Wealth is simply what you own, minus what you owe.
Featured on The Project on Tuesday, Jesse Mulligan explained the formula for calculating personal wealth, inviting inequality researcher and writer Max Rashbrooke to share his findings.
Based on Rashbrooke's research, those with wealth of $860,000 plus are in the top 10 percent of New Zealanders. His research shows the bottom 10 percent of Kiwis owe a collective $13 billion, whereas the top 10 percent has $800 billion.
"The bottom 10 percent has a collective $13 billion of debt. The top 10 percent has $800 billion in wealth - more than the other 90 percent combined."
A simple formula for calculating personal wealth
Wealth is the money you have, not the money you earn. Assets, minus debts (liabilities), equals wealth. As shown on The Project, here's a refresher on how to calculate it.
- Start by adding up everything you own (individual or couple): house/s, car, furniture, electronics, bank accounts, KiwiSaver and investments.
- Subtract any debts: mortgage, student loan, car loan, credit card/s.
- The difference is your net worth. If the figure is calculated based on jointly owned assets or debts, divide it in half.
Example:
Assets:
House: $1,000,000
Car: $20,000
KiwiSaver: $80,000
TOTAL: $1,100,000
Debts/liabilities:
Mortgage: $600,000
Car loan: $10,000
Student loan: $20,000
TOTAL: $630,000
Total net worth: $470,000
How your wealth might compare to the rest of New Zealand
- Less than $0 (lowest 10 percent of New Zealanders).
- $0 to $4000 (next 10 percent).
- $4000 to $15,000.
- $15,000 to $39,000.
- $39,000 to $92,000 (middle of the pack).
- $92,000 to $188,000.
- $188,000 to $301,000.
- $301,000 to $487,000.
- $487,000 to $860,000.
- $860,000 plus (top 10 percent).
Having crunched the numbers, Rashbrooke said the results show contrary to popular belief, New Zealand is not an egalitarian country.
"There are massive disparities - there are kids growing up in these families at either ends of the spectrum who are obviously going to have completely different opportunities," Rashbrooke said.
He says economic growth doesn't solve inequality. If the wealthy get wealthier, that money doesn't trickle down to everyone else.
"What we've seen is that doesn't really happen. If you look at incomes in the last 30-to-40 years, incomes have doubled for the richest New Zealanders, but they've barely increased for the poorest.
"After housing costs, the poorest New Zealanders have less disposable income now than in the 1980s," Rashbrooke said.
But the answers aren't simple. Resolving the housing crisis, encouraging savings for poorer families (for example a kids' KiwiSaver) and shared ownership for employees are among his suggestions. These initiatives could be funded through a wealth tax.
"A 1 percent levy on the largest fortunes: those over $2 million or $4 million," Rashbrooke said.
"If you put those things together, you'll be starting to make a real dent in levels of inequality."
