How rich are you

How rich are you?

How to compare your wealth with other New Zealanders, but should you?

There is a handy online tool that enables us to measure how we stack up financially against other Kiwi’s, though before we get to that, let’s ensure we’re using it for the right reasons…

Comparing our riches – why would we?

Humans are designed to understand ourselves and the world around us. The ability to reflect upon things is one of the defining characteristics of humans.

This is what makes us look up at the stars and ponder our purpose, keeps us from acting out of turn at a work Christmas party, and pushes us to cooperate and compete with the other highly evolved apes (humans) we interact with every day. This means we constantly evaluate ourselves and others in domains such as attractiveness, wealth, intelligence, and success. According to some psychological studies, as much as one in ten of our thoughts involve comparisons of some kind. Psychologists think we determine our own social and personal standing based on how we stack up against others.

Wealth comparisons: the good, the bad, and the ugly

Good comparisons. Comparisons can be beneficial when we compare ourselves to others as a way of measuring our personal development or to motivate ourselves to improve and, in the process, develop a more positive self-image.

In addition, many studies have shown that friendly competition can be highly effective in pushing us to do better, for instance to exercise more regularly.

Bad comparisons. Just as comparisons can motivate us to improve, it can also lead us to judgmental, biased, and overly competitive or superior thoughts.

Ugly comparisons. Most of us have the social skills and impulse control to keep standards for social comparison to ourselves, and not to act on any envy or resentment spurred by comparison-making. But our true feelings may brood under the surface, or perhaps be expressed in non-verbal ways. At worst, we could hold on to simmering guilt, envy, or remorse, or perhaps engage in destructive behaviours like lying.

How rich are we?

So, before we figure out how rich we are compared to other Kiwi’s, hopefully we’ve now confirmed we’re doing it for healthy reasons!

NZ wealth comparison tool

We can all see how our wealth measures up against the rest of New Zealand with this simple to use online tool provided by Statistics NZ. We just have to input our:

  • Household type,
  • Annual earnings,
  • Assets – what we own, and
  • Liabilities – what we owe

Of course, this tool is imperfect, as age can’t be entered-in, and there is some doubt that the wealthiest New Zealanders would give their information to Statistics NZ anyway – if those people haven’t then that has altered the overall comparison data.

How wealthy are you - should you compare your riches to others

Another comparison – comparing ourselves with ourselves

The famous book, The Millionaire Next Door, was written after the authors conducted exhaustive multi-year research on self-made millionaires. They eventually determined a basic formula based on our age and income so we can all see how we are tracking wealth-wise. It goes like this:

[Your age] x [pre-tax annual household income from all sources, except inheritances] / 10 = your “expected” net worth.

For example, a 30-year-old with an income of $75,000 would calculate it this way:

30 x 75,000 / 10 = $225,000

From there, the authors categorise us all in one of three ways:

1. Under accumulators of wealth (UAWs) are those whose real net worth is less than one-half of their expected net worth.

2. Average accumulators of wealth (AAW) are on par with their expected net worth.

3. Prodigious accumulators of wealth (PAWs) have a net worth twice their expected level. This group are what the authors called “builders of wealth”

How did you compare?

Depending on our age group and situation, the goals we all aim for can vary widely. If someone thinks they’re lagging behind: there are plenty of ways to increase wealth and improve the situation.

To learn more get in touch.

How rich are you? – the bottom line

Hopefully, we all enjoyed making a harmless little comparison or two.

Though even if we’re comparing wealth, we should be mindful there’s a lot more to riches than just dollars and cents. For most of us, health and happiness are probably top of the list – anyone who has those is as rich as can be!