Are you wealthy?

[Kyle J.]

Saw this article on MSN Money today: The answer to this question will tell you if you're wealthy.  

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Excerpt from the article:

To qualify as upper class in the U.S., a family of four needs to earn an annual income of at least $144,251. To place in the top 1 percent of Americans, they would need to bring in at least $389,436.

But do either of these comparative distinctions make you wealthy? It depends on how you define wealth.

For Derek Sall, a personal finance blogger and financial analyst who paid off $116,000 in seven years, it's not about how much money you bring in each month but how much you're able to save.

He says you need to ask yourself only one simple question to determine whether you're wealthy: If you lost your job tomorrow, how long could you survive?

It's easy to judge wealth as a function of what you own, but as Sall points out, material possessions mean nothing about the real state of your finances.

"Heck, you could drive a $40,000 BMW and live in a $500,000 home, but if you're $600,000 in debt, then you're actually worth less than a 7-year-old child," he writes.

To answer his own question, Sall developed a scale for quantifying wealth. Here's how well off you are depending on how long you could last without a source of income:

• Less than a month: Broke
• One to three months: Teetering
• Three to six months: Satisfactory
• Six months to two years: Well off
• Two to five years: Wealthy
• Five or more years: Ultra-wealthy

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The author makes some good points.  Often times people are presumed to be wealthy because they live in a big house or drive a fancy car, but I would argue that alone usually doesn't tell you how well the person is really doing financially.  In fact, I've personally known people who live in a big house and drive a nice car and they wouldn't be able to pay their bills for a single month if their income suddenly stopped.

The one thing I would probably disagree with the author on is what seems like his interchangeable use of the questions "How long could you last if you lost your job" and "How long could you last without a source of income".  I'm sure to most of us on BP, these mean different things.  For example, if you lost your job tomorrow but still had your passive income from rentals, you may be able to survive much longer - perhaps indefinitely.  The point is, a job is just one source of income, not the only source.  (Or at least it shouldn't be.)

I'm curious what others interested in personal finance think about the author's definition of wealthy?  How about you Scott Trench....would being able to survive for five or more years without a job be considered Set for Life?