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There have been a couple of articles that have caught my attention over the past few weeks regarding the idea of wealth in Australia – the richest of the rich, income inequality, where the majority of Australians lie and what individuals think wealthy actually means.
The Financial Review’s 2018 Rich List was released in May and revealed that the number of billionaires in Australia grew by 16 over the past 12 months, taking the total to 76.
Interesting to note, that the combined personal fortune of top 6 richest Australians in 2018, is equivalent to what the bottom 20% of Australia (approx. 1.8 million people) is worth. Wealth inequality seems to be rising in Australia, with the International Monetary Fund stating in October last year that Australia is among “countries with the highest growth in income inequality in the world over the past 30 years”.
According to a report by the Australian Council of Social Service (ACOSS) and the University of NSW (UNSW) looking at inequality in Australia, in 2016 a person in the highest 20% income group lives in a household with 5 times as much disposable income as someone in the lowest 20% ($3,978 per week versus $735 per week). Those individuals most likely to be in the bottom 20% include older people (over age 64 years), single people and sole parents, and those who rely on social security. By contrast, those most likely to be in the top 20% are full time employees, people with investments as their main income source and couples without children.
When asked what salary is considered ‘wealthy’ or ‘well off’ in Australia, whilst most individuals stated earning a figure of around $100K per annum, this was always prefaced by stating its relativity. $100K might be enough in some locations in terms of cost of living, but not enough in others. It also depends on one’s definition of ‘wealthy’ or ‘well off’ – Australia’s free health care and cheap education could deem low income earners to be relatively well off. However, if ‘well off’ means driving a luxury car, living in sought after locations and eating at the best restaurants, the bar is set higher.
Wealth is different to income, and far more unequally distributed. Again, according to the ACOSS and UNSW study, wealth in this instance means net household wealth including owner-occupied housing, superannuation assets, shares, other real estate and motor vehicles etc. The highest 20% of households ($2.9million) hold 62% or all wealth, the middle 20% ($570,000) holds 12% and the lowest 20% ($30,000) holds less than 1%.
So how does one strive to be wealthy? One proven way is to spend less than you earn and invest the difference. Spending less than you earn can generally only be done mindfully by way of a budget. Organising your finances and finding ways to save can lead to boosting investment and ultimately wealth over the longer term. Here’s some tips from the ultra rich to get you motivated:
- Fly economy – Gerry Harvey, Chairman Harvey Norman, estimated worth $1.3billion
- Catch public transport – Naomi Simson, Founder of Red Balloon, estimated wealth $60million
- Never buy bottled water – Dick Smith, Founder of Dick Smith Electronics, estimated wealth $100million
- Reuse and recycle – Elle Macpherson, Model and Entrepreneur, estimated worth $100million
- Call around for better deals – Janine Allis, Founder of Boost Juice, estimated worth $66million
- Review every bill – Alex Waislitz, Founder of Thorney Investment Group, estimated worth over $1billion
- Take stock of what you already own – Tania Austin, CEO Decjuba and co-funder of Cotton On, estimated worth $60million