You Are Rich
It might not feel like it, but there’s a good chance you are richer than 99% of the world.
The hedonic adaptation theory suggests that humans quickly revert to a stable level of happiness after any positive or negative life changes. For example, you might be pleased with a raise for a while, but it will soon become the new norm, wiping away any gains in happiness¹. While generally comparing yourself to others is a bad idea, it’s a great way to put your financial well-being into perspective. So, how rich are you really?
Merriam-Webster defines rich as “having abundant possessions and especially material wealth.” It’s a good dictionary definition, but it’s somewhat lacking in specificity. The trouble is, specific definitions are pretty hard to come by.
As a way around this, we could say that being rich means not being extremely poor. World Bank’s international poverty line is $1.90/day in 2011 dollars. It’s a pretty terrible definition of rich, and yet even that is too steep for 736M people (10% of the world’s population).
Of course, poverty varies significantly across countries. For example, based on a national definition, 82.3% of South Sudan’s population is extremely poor (i.e., lives on less than $1/day). In the US, the official poverty line is 12.3% and corresponds to a yearly income of $12,488 for a single individual. In the UK, 19% of population is considered poor (£192/week, or around $12,000/year). Lithuania defines two poverty lines, with 11% of the population living in extreme poverty (under €245/month, or around $3,200/year), and another 12% at risk (under €345/month or $4,600/year).
The middle class
We could take the definition a step further and say that being rich means being richer than the middle class. Now this is where things gets tricky, as there is no universally (and often even nationally) accepted middle class definition. The Brookings Institution has a beautiful interactive summary of “expert definitions” of the American middle class: