To live in Monaco at all, you have to have loads of dollars. This tiny country in Europe has a population of only 40,000 people, making its population compared to a Midwestern city in the United States. Nevertheless, one-third of those people are millionaires, and the country has been nicknamed “the billionaires’ playground.”
Monaco’s people are not necessarily wealthy, however. The government has created tax-friendly policies that encourage millionaires to move there. With the country itself functioning as a giant tax haven, its beaches are lined with yachts, and home values have an average value in the tens of millions.
The United Arab Emirates, or UAE, is a small country in the Arab Gulf, and one of the wealthiest countries in the entire world. The region does have the largest oil fields on the planet and with oil comes money. An influx of oil money after World War II caused parts of the Middle East to become immensely wealthy. The United Arab Emirates is one of those countries, and its income threshold to be considered rich is so high that you need to make $922,000 a year to be in the top one percent.
Today, the country has a diverse, international population of people attracted to its global cities, most notably Dubai and Abu Dhabi. The UAE is attractive because it does not have an income tax for high earners; its government and public services are funded almost entirely through oil revenue. Despite having an exceptionally high threshold to be in the top one percent of earners, the average income hovers at about $40,000. Why the discrepancy? Because many of the people who do service work in the UAE come from impoverished countries such as Bangladesh and India and are paid meager wages for their work.
Bahrain is another tiny country in the Arab Gulf flush with oil money. It’s less diverse than the UAE, but only slightly. International residents take advantage of its oil wealth and tax-friendly climate. With so many people earning high incomes in Bahrain, you need about $485,000 a year to be in the top one percent.
That number is about 10 times higher than the average income, which is roughly $45,000. Like the UAE, many service workers come from impoverished countries and make low wages drive down the average salary. One payoff of being wealthy in Bahrain is that, like the UAE and Monaco, the country is a giant tax haven. There is no income tax for those in the highest income bracket because, like the UAE, the country’s government and public services are funded almost entirely through oil revenue.
Remember, in the United States, you need to earn about half a million dollars per year to be in the top one percent and considered rich. However, in Australia, that number is more than halved at only $246,000. That number is before taxes, though, as those in Australia’s highest income bracket have to pay about half of their earnings in taxes.
Australia is one of the countries whose government believes that wealthy people have an obligation to those who have less money. While many wealthy Americans turn to philanthropy to redistribute their wealth on their own terms, the Australian government requires that those in the top income bracket pay their fair share for social services.
Western European countries have economic models that are more socialist than America. These governments tax the wealthy to redistribute income to fund social services for the poor. There is much less income inequality in Western Europe than in the United States.
For example, in Germany, a country where the average income is about $47,000, you only need to earn $277,000 per year to be in the top one percent of earners. In the United Kingdom, that number drops to $248,000. And in France, it is only $221,000. In Italy, those in the top one percent of earners need a paltry $169,000 a year, much more than the country’s average income of about $33,500. Not that these countries are any poorer than the United States, they merely have laws that promote more income equality.
India is the superstar of developing nations, with rising exports fueling the growth of its middle class. But on a global scale, India’s income rates are still relatively low. You only need to earn $77,000 per year to be in the top one percent of earners in India, an income on the low end of average for the middle class in the United States.
India’s population is enormous and growing by the minute, so being in the top one percent means being one of 13 million others. Income inequality in India is still quite massive. Despite an economy that appears to be booming, much of the population still live in squalor and poverty, with the average income only $2000 per year, a lower $167 per month.
South Africa is a country that has long been plagued by income inequality due to Dutch colonial rule that led to decades of apartheid between black and white people. The average income there is only $5,570, and for many living in slums, it is much lower.
Yet some in South Africa enjoy a luxurious lifestyle. Those who make upwards of $188,000 per year (still middle class in America) are in the top one percent. They can afford to do almost anything they want in a country full of natural beauty with relatively low living costs.
China is a communist state, where much is based on the principle that income should be evenly divided among the workers, an economy’s means of producing wealth. However, China, like India and many other non-communist countries, has recently seen the rise of a middle class and an elite wealthy class, indicating income inequality that is hardly Marxist.
To be in the top one percent of earners in China, you need to make only $107,000 per year. However, reaching that much money is de-incentivized. Those making that much money are taxed at 45%, a similar rate as the highest-earning brackets in many socialist countries. So despite an economy that is taking over the world, becoming rich in China is still very difficult. The average income in China is only about $9500.
Brazil is another developing economy that has seen booms alongside a fair share of criticism for burning the Amazon rainforest. With an abundance of natural resources and government policies that promote economic growth (often at the expense of the environment), Brazil has seen the rise of a middle class and a strengthening economy.
To be in the top one percent of Brazil’s earners, you need to make $176,000 per year. But most of the country’s citizens make far less than that amount, with an average income of less than $10,000. And there is a significant gap between the rich and the poor. Still, if you can earn upwards of $100,000 a year, you could have a very comfortable lifestyle in Brazil.
The Northern neighbor of the United States could hardly be more different in terms of policies. Canada veers towards socialism in terms of redistribution of wealth. The average income in Canada is about $45,000 per year, which is lower than the US and reflects a lower cost of living.
In the United States, you need half a million to be in the top one percent, Canada’s economy is so different that you need less than half that amount to be considered rich. Far from being a tax haven, like Monaco, the UAE, Singapore, and Bahrain, those in the upper-income bracket in Canada pay about one-third of their earnings in taxes.
Income inequality is the gap between the top one percent and everyone else. The top one percent tend to hold an inordinately high level of a country’s wealth. In some countries, laws favor “everyone else” by taxing the wealthiest people and using those taxes for public services. Other countries, however, tax laws favor the top one percent and, in some cases, encourage those at the top to hoard money.
While some argue that a fair economic system encourages those who “have what it takes” to get to the top, others disagree. Moreover, there are plenty of studies to show that when public services, such as schools, are not funded, an uneducated populace leads to an uneducated workforce. The result is a lower quality of life for everyone including those at the top. After all, even the wealthy fare better when those around them are educated and competent.
You can have an income of a million dollars a year, but if you spend all of it, you are not accumulating wealth. Many of the world’s wealthiest people spurn high fashion labels, such as Gucci and Louis Vuitton, and prefer to drive standard automobiles instead of Cadillacs and Rolls Royces. They understand that to build wealth you can’t just make money; you have to use and save money wisely.
Nevertheless, other forms of wealth have little to do with having a high income. Some of the world’s happiest people are middle class. They have plenty of money to provide for their own needs and some of their wants, and most of their energy is focused on the people they love instead of wealth.
Having an individual income means you have spending power, but it does not necessarily mean you’re rich. You can spend that entire income maintaining a lavish lifestyle and still be paycheck to paycheck. But then you’re no better off than someone who makes much less. Without assets, investments, and other forms of wealth in place, any economic downturn that causes you to lose your income can devastate your finances. And little things matter. If you don’t have adequate insurance and have a medical catastrophe or your house gets destroyed, you immediately lose that investment.
And no, a luxury car is not an investment. Cars lose 20% of their value the second you drive them off the lot. A vehicle has the job of getting you to where you need to be safe. It is not an investment. Make sure that when you are considering what wealth is, you are considering all factors. Income can disappear just as quickly as you can spend it. Wealth has to be built over a lifetime or over generations.
So how much do you need to be in the top one percent? We saw the