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What Does it Mean to Be "Rich"?

Defining "rich" is not as easy as you may think. Perhaps it’s a numbers game: if you make $400,000 a year in income or if you have $5 million in net worth, are you rich? Early in the last Presidential campaign the threshold of $250,000 was being tossed around. That amount might make you rich in Scranton, but would this still be true if you lived in Manhattan?

Some say being rich provides a rare chance to accomplish greater ends. Others equate being rich with a sense of security. In Frank Capra’s It’s a Wonderful Life, George Bailey was toasted as "the richest man in town" although he teetered on the verge of bankruptcy. Perhaps being “rich” is not a numbers game after all.

A January survey from Spectrem's Millionaire Corner(1) offered a somewhat surprising result: people with enough extra money to be considered “investors” actually associated wealth with greater security more than they associated it with happiness, fun, or a life of leisure.

Overall, 84 percent of investors indicated "greater security" as the characteristic that best describes what it means to be rich. Older investors (ages 61 and up) scored the highest at 87 percent. These people had a greater tendency to see the “rich” as having more responsibility and a more complicated life. Younger investors (ages 40 and under) were somewhat less likely to view being rich in terms of greater security (72 percent) and more apt to associate wealth with less work, greater happiness and more fun. Interestingly, corporate executives associated being rich with "more stress."

It seems that wanting to be “rich” may not be about the pursuit of happiness after all. What people seem to value most about having money is the greater sense of security it brings.

And is this really any surprise? Think about it: from the day you were born, right up until today, is there really anything better than feeling truly secure? Flip it around, especially if you have a family or other dependents: is there anything worse than feeling financially insecure?

Recognizing this basic, fundamental human need can help you in a variety of situations – including the resolution of personal injury claims – and here’s proof. I was recently asked to attend a mediation involving a 46-year-old man who had sustained a head injury resulting in a craniectomy (the surgical replacement bone with metal plate). It was generally agreed that the facts conveyed a significant degree of liability exposure for the defendants.

In the early stages of the day, the plaintiff said he had to have two million dollars and would not take anything less to settle his case. Later on, after some discussion, the question was posed: “Why two million dollars? What are you looking to get out of this?”

He answered that, as a result of his injury, he would not be able to maintain his previous occupation as a contractor so he needed to replace at least a percentage of his former wages. Not much argument there. Then he said he wanted a house and money for a Christmas Fund. I took careful notes. Ultimately, his list included money for future medical expenses, money to help maintain his household, and $30 per month for pet food.

No joke. This might seem a little humorous, but I actually admired the man. He had clearly done some very specific thinking about what he needed to feel secure in his life. Armed with that information, I was able to craft a settlement plan that gave it to him:

• $ 1,000 a month for 20 years to replace lost wages
• $ 2,000 a month for 15 years to meet payments and taxes on a new house
• $ 1,000 every quarter for life to fund future medical expenses
• $ 300 a month for life to meet household expenses
• $ 3,000 every December 1st for 20 years to buy Christmas presents
• $ 30 every month for as long as he lives for pet food

Nice to know that you can take care of yourself, give gifts to all your grandkids, and still doze off by the fire with your Golden Retriever/Poodle/Schnauzer for the rest of your days.

Combined with a responsible amount of cash at settlement, this plan wound up delivering to our injured hard-working contractor the all-elusive sense of security that even multi-millionaires have trouble finding. No financial stresses, no sleepless nights - and no income taxes to pay! Oh, and as you may have guessed, this guaranteed financial future did not cost anywhere near the $2 million dollars he was sure he needed at the start of the day.

What does this all tell us? Cash alone doesn't erase life's problems; it sometimes just replaces them with more expensive ones. But a well-designed, guaranteed, and tax-free structured settlement can actually deliver to most people what they say they are really looking for: financial security.

Interested in designing settlement plans that help claimants feel even better than “rich”?  Call Frank C. Kilcoyne, CSSC at 800 544 5533. I am here to help.

(1) SpectremGroup, http://www.spectrem.com/news/what-does-it-mean-be-rich-america-575 (January 2013)