UPDATE: I have added better story links for Ronald Read and Jack MacDonald. Time 3:11PM EST
Yesterday, I received an e-mail from a long time reader who still has my e-mail address from when I started blogging years ago. She wanted to know what would make her rich? How much money did she need? I thought about that question all day long and decided that I would try to answer her question here.
One of the simple definitions of rich at Dictionary.com is "having wealth or great possessions;abundantly supplied with resources, means, or funds;wealthy.
No dictionary definition seems to tell us how much money you have to have to be rich. I read a recent article that stated that if you had one million dollars you used to be considered rich. However, it said that is no longer the case and you need to have five million dollars to be considered rich. For most people five million dollars is out of their reach. You most likely would have to own your own business and that business would have to be very successful or you would have inherited that wealth.
Now in my opinion there is no reason why any person, who works for someone else, can't strive for a million dollars or even five million dollars. However, you would have to work very hard, practice extreme frugality, and have a long time investment plan. You would also have to be very disciplined.
That said, I have my own definition of rich. Rich to me means having family and friends whom I love dearly. It means being able to freely spend time with them. It means having enough money to be stress free and live life on my own terms. It means being debt free and knowing when we retired early that we had enough money to live out our lives in comfort.
How much money is enough? It depends on what your yearly expenses are. If you need $20,000 or $50,000. per year to meet your expenses and you want to make sure that you have enough to live 40 more years when you become financially independent, then you need your yearly expense amount multiplied by 40 years. If that money is invested wisely, you will earn enough money every year to beat inflation so that you don't run out of money early. You also have to be smart about only withdrawing a certain percentage of your money each year. That number used to be 4%. With the economy being bad these past 8 years, I believe that number should be 3%. But that is just my own $.02.
However if you want get to get to that 1 or even 5 million figure, read every book you can on investing. If you want to be rich, read and learn how millionaries and even billionaires got there. I think you will find that some of them inherited their fortunes. Many are sports figures who made huge salaries. But many of them are self made. Some went to college and others either didn't go or were drop outs.
But one of the things that many of them seem to have in common is they are not adverse to hard work and they live simple frugal life styles that are way below their means.
Of course there are many who become millionares who live above their means and end up bankrupt. Many sports figures and actors and actresses come to mind.
Their are many stories of ordinary people who became millionaires by living frugally. Here are some of them for your viewing pleasure:
Bob and Angela
There are many, many more stories out on the internet. One thing that aggravates me about some of these stories is the way they are written by the media. They make these people look like there is something wrong with them with phrases like she lived poor. They were frugal and I would bet you they were very content and happy with the way they lived.
I find these peoples' stories motivational and they want me to strive harder to reach my goals.
So I have tried to answer my reader's questions to the best of my ability. There is no way that I can give her an actual figure. She needs to do her homework to figure that question out.