Wise Money: What Percentile Is Your Income?
Quote to Ponder
"He who is not contented with what he has, would not be contented with what he would like to have." - Seneca
Recommended Links
- Charlie Munger's Last Interview
- What the Rich Won't Tell You - New York Times
- Top Incomes by Age in the US
- You Can Do Better Than Indexing - Dimensional
Insight
We often don’t appreciate how well off we are.
How much household income do you think a family needs to be in the top 10%, 5%, and 1% in the United States? Think about your answer before you scroll down so you can compare your guess with the data.
Okay, here are the answers:
The median income in the US for 2021 (most recently available) was $69,717.
To have a top 10% median income, your family would have needed an income of $191,406.
Top 5% was $290,164.
Top 1% was $867,436 and above.
I love to ask these questions to friends because it reveals something: The more well-off you are, the higher the income you will guess for each percentile.
In the NYT article linked above, one interviewee with a $2.5 million household income, a house in the Hamptons, and a child in private school didn't consider herself "affluent." Real affluence, she said, belonged to her friends who traveled on a private plane.
High-income households usually think they are closer to the "middle class" than they are. Why is that?
One reason why we underestimate our fortune is that there is always someone with more. The richest person in the world is the only one who can't be envious of another's wealth.
Another reason is that we tend to socialize with and live near those with similar financial situations. This can skew our perception of what is normal.
The holidays are a great time to reflect on our good fortune. If you are reading this newsletter, you likely are in a top-percentile financial position. That's wonderful! But do you feel how wonderful that is?
Let's start 2024 by cultivating gratitude for what we have rather than envy for what we don't. How do you know if you've made progress? Perhaps you begin to share a bit more with those who have less.