The Paradoxes Of Wealth: Misaligned Beliefs About Money
The Paradoxes Of Wealth: Misaligned Beliefs About Money
By Financial Samurai / 06/28/2023
The 2023 Charles Schwab Modern Wealth Survey highlights the many paradoxes of wealth in America. Over 1,000 individuals of all different backgrounds filled out the survey.
Overall, the survey, conducted between March 1 and March 23, 2023, says it takes a net worth of $2.2 million to be considered wealthy in 2023. The net worth amount is the same as it was in 2022 but up from $1.9 million in 2021.
If there's one positive thing a bear market does, it's that it lowers wealth expectations.
In this post, I'd like to look more closely at the data and point out the wealth paradoxes. Americans don't seem to understand what it means to be wealthy. We also don't seem to act according to our financial goals and personal beliefs!
Wealth Paradox #1: Inflation Is Not As Bad As It Seems
The first paradox of wealth is Americans' inability to accept reality. Americans believe inflation is a big negative to lifestyle quality.
High inflation is why the Federal Reserve has aggressively raised interest rates since 2022. However, despite inflation reaching 40-year highs, the amount of net worth necessary to feel wealthy has not increased.
With inflation up between 4% to 6.4% YoY in 2023, it would be logical to believe the net worth required to be wealthy in 2023 would also rise by 4% to 6.4%. If so, the net worth range in 2023 should be between $2.288 and $2.34 million. But paradoxically, the net worth amount stayed flat.
So maybe, the threat of inflation to American livelihoods is overstated. Just as life goes on whether you take action or not, inflation goes on whether you're accumulating more wealth or not.
Wealth Paradox #2: Feeling Wealthy Despite Not Having Enough
48% of Schwab's Wealth Survey respondents feel wealthy, yet the average net worth of those who feel wealthy is only $560K. Yet, we just learned that $2.2 million is the net worth considered by survey respondents to be considered wealthy! A $1.64 million shortfall is huge, especially in terms of percentage.
Therefore, either the respondents are lying about the amount needed to feel wealthy, lying about their net worth, or are inexperienced about how much it really takes to feel wealthy. Or maybe Americans are simply delusional about money.
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