Well off is one of those phrases that eludes simple definition, but like the U.S. Supreme Court’s historical definition of obscenity, we know when we see it. 

I recall teachers who were more ‘well off’ than I was. As a kid, some teacher friends of my dad (who was also a teacher) had a big house with a view of Vancouver Lake. I recall they lived on a private road which I thought was pretty cool. We visited their house a few times. It was there that I learned that the middle class included ‘upper’ and ‘lower’ subcategories. 

As a teacher myself, I befriended a colleague who was also well off. She and her teacher spouse collected Russian icons and while their house didn’t have a view, they lived in an old money mid-Century neighborhood and retired very comfortably.

Another former colleague of mine was married to a school principal. They both drove Mercedes well before that became a thing. I also recall that they would vacation in Europe and Canada with another well off educator couple.  

But what does well off mean?

I rediscovered this term when reading an retirement article one night. The article was about net worth among retirement-aged persons at different levels of wealth in America. (Reading articles about personal finance helps me fall asleep.) 

Up until I read this article, I never had a firm definition of what it meant to be well off.’ But thanks to an article from Yahoo! Finance, based on a YouTube video by speaker and finance author Geoff Schmidt, based on data from the Federal Reserve Board Survey of Consumer Finances, 

“People in the 90th percentile are considered well off, with a household net worth of $1.9 million. They can go on trips, and think about charity donations and sending their kids to college.”

For the record here are some of the other percentiles and descriptors. Remember, this data is about Americans aged 65 and up. So if you’re not 65 yet, you’ve still got time to catch up. 

Poor: “Households in the 20th percentile ($10,000 net worth) are considered poor. They likely do not own their homes and are focusing the money they do have on the basic necessities.”

Middle class: “The 50th percentile…is what’s called the median: half of U.S. households have a lower net worth than the median; the other half have a higher net worth. Americans…in the 50th percentile have a household net worth of $281,000, which is usually the equity of their home, some savings and a 401(k) account.”

Filthy rich: “The 95th percentile is considered wealthy, with $3.2 million household net worth, so even more spending power, which means estate planning and possibly more than one home. And the 99th percentile is very wealthy, with $16.7 million in net household worth, Schmidt says. They can do whatever they want, and might own a winery or ranch.” 

Do I want to be well off?

Well off seemed to hit a sweet spot somewhere above poor and the generic median while comfortably below the complications of being wealthy, or God forbid, very wealthy. I don’t think most ranchers have $16.7 million. And the saying goes that if you want to make a small fortune in wine, start with a big one. 

I also liked the description for this percentile — I enjoy going on trips and giving to charity (and would certainly welcome a net worth of $1.9 million.) Recalling those upper middle class educator friends from the past, this is probably a pretty accurate description where they stood on the net worth ladder. And knowing my current educator friends and colleagues, I think most would like to be well off too. 

More importantly, well off seemed to be a good description of what it might mean or feel like to be financially independent. Much like the word wholesome, it’s vague but familiar; aspirational if sometimes elusive. As in…

• He looks a bit shabby but seems to be well off,
• They are well off — two retired teachers living in Portugal,  
• At age 65, I would like to be well off, and/or
• What does it mean to be financially independent? To be well off. 

What is NOT well off?

Using the data and definition above, it is net worth, not income, that defines being well off. According to this article, that means having close to $2 million in the bank, in investments, and/or equity, at age 65. As I write in this post, many adults (educators and non-educators) do not have this kind of wealth. And while they may not own wineries, they are living in big houses, driving nice cars, and sending kids to expensive colleges. So what gives?

Quantitatively, there aren’t many households with that kind of wealth. In case you were sleeping in math classes, being in the 90th percentile means that nine out of ten 65-year-old households have less than 1.9 million dollars. My hunch is that among educators, there are even fewer folks with that much wealth.

Anecdotally, more than 1 in 10 of my educator friends live in houses much larger and fancier than mine. (And purchased more recently than mine.) Many drive cars which cost more than my compact Ford pickup. Some have RVs, boats, and/or vacation homes. And, in most cases, they have multiple kids. What gives?

I would argue that some of them are not well off, but are instead artificially affluent. Their current income sustains a certain lifestyle, but it may be subsidized by credit cards and/or an outsized mortgage. And they may or may not have signficant net worth.

Does well off really cost $1.9 million?

While this article examines data on net worth — what people have as assets (savings, retirement, real estate) — you also have to consider cash flow and cost of living. If you live simply and within your means, then 1.9 million is likely overkill. 

As I’ve shared in other posts, the FIRE movement has helped us reexamine our relationship between money and stuff. Alongside aggressive saving, FIRE enthusiasts also pare back their consumption both to accelerate meeting their financial goals and to downsize their lifestyle to a smaller footprint.

Many followers of FIRE achieve financial independence by doing two things simultaneously. They cut back on their current expenses in order to free up money to save and invest aggressively.

What’s interesting to me is that when they achieve their financial independence, they don’t suddenly start spending like crazy. Instead, they continue living with less. By doing so, they seek to maintain a simpler lifestyle and by not needing as much, they can also sustain their financial independence in the future. 

To me, being well off is not solely a number associated with net worth. While financial independence can’t be achieved without having wealth — an emergency fund, debt management, and self-sustaining investments — the magic number is necessarily going to vary depending on who you are, who and how many are in your household, and how much money you spend each month on the things that keep you happy. 

I have friends who live more simply than my wife and I. My hunch is that they don’t have a net worth of anything close to $1.9 million but that they are also happily living within their means. While they may not be financially independent, they may still consider themselves to be well off. Or at least on their way to being well off when they are older. 

In recent years, personal finance blogs and writers have come to realize that financial security and independence are not enough to make us ‘well.’ But if you look past the $1.9 million valuation of well off, note what is included in this category.

“They can go on trips, and think about charity donations and sending their kids to college.” These examples speak to the ability to enjoy life and take care of oneself, those outside of our family, and those close to us. 

By contrast, the wealthy and very wealthy are buying multiple homes, ranching cattle, and losing money in the wine business

Let’s seek to be well off together! Whatever that might mean to you. 

You. Can. Do. This.

Now

1. Jot down some things that define being ‘well off’ for you. These could be things which you have now or things that you wish for in the future. 
2. Think about why these things are important to you.
   • In what ways are they connected to your income or wealth?
   • Have these always been important to you?
   • Are they sustainable in the present and/or the future?
   • Would these things be possible if you lost your job?

Next

1. If you haven’t already done so, read my post about net worth and calculate your current personal and/or household net worth.