admin-ajax.php

What it takes to join the ranks of the world’s richest 1%

I can see 2011 going down as a year that will be remembered for civil unrest.

It started with a street vendor setting fire to himself in Tunisia and moved on to civil unrest in a number of countries in the Middle East. Then there were riots in London and, more recently, protests around the world against the richest 1%.

The protesters say they are opposed to “the fundamental inequality in society — social, economic, ecological — and want to change the ways that our society is structured and run so that way, the vast majority of people — the 99% — have their interests accounted for, their voices heard, their needs represented.”

As many of these protestors claim our society is run for and by “the 1%”, I found it interesting to read an article explaining exactly what it takes to join this exclusive club in a recent copy of the Australian Financial Review.

And by the time I finish explaining how to join the ranks of world’s richest 1%, you may find you’re already in it. But I’m getting ahead of myself…

What it takes to make it into the Rich1% Club.
Apparently it takes assets of $11.2 million to be amongst the richest 1% of Australia’s 8.4 million households.

The top 1% has a lazy $1.07 million kicking around in cash or it’s equivalent according to the Australian Financial Review. That compares with just less than $120,000 for the top 20% of households.

The average value of cars owned by the top 1% is $84,000; compared with $32,000 for the top 20%. And their financial security is covered by $1.4 million in superannuation, more than double the super held by the wealthiest 20 per cent.

Those who make it in the top 1% of rich people tend to have extensive share portfolios, worth $450,000 and have a business valued at an average price of  $3milion.

This is in line with the Merrill Lynch Cap Gemini report of High Net Worth Individuals that found 80% of this club made their wealth through business.

But that doesn’t mean that the wealthiest Australians don’t like property – they do and they are amongst the keenest property owners in the world.

If you are in one of those 84,000 households that make up the 1%, you are likely to live in a house worth on average $1.9 million and own other property holdings worth over $3milliion.

Now clearly there is a wide gap between the top 1% and the average Australian and figures from the Australian Bureau of Statistics show that Australia’s richest households are expanding their wealth three times faster than the poorest groups, and many are using property to leverage their wealth. I wrote about it here in a recent market commentary.

Another perspective.

No one’s hardship should be belittled. Becoming unemployed or not being able to keep up your mortgage payments aren’t just financial problems. They’re social and emotional problems that strike at your sense of worth.

But things always need to be kept in perspective. Some really interesting numbers emerge when you expand your view and look at the richest 1% in the entire world.

It’s no secret that Australia is among the richest nations on Earth, so how much do you need to earn to be among the top 1% of the world?

According to an article by Morgan Housel in Motley Fool the answer is US$34,000.

This article explains that in his book The Haves and the Have-Nots, World Bank economist Branko Milanovic shares that be in the top half of the globe, you need to earn just $1,225 a year.

To be included in the top 20% of income earners in the world all you need is a salary of US$5,000 per year. To be the top 10% you would need to earn US $12,000 a year. And to be included in the top 0.1% requires an annual income of US $70,000.

Dig even deeper and the figures become inconceivable.

According to the U.N., “Nearly half the world’s population, 2.8 billion people, earn less than $2 a day.” According to the World Bank, 95% of those living in the developing world earn less than $10 a day.

When you consider the context of the entire world, it means that the Australians we consider poor are among some of the world’s richest people.

A new report from Credit Suisse Global Wealth has revealed what many of us Aussies already know; that we are indeed living in the lucky country!

In term of average wealth per adult in 2011, Switzerland, Australia and Norway are the three richest nations in the world, with the average Australian worth close to $221,704, which is four times more than that amount boasted by each US adult. And the proportion of Australian adults who can claim a worth of more than $100,000 is eight times the global average.

In short, most of those occupying Wall Street or Melbourne or Sydney would be considered extraordinarily wealthy by much of the world.

Many of those protesting the 1% are, in fact, the 1%.

Apart from having amongst the highest incomes in the world and the second best lifestyle, the ABS advises we also have one of the highest life expectancies on the planet.

Since 1990 six years has been added to the life expectancy of Australian males and four years has been added to the life expectancy for women.

Anyone can join the 1% club.
But the protestors in Australia should remember that we live in the best country in the world. A country of opportunity where virtually anyone can make it into the BRW Rich 200 list.

Clearly that’s just not possible in many other parts of the world.

