How much money do you need to be considered rich?

According to a recent survey, almost half of Americans think they need at least $1 million to be considered rich. While that may be a lot of money and the gap between the rich and poor continues to grow, is it really that much? Or are those surveyed just not used to thinking about money in those terms?

That depends on who you ask. Many experts say that $1 million definitely isn’t enough to consider yourself rich. In fact, some people would not even consider themselves wealthy until they have at least $5 million or more.

The truth is there is no answer to this question with universal consensus. In other words, it all depends on your personal values and financial situation. The general rule of thumb is that you are wealthy when your assets exceed your liabilities by a significant amount. Here’s how to know if you qualify as “rich” based on three different factors:

Asset Rich

The first thing to know about being rich is that you should have significant assets. Assets are items you own that can generate passive income, such as real estate, stocks, bonds, and even collectibles, such as rare coins.

Basically, you are asset-rich when your assets are worth significantly more than your liabilities. It is good to have a healthy savings account, but your savings account has nothing to do with your assets. Your assets are what you can cash in on to pay off your liabilities, like a mortgage or car loan.

Liability Rich

The second thing to consider is being liability rich. This means you have significant liabilities. Liabilities are debts such as a mortgage, car loan, student loan, and credit card debt. Being rich means having less liabilities than your assets. Having no debt is ideal, but it is not realistic for most people.

In fact, the average household debt for various types of debt totals around $161,000, according to a survey published by Experian. That’s about $13,000 more than what it was in 2008, when the U.S. last experienced a recession.

Income Rich

The third and final thing to consider is being income rich. Being income rich means you have a high enough income to live a comfortable lifestyle. A good rule of thumb is to maintain your spending habits while in debt reduction mode. In other words, don’t live more comfortably than you did before you were in debt reduction mode.

Income is the only category where you don’t have to be rich to be considered wealthy. The only thing you have to worry about is having a high enough income to cover your expenses and debt payments. That being said, if you are income rich and asset-rich, you are almost guaranteed to be liability rich.

The truth is there is no one way to know if you are rich or if you will ever be able to consider yourself rich. The only way to know if you are asset rich, liability rich, and income rich is to track your finances.

You can’t know if you are rich unless you know where you stand financially. For example, if you have $1 million in the bank, but you have $1 million in debt, you are not rich.

The only way to know if you are rich is to know where you stand financially. You can’t know if you are rich unless you know what your financial standing is. If you have $1 million in the bank, but you have $1 million in debt, then you are still not rich.