No One is Rich

Alternative title: "How the 4th Dimension Screws With Our Heads"

I am nowhere near the magical $250k/year number that we seem to have arbitrarily decided is the cutoff for rich, but I'm also not very old, and doing fairly well. In fact, so long as nothing too terrible happens in the next 15 years or so (which is not outside the realm of possibility) I should be pretty much free of debt (including student loan and hopefully even house), and pretty well positioned such that if something terrible were to happen at that point I wouldn't need to worry much.

Even now, I wouldn't consider that rich, but to a huge swath of this country, it is, and to the world writ large it certainly is. Rich is something that, no matter how much we make/have, is more than that. We compare up, not down. We also compare dollars to dollars and not $/age to $/age and both those things matter. As for comparing up, it is our nature. The age thing is harder to picture...

$60k/year is a very good income, but it is a particularly good income for a young single person with no kids. However, most young single people earning $60k year are professionals with a lot of debt. If that income is being used to pay off $120k in non-house debt (student loans and credit cards) before any living expenses kick in then it suddenly doesn't seem to be much. Of course, that income is a starting point and the debt is getting smaller. The idea is that, while someone just out of grad/professional school, may not have much extra each month this year, in 10-20 years they will be living easy while someone who cut out early with 20% of the debt load will be earning less with less opportunity to get ahead.

I've commented before on how the marginal value of $1 gets less and less as income skyrockets, but a similar thing happens when looking vs. age. When studying economics/accounting this comes out as a present value issue, but even that is not quite the same. If, through hard work and lots of saving/investing I have $1M in 40 years, that will be nice, and if I retire on that then I can be pretty comfortable for the remaining 5-25 years of life. Of course, I'll be 75 then and less able to enjoy life, but it'll still be good. If I had that same $1M today then I would be much better off, and if I had gotten it 12 years ago life would be amazing!

This is above and beyond the present value issue. It is a life issue. Someone who has enough money that they do not need to work the rest of their life can spend the rest of their life doing whatever they want. Some of us are fortunate enough that we are doing things we love even today, but even still that money would have a huge impact on my life today that it can't have in 30-40 years.