Just look at this year’s Rich 200 List…

While 17 percent inherited some of their fortune, most were self made successes, some coming from working class backgrounds.

And there’s no use complaining about the school you went to, because attending a private school and having an elite education is clearly not a prerequisite to joining Australia’s wealthy. While some forged important networks at school, many went to public schools and others didn’t even finish high school. In fact less than half of those in the Rich 200 list have tertiary qualifications.

And don’t say it’s too late…

You’re never too young and you’re never too old. The youngest member of this year’s BRW Rich 200 is aged 35 and has an estimated wealth of $1.01 billion, which is even more than the oldest member who at the age of 92 has accumulated $289 million.

Some final thoughts.
Just to make things clear…before I receive a flood of negative comments- this blog isn’t to belittle the protestors’ message. I see merits in some of the Occupy protestors’ arguments.

And I’m definitely not against protesting – I grew up in the age of protests against the Vietnam War.

Needless to say I can understand why people would be upset when many of 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.

Remember…I’m not having a go at the protestors.

The Occupy Wall Street movement has attracted support around the world and many believe they have a genuine grievance. High flyers in the world of finance helped create the Global Financial Crisis and the poor of the world are now paying for it.

I’m just offering another perspective and reminding them 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.



icon-podcast-large

SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

icon-email-large

PREFER TO SUBSCRIBE VIA EMAIL?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Avatar for Property Update

About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'What it takes to join the ranks of the world’s richest 1%' have 14 comments

  1. Avatar for Property Update

    November 25, 2011 @ 6:04 am John Henley

    Thanks for another great commentary Michael

    Someone had to say it and I’m glad you have

    Reply

  2. Avatar for Property Update

    November 25, 2011 @ 10:30 am will seeker

    typical of a property guru to distort the figures so the story looks good.

    We maybe in the 1% of the world’s wealthy, but that doesn’t help with paying the mortgage, paying the electric, paying for petrol and paying for rip-off priced groceries!
    Australia needs a recession to bring prices back to normal!l

    Reply

    • Avatar for Property Update

      November 27, 2011 @ 2:28 pm Peter Gen X

      I’m astounded that you, (will seeker), would expect me to be selling my properties for 40% lower, just so you can enter a market, you clearly despise anyway? If you think property is overpriced now, what makes you think it will be worth buying into when they are at a value you see fit? Oh, wait a minute, because when you buy them for 40% less they will be destined to go up is that it? Gee your so much smarter than us, you may want to start your own website, called propertydoomssayer.com.au, and educate people on how to jump on property investment sites, and spitefully ridicule a man like Michael, who has lived through many downturns, and succeeded. Nobody is asking you to buy anything, in actual fact I’m begging you and you’re friends to continue to rent, and wait for the ” inevitable crash” you all so seek. All I can say is be careful what you wish for, because If property was to fall to a heap as you so clearly campaign for, then it is more likely that employment will be at a very high point, our banks would have hit a brick wall, and you probably won’t have a job anyway…. can you please now go to news.com.au and sing koombaya with all the other doomsayers in the property section, and leave the “glass half FULL” group of property investors to comment on what was another amazing article by this informative and educational website.

      Reply

      • Avatar for Property Update

        November 27, 2011 @ 10:32 pm will seeker

        I reckon Peter, that I might be able to buy property for 30-40% discount some time next year based on my formula.
        First I’m a property owner with no mortgage. I have bought my property for 390oz of gold in 2007. According to my real estate valuer it has gone up 50% since I bought it in Aussie dollars, however if I had of waited until a couple of weeks ago when I had it re-valued, I could have bought for 360oz. However to buy at 30% discount even if property prices do not drop, I would have to wait until either gold reached $2300 oz. Or if Gold also stayed the same in US$ maybe the aussie dollar might fall back to its historical average of 70cent then Aussie Gold would still then be priced at $2300 oz.
        This is also the reason why you should not keep all your eggs in one basket. Wealth is not destroyed it only moves from one asset class to another. Thats why I have been in 3 different asset classes over 3 decades. I just hope Gen Zero reading this Start saving for their deposits in Gold and Silver, these would be part of mine “Golden Rules”.

