How much money do you need to feel wealthy?

Some say wealth is a frame of mind. But for financial advisers it’s a measuring stick.

The financial services industry clumps households into various categories to segment their relative wealth. For example, the “mass affluent” are loosely defined as having between $100,000 and $1 million in investable assets.

The definition of high-net-worth varies widely. Some advisory firms say that those between $1 million and $20 million are high-net-worth while the ultra-high-net-worth have more than $20 million. Others use $5 million, $30 million or another figure as the dividing line between the two groups.

Regardless of how they distinguish between high-net-worth and the ultra camp, advisers find that the labels don’t necessarily reflect how the clients see themselves. Mass affluent individuals may perceive themselves as rich. And ultra-high-net-worth folks may fret about every dollar they spend.

The impact of inflation can skew a client’s sense of their wealth. Someone with $2 million may have felt well-off until the last two years, when inflation made them feel less wealthy.

“Wealth is really relative in the eyes of the beholder,” said Carla Adams, a certified financial planner in Lake Orion, Mich. “It depends on whether you feel you have enough money to live a lifestyle that’s fulfilling to you.”

Our background and early experiences with money affect how we feel about our wealth (or lack thereof). If you grew up with parents who built a business that underwent boom and bust cycles, you may worry that wealth is illusory. But if your childhood was filled with privation — and now you’ve accumulated a sizable nest egg — you may act like you’re boundlessly rich and spend freely.

“I’ve worked with a client who had about $600,000 and lived so frugally that I had no concerns of her running out of money,” Adams said. “I’ve had other clients with tens of millions who’ve become accustomed to extravagant lifestyles that they will not be able to maintain in retirement. Most of them are unwilling to face this fact.”

The manner in which someone acquires their money also shapes how they interpret their net worth. Those who generate steady earnings over time and adopt a conservative investment strategy tend to have a more grounded view of their wealth.

But it can feel vastly different if you earn $150,000 a year in salary and then wake up one morning and reap millions in equity compensation. Adams cites a client in this situation who said, “Oh, it’s not real money.”

“She was a busy mom and wife and it was hard for her to imagine she suddenly had all this money,” Adams recalled. She didn’t register how this newfound cash might impact her sense of her own wealth.

If you surround yourself with people who are much richer than you — or at least those who spend more lavishly — you’re more apt to feel poorer.

Whether you have a realistic perception of your wealth also depends on your social circle. If you surround yourself with people who are much richer than you — or at least those who spend more lavishly — you’re more apt to feel poorer as you race to keep up.

“I had a client with $8 million, but many of her friends had $100 million and flew on private jets,” Adams said. “She felt very poor and bad about herself.”

Other factors play a role as well. Your age, marital status, job security and personal debt can influence how you perceive your wealth. “Two people can walk into my office with $1 million with different perspectives on whether they’re wealthy or not,” said Michael Berkhahn, a certified financial planner in Tampa. Fla.

Age itself is a big factor. Among younger adults (age 26-41) who feel wealthy, their average net worth is $531,000, according to the Charles Schwab Modern Wealth 2023 survey. For baby boomers (age 58-75) who feel wealthy, their average net worth is $692,000.

When clients have a distorted sense of their wealth, advisers might pose searching questions. The goal is to get clients to rethink how they feel about money and what it means to them.

Berkhahn likes to ask clients, “What are your concerns about money?” Based on their answer, he seeks to match their concerns with their goals.

“Maybe their end goal is to leave a legacy or fund their kids’ education,” he said. “Their sense of their own wealth can be based on fear” or worst-case thinking, so addressing their money worries helps them get a more realistic handle on their net worth.

Adams asks clients, “What are the top values in your life?” Once they open up, she asks, “Does your spending reflect those values?”

If your saving and spending habits reflect your most cherished values, you’re more likely to see your wealth as sufficient to bring you the happiness you seek.

More: When the family wealth talk goes badly: One in four people regret having the conversation

Also read: Here’s what really matters when you buy stocks, real estate and other investments

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