Are You Rich? This Simple Formula Gives the Answer
A banker who spent years working at Goldman Sachs developed an interesting formula to help answer a surprisingly complex question: Are you rich? In an explanation shared via Business Insider, he explores what “being rich” really means—and why wealth is ultimately subjective.
“F*** You Money” and the personal meaning of wealth
People who work on Wall Street are familiar with the concept of “F*** You Money”. The idea is simple: once you have saved a certain amount, you could quit your job on the spot and never return—especially if you hate what you do.
But that amount is different for everyone. For one person, “rich” might mean freedom from debt. For another, it might mean financial independence, security for family, or the ability to travel without worry. Wealth, in other words, is shaped by personal context.
Lifestyle costs shape your sense of richness
Your sense of wealth is closely connected to the costs of maintaining your current lifestyle. Some people feel rich with very little; others feel poor—even with hundreds of millions in the bank—because their lifestyle expenses are enormous.
Wealth and passive income are tightly connected
Wealth and passive income have long been linked. Passive income is regular income that requires little or no effort to generate on an ongoing basis.
Historically, passive income was a key factor in the sense of well-being among land-owning nobility. Today, passive income still matters—whether it comes from:
- real estate (apartments, houses, farmland), or
- other sources (dividends, business profits, pensions, interest, social security)
The formula: a simple test for “being rich”
The banker proposes a straightforward formula:
Compare your annual passive income with the annual costs of your lifestyle. If your passive income is higher, you are rich.
It is a simple and surprisingly powerful way to define wealth: not as a number in a bank account, but as freedom—the ability for your lifestyle to be supported without having to trade your time for money.
Why time matters too
The formula is not complete, because time is also important. Someone who has enough money to live for three more years, but only one year left to live, is—cynically—very rich. Age changes the equation.
The younger you are, the higher your passive income needs to be, because statistically you have more years ahead. Financial independence is not just about money—it is also about how long it can support your life.
Being rich doesn’t mean you must stop working
Finally, wealth does not necessarily mean quitting work forever. Work can give life meaning—especially if you find purpose, contribution, and satisfaction in what you do.
In that sense, the goal is not “never work again,” but to reach a point where work becomes a choice, not a necessity.