Frugality is a necessity for some, and a choice for others. There are many opportunities to spend carelessly – the Starbucks around the corner, that new gym membership, or going out to eat all the time. It takes serious effort to save money and spend less.

It’s far harder to find ways to lower your bills and balance a budget. At some point the desire to be frugal can fade when wealth, affluence, and income increases. How much money would you need to make per year to relax or throw away your budget, and say goodbye to the frugal life? Would you?

A dictionary definition of being rich

For many, becoming wealthy entails a certain level of privilege, posh, and the ability to spend wherever you want – without much care or a budget. Riches generally come from a combination of income and savings. Without any savings and a hearty salary, you’re likely vulnerable to economic turmoil. Without an income a moderate savings, you could be in trouble, too.

Here’s Dictionary.com’s definition of bring rich:

having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy (Dictionary.com)

Pondering whether you’re rich? You may want to ask these questions:

• How much liquidity is in your checking accounts?
• How much is invested?
• How much do you make per year (and what tax bracket does that put you in)?
• What kind of liabilities do you have (e.g., loans, debt, future payments)?
• Have you ever compromised your lifestyle due to economic turmoil?

The New Rich and middle class

Only 2.9% of earners make more than $250,000 a year (CNBC). On a nationwide and worldwide scale, many consider this to be wealthy. But some people within this income level hesitate to call themselves rich – identifying more in the upper middle class.

A recent article by Associated Press (AP) writer Hope Yen interviewed some of those people:

“I definitely don’t see myself as rich,” says Lott, who is saving to purchase a downtown luxury condominium. That will be the case, he says, “the day I don’t have to go to work every single day.”

…Sponder says she doesn’t consider her income of $250,000 as upper class, noting that she is paying college tuition for her three children. “Between rent, schooling and everything — it comes in and goes out.” (AP)

The new rich still get to decide which elite private schools to send their children, live in high cost of living areas, and have more job security. On an international scale, these riches are incomprehensible to abject poverty.

Compare this to Kibera, Nairobi, where you’ll find residents without running water, electricity, proper sewage, or waste disposal. Here’s a little information about the conditions:

The slum is contaminated with human and animal feces, due to the open sewage system and the frequent use of “flying toilets” (defecation inside plastic bags that is thrown elsewhere). (Wikipedia)

Nobody should have to live like this. Unfortunately, as the world economy has largely recovered from the disastrous housing bubble and mortgage crisis, many lower and middle income families have missed out on income gains. It’s no longer a dream to have more than you need – it’s an expectation. People in lower and middle class incomes don’t think they have it – they probably don’t – and those in the top percentages for earners seem to be denying their wealthy status.

The $250k a year tax bracket and government intervention

There’s a complicated interplay between this income status and the federal government. Those filing individually at the $200k or married at the $250k levels have their marginal tax rates increased significantly. A marginal rate suggests that you get taxed at the traditional rate up until the income limit ($250k in this example).

In recent years, President Obama focused on the $250k income line and greater for increased taxes. Part of the proposal for tax reform included breaking down income brackets and increasing the marginal rates for those in the highest levels.

Regardless of where tax reform goes from here, there has been a target on the back of the $200k/$250k level. This campaign to define the wealthiest class and tax them more has bred a hearty argument on a variety of news sites.

A long-running article on Debate.org asks, “Is a couple making $250,000 a year considered rich anymore considering how fast costs are rising?” Many people have commented to say “no” – that $250k is not rich:

Try supporting a family of 5 on $250,000/year in the SF bay area. The cost of living here is so high and I’ve got 3 kids. It does not seem fair to tax me the same as someone making $250,000 per year in, say, South Carolina where housing is less than 1/5th the cost. The potential tax should be more thoughtful and consider local cost of living.

People that make $250,000 already pay close to half of their income in taxes. Federal, State, Local, Social Security, Medical…leaves you with $125,000. Family of 5 automatically puts you in a “no financial aid” status for your kids in college.

However – people earning $250k/year are most likely in a high cost of living area – so expect $3k/month housing expenses, $2k/month other expenses (food, transport, etc.)

CNBC, the financial/market show known for rampant support of free-market economic principles, says:

For folks like the Joneses who live in high-tax, high-cost areas, who save for retirement and college, pay for child care to enable two incomes, and pay higher prices for housing in top school districts, $250,000 does not a rich family make. (CNBC)

Overwhelmingly, the comments suggest that this income level is on the precipice of riches. Many feel vulnerable, as if they could lose this status. While they can live healthy lives, they are taxed heavily, the target of much tax reform, and generally live in high cost of living areas. Then, there are the government subsidies, kickbacks, and write-offs that the $250k level cannot easily attain. These cost savings that lower income classes can receive effectively make living even more expensive. The government proposes that people at this level don’t need as much help paying for college and saving.

As lower and middle income classes have seen social support and welfare programs devastated by government bureaucracy and cutbacks, the $250k group has actually become more vulnerable – in a sort of middle-ground that gets the least support, protection, and understanding. They’re economically unprotected, and this leads to a fear of losing this income level.

Finding frugality and a healthy budget, despite vast wealth

When I first started writing this article, I wanted to make it clear that this income tax bracket is very rich. Honestly, they have an incredible privilege of choice that is granted to very few. But with the collapse of social welfare, support, and market troubles, this bracket is in an economic no-mans-land – you either go up or get out. A family with a combined income around $250,000 a year may not feel rich. When the international economic world is studied, they are the richest of the rich. The average salary here in the States is still around $50,000. But in America, there is a well-warranted fear about the future status for those earning this much.

This is why frugality spans vast demographics. Most everyone can find reasons to save for tomorrow. When you are trying to earn and invest, but feel vulnerable to economic shifts, finding a budget and healthy spending habits can save you. Somewhere along the way we were duped into thinking that everyone needs more stuff, and that success is measured by how much we’ve amassed before our inevitable demise. We can’t buy ourselves out of death (yet), but we can provide help, support, and hope to those truly in need.

Have you ever wondered how much you need to make/amass to stop working, consider yourself rich, and/or feel financially secure?

Further reading: Too Poor To Protest: How Income Inequality…