A New Survey Determines How Much Money You Need to Be Financially Comfortable–or Does It?

Everyone’s definition of “success” is different, and should be. Embrace other people’s definition of success and, with time and effort and persistence, you can certainly build a “successful” business. Or life.

But the end result — much less the daily experience — may also leave you feeling hollow.

Instead of defining success by a finish line — a number, a metric, a certain house or car or public profile — a better approach might be to define success as whether you get to do work you enjoy: work that leaves you feeling fulfilled, and satisfied, and happy.

Work that allows you to control, as best possible, your own destiny: because we all have to make a living, but we also need to live.

That’s one way to define “successful.”

But what about the definition of “wealthy”? How much money is enough?

According to the latest Charles Schwab Modern Wealth Survey, the average respondent feels a net worth — cash, investments, home equity, etc. — of $2.2 million would make them feel “wealthy.”

As for “financially comfortable”? That bar was set at a little over $770,000.

Both are big numbers; while a Federal Reserve study published in 2019 (the study is only conducted every three years) found the average net worth of U.S. households was $748,000, the median net worth was $121,700. 

And even that sounds high; for example, one survey shows that only 44 percent of Americans have enough money saved to cover an unexpected expense of $1,000 or more. That means plenty of people would likely feel much more financially “comfortable” if they had $10,000 in savings. 

Plus, net worth doesn’t always equate to spending power. If you have $450,000 in a 401(k) and $325,000 in home equity, you hit the survey’s $774,000 “financially comfortable” bar. But unless you’re willing to dip into your retirement savings or sell your house, that money doesn’t do you a lot of good if you need to cover an unexpected expense or make a major purchase.

All of which shows that surveys are interesting, but what really matters is how you choose to define terms like “financially comfortable” and “wealthy.”

Most of us want to gain the peace of mind that comes with knowing that we can get by, at least for a few months, if something bad happens.

Another way to define “financially comfortable”?  As Daily Show host Trevor Noah says, “People don’t want to be rich. They want to be able to choose. The (more money you have), the more choices you have. That is the freedom of money.”

Maybe that’s a better way to define “wealthy”: the ability to better choose how you work and live.

For example, a 2017 study published in Proceedings of the National Academy of Sciences found that people who were willing to spend a little money to buy a little time were happier and felt greater overall life satisfaction than those who did not. Think paying other people to perform tasks you don’t enjoy or want to do, like mowing the lawn, cleaning the house, running errands … stuff you need to do but don’t particularly like to do. 

Interestingly, you don’t have to be rich to experience the boost. While relatively wealthy people who spent money to buy a little time were happier than relatively wealthy people who did not, people at the lower end of the economic spectrum who spent money to buy a little time were happier than those at the lower end of the economic spectrum who did not.

Yep: Being able to occasionally choose to pay someone to do something you don’t want to do can make you feel happier and more satisfied with your life.

The same is true for how you choose to spend your money. A 2005 study published in Review of General Psychology found that the higher the annual income, the less likely respondents were to say that material purchases made them happier. Experience purchases made people much happier — especially as their level of annual income increased. (At a $35,000 annual income, the difference was substantial. At $125,000 per year, the difference was huge.)

Yep: Being able to occasionally choose to spend money on an experience, rather than a necessity — much less a material want rather than need — can make you feel happier and more satisfied with your life.

That’s why the Schwab survey is interesting, but ultimately irrelevant.

What matters is how you choose to define “wealthy.” What matters is how you choose to define “financially comfortable.”

And what you then do to achieve your personal definition of financial — and personal — “success.”