        Reply

  3. Avatar for Property Update

    November 25, 2011 @ 10:34 am Ian Dart

    A very well put opinion Michael! WIth your permission I’d like to post on F/B.
    Thanks
    Ian

    Reply

    • Avatar for Property Update

      November 25, 2011 @ 10:36 am Michael Yardney

      Thanks for the words of encouragement Ian

      Sure you can link to it on facebook

      Reply

  4. Avatar for Property Update

    November 25, 2011 @ 11:07 am James

    i dislike this article. The protests are against the way money is created and the banking systym. It is fraud and a ponzi scheme which im sure you well know.

    Reply

    • Avatar for Property Update

      November 26, 2011 @ 7:02 am Martin

      James
      I think you miss the point of the article.
      It seems that Michael has some sympathy for the cause of the protestors. In fact he says as much.
      He’s just showing a different perspective.
      It’s one of the best commentaries I’ve read

      Reply

  5. Avatar for Property Update

    November 25, 2011 @ 12:48 pm Ainslie

    “Will Seeker” – maybe you could change your perspective and take his advice and do something with it, like making some good money in shares or property and then you can pay for the mortage, groceries, fuel etc quite comfortably. Wealth doesn’t just fall in your lap my friend you have to put in some effort to create these things for yourself. It depends how badly you want these things as to how much effort you’re prepared to put in to get the results that you want. Usually it goesn’t happen overnight and by having good mentors and people to support and guide you.
    So instead of bagging people who are offering advice and their opinion from their research – what about saying “WOW thanks thats another way of looking at it..now which percentage do I want to be in?” I know which one I do…. Well done Michael for putting things into perspective and reminding us that we are rich and wealthy…and it doesn’t always have to come in the form of money.

    Reply

    • Avatar for Property Update

      November 25, 2011 @ 2:00 pm will seeker

      Actually, Ainslie,

      I have made money in both asset classes, I had shares in the 1990s, then sold and bought property in 1998 I then sold property at top of uk housing market in 2006.
      I was told by my aussie accountant and bank manager to get back into shares in early 2007. I resisted as I could not see the ASX 200 rising for a 4th year at 20% per annum. because of compounding interest this would mean that the companies in the asx 200 would have doubled in 4years. then I realised that goods in the shops weren’t going up 20% each year so how could company profits match the share price? well history shows what happened later in 2007 and it was the top for the asx 200. Now going to housing we should have had a collaspe in property prices in 2009 but the RBA and Government introduced low mortgages and FTB grants to suck First timers into the market. I have many friends earning over $100,000 yet carnt afford to buy in Sydney. If they cannot buy on $100k salaries what hope has the rest got? So just like the sharemarket, australia’s Housing market is overdue for a correction. one reason is the 40years of easy credit is ending and the european dept bubble will casue massive asset devalutions across the world. I’m also looking forward to buying property in 3years time when the’re 30-40% discounted. Maybe I could be buying some of yours.
      ps if you look at demographics, you will see that baby boomers are now retiring and they were the ones putting into sharemarket. so even the share market is not the place to invest over the next couple of years either. Thats why the government wants to support the sharemarket with 12% super contributions instead of 9%. bring on 2014, when prices are back to normal.

      Reply

      • Avatar for Property Update

        November 25, 2011 @ 9:58 pm Dean

        Well done Will Seeker. Finaly one comment without vested interest in any asset. And most importantly very realistic and objective.

        Reply

      • Avatar for Property Update

        November 27, 2011 @ 2:04 am Peter Gen X

        Nah, you’re just pissed you missed out on the last mini boom, and want your 2006 prices back so you can jump in again because you missed out. Either that or you are the smartest, most insightful and forward thinking investor I’ve ever heard………..40% drop, and so may people would enter the market the prices would go through the roof faster than you can say “im a doomsayer, just ask me”…………..Never ever, ever ever ever ever ever ever…….

        Reply

      • Avatar for Property Update

        November 27, 2011 @ 10:01 pm John Keen

        A lot of what will seeker is saying has already started to happen as in the west of melb some suburbs are almost at a 40% discount if not already. There is some bargains to be had . l don’t call him negative just aware of the situations happening , there is money to be made out there in burbs.

        Reply

  6. Avatar for Property Update

    November 27, 2011 @ 10:01 pm John Keen

    A lot of what will seeker is saying has already started to happen as in the west of melb some suburbs are almost at a 40% discount if not already. There is some bargains to be had . l don’t call him negative just aware of the situations happening , there is money to be made out there in burbs.

    Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*

facebook
twitter
google
0
linkedin
0
email

Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!