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Are you wealthy yet?

Don’t laugh. It’s a serious question. You’ll know if you are wealthy depending on your answers to a simple four-question in this column.

Who knows, you might be wealthy and not know it. You could also be poor and not know it, which is more likely.

The problem here is that we don’t have a shared definition of wealth.

A definition of wealth that I favor comes from the late economist and journalist Ferdinand Lundberg. In his 1968 epic “The Rich and the Super-Rich,” he defined being poor this way:

“For my part, I would say that anyone who does not own a fairly substantial amount of income-producing property or does not receive an earned income sufficiently large to make substantial regular savings or does not hold a well-paid securely tenured job is poor.
He may be healthy, handsome and a delight to his friends — but he is poor.

Wealth is about income-producing assets; it’s not about consumption stuff.

Lundberg’s definition shifts our attention from having the stuff of imagined wealth to having secure sources of income to support however we happen to live.

So here is my four-question wealth test:

1) Do you make payments on your house or car?

If you answered yes, it’s unlikely you are wealthy, although exceptions can be made for car loans where the interest rate is lower than the rate of inflation.

According to the most recent data on consumer debt, older people are carrying more debt into retirement, not less; so fewer retirees can be considered wealthy.

2) Does your interest income exceed what you pay in interest?

With the Federal Reserve holding interest rates down, it isn’t easy to find interest income these days, but dividends are an acceptable substitute. If you answered yes because you have income from dividends, rental properties, pensions, or even patents, copyrights and royalties on your country-song portfolio, that’s a pretty good sign that you are a budding rentier — a person who lives on nonwork income.

The more income you have from sources that don’t involve working, the closer you are to being wealthy. For retirees, Social Security can be a big part of this income.

3) Can you keep what you have without actually working?

If losing your job means the repo guy will be visiting in a matter of days, you’re definitely not wealthy. If you can answer yes to this question, you’re definitely not poor.

4) You are at a cocktail party and a stranger asks, “What do you do?”

If you answer this with any known occupation, you are not wealthy and you’re probably a workaholic. You’re still a working stiff, even if your job is, as Lundberg suggested, “a well-paid securely tenured” one. The only acceptable answer here is to remember your Jane Austen. Give the stranger your best disdainful Darcy look and say, “In the event of what?”


Copyright, 2013, Universal Press Syndicate