This is what it takes to be in the top 1% of wealthy people
We know that true wealth is much more than how much money you’ve got in the bank or how many properties you own.
But you don’t have to look too far to see references to the top 1% of money earners and how disproportionate the distribution of wealth is.
Among the many hard truths exposed by COVID-19 a few years ago was the huge disparity between the world’s rich and poor.
At the same time as economies fell into recession and many ordinary people lost their jobs and fell into poverty, many of the world’s billionaires increased their fortunes.
Each year Credit Suisse produces a Global Wealth Report showing how money is distributed around the world, and according to their 2022 report (released late last year), total global wealth grew by 9.8% – the fastest annual rate ever recorded.
It revealed that the top 1% of households globally own around 44 percent of all personal wealth, while the bottom 50 percent own only one percent.
Such a divergence in affluence further fuelled criticism of the so-called 1%, which has long been the standard rhetoric of the political Left.
It all started back in 2011 when Occupy Wall Street protesters called outgrowing economic inequality by proclaiming: “We are the 99%!”.
They demonized “the 1%” as fat cats who have grown even richer while the middle class has stagnated.
But you might be surprised to find this 1% doesn’t just comprise the super-rich.
It may include you, or people you know.
When you hear references to the 1%, you might think of billionaires such as Amazon’s Jeff Bezos or Tesla founder Elon Musk.
According to Forbes’s 2021 list of billionaires, there were 2,755 billionaires worldwide in 2021, for an average of .35 billionaires per million people.
This is 660 higher than 2020’s number, with a record high of 493 new billionaires joining the list.
This is a minuscule proportion of the 8 billion people on Earth.
So obviously, you don’t have to be a billionaire to join this global elite.
In fact 1.1% of the world’s adult population are millionaires.
This adds up to about 56 million people.
Collectively, this group has about $191.6 trillion and controls about 46% of the world’s wealth.
So how rich do you have to be to make it into the 1% club?
Well, look in the mirror because it’s very likely if you’re reading this you’re already in the 1%.
Australians wanting to be in the country’s top 1% for wealth need to have an individual net worth of US$5.5 million ($8.3 million), Knight Frank’s 2023 Wealth Report has found.
To be in the top 1% of wealth across Asia, the net worth required is even smaller – just US$3.5 million
There are even significant disparities within the 1%.
The 1%, it turns out, have their own 1% – people like Bill Gates, Warren Buffett, Elon Musk, and Jeff Bezos.
But when you look at mere mortals, the Australian Bureau of Statistics data shows the average Australian household has a net worth of A$1.04 million.
The average earnings of Australia’s top 20% are 12x the average earnings of the bottom 20% and the wealth of the average household in the top 20% is 93x the average wealth of those in the bottom 20%.
The average household gross income is $121,108, however the top 20% of households earn 48% of all income.
And in Australia, it has a lot to do with property
Now clearly there is a wide gap between the top 1% and the average Australian and the fact is Australia’s richest households are expanding their wealth three times faster than the poorest groups, and many are using property to leverage their wealth.
Fact is, Australia’s wealth is heavily skewed towards property ownership.
It’s the investment vehicle that more average Australians use to develop their wealth than any other asset class.
Simply owning their own home over a period of 10 years or more has made money for an incredible number of people.
Over this period many homes doubled in value, which meant that many homeowners saw their household wealth increase substantially.
But another group discovered how to profit in ways other than just owning their own home.
They became real estate investors and bought additional properties.
They took their financial future into their own hands.
What’s the solution to this wealth inequality?
Sure, much attention and many headlines are devoted to the “unethical” wealth of these billionaires.
I believe rather than attacking the ultra-rich, we should focus less on taking actions that could inhibit top earners and we would be better off addressing the reasons others aren’t as successful and concentrating on how to improve the lives of those in the bottom 50 percent.
In this group, many workers are in desperate need of a skills upgrade and others need to learn financial fluency.
Many need to how to handle the money they earn including practicing delayed gratification and spend less than they earn so they can save and invest in their future.
One great lesson for them is that it is either having an easy life now and a hard life later; or doing the hard things now so they can have an easy life later.
Just to make things clear…before I receive a flood of negative comments- this blog isn’t to belittle the hardship many ordinary Australians have endured during the last year as mortgage costs, rents and the cost of living have skyrocketed.
Needless to say, I can understand why people would be upset when many of the top 1% are perceived to have earned their income unjustifiably.
Being paid by big corporations that in some cases have been run into the ground and then been bailed out by their governments doesn’t sound right.
Nor does a tax system where the wealthy seem to avoid tax and the poor seem to pay a disproportionate amount.
It’s hard to argue with that logic
I’m just offering another perspective and reminding you that even though our system has lots of faults, it has created more prosperity, even for the lowest 1%, than most of the world can comprehend, considering it was not that long ago that according to the UN, “Nearly half the world’s population, 2.8 billion people, earn less than $2 a day” and the World Bank suggests that 95% of those living in the developing world earn less than $10 a day.
While it is very hard to develop wealth in many of the world’s underdeveloped countries, which are rife with corruption and have poor education standards, in Australia, everyone has the opportunity to educate themselves, work hard and become financially fluent and join the ranks for the wealthy.
We are so lucky that we live in the best country in the world at the best time in history.
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