that our priorities reflect our higher purpose and live our best lives. Net worth aside, only when we have the freedom to spend our time and money the way we want with those we love can we live our best lives and experience true wealth. 

Find a Financial Advisor

Do you have questions about your financial future? Find a financial advisor who can help you enjoy life with less money stress by visiting Wealthtender’s free advisor directory.

Whether you’re looking for a specialist advisor who can meet with you online, or you prefer to find a nearby financial planner, you deserve to work with a professional who understands your unique circumstances.

Have a question to ask a financial advisor? Submit your question and it may be answered by a Wealthtender community financial advisor in an upcoming article.

–

Do you already work with a financial advisor? You could earn a $50 Amazon Gift Card in less than 5 minutes. Learn more and view terms.

This article originally appeared on Wealthtender. To make Wealthtender free for our readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a natural conflict of interest when we favor their promotion over others. Wealthtender is not a client of these financial services providers.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.