Most people underestimate how ordinary their incomes actually are.
One of the things holding people back from making real money is that they often lack motivation.
And sometimes they lack motivation because they just don’t really understand where they sit in the pack. They tend to think that they’re doing better than they actually are.
I was thinking about this the other day when I saw a survey on how much people in America thought CEOs earned relative to their front-line employees.
They thought it was about ten times more.
The truth of it? They earn 354 times more, on average.
We’re just not great at understanding big numbers. If a CEO is earning $17m, and their front-line employees are earning $50,000 a year, that means the CEO earns the annual front-line salary every single day!
Anyway, I thought it was worth doing a quick recap of the Australian numbers so we know where we stand.
What does it take to be average?
So the median (half the population above, half the population below) Australian employee earned $65,000 in 2022, according to the Australian Bureau of Statistics.
But this figure captures both full-time workers and part-time workers.
If we just look at full-time, the median full-time worker earned $78,800.
What does it take to be rich?
So that’s what it takes to be ‘average’. What does it take to be rich?
Well, if your taxable income was $131,501 or higher, then you earned more than 90 per cent of other Australians.
If you earned more than $180,000, then you took home more than 95 per cent of taxpayers.
If you earned more than $253,066, then you took home more than 99 per cent of taxpayers. You were in the top 1% and the revolutionaries are coming for you.
There’s still a gender-gap in play. Of the 10 per cent of taxpayers who earned more than $131,501 in 2019-20, about 70 per cent were men. Meanwhile, women made up almost 60 per cent of the 20 per cent lowest income earners.
What does it take to be wealthy?
And income is one thing, but at the end of the day what we’re really interested in is wealth.
ABS data shows that the median household had a net worth of $579,200 in 2019-20.
But there’s huge differences between the wealthiest households and the poorest ones.
The top 10% in Australia had a net worth of $2.26 million or more. The bottom 10% had a net worth of just $36,900.
That is, the wealthiest 10% have 61 times more than the poorest 10%. That’s substantial.
What if we include the rest of the world?
But it’s also worth remembering that even the poorest Aussies are very rich in the global scheme of things. Australia is still comfortably one of the world’s wealthiest countries.
Australian household incomes are the seventh-highest in the OECD – a club of mostly wealthy countries – while mean household net worth is third-highest, behind only the United States and Luxembourg.
Podium finish! Alright.
Average household net wealth in the OECD sits at $US323,960, about $US200,000 below the wealth of the average Australian household.
So look, it’s just worth keeping this all in perspective.
To know how to get where you want to be, you first need to know where you’re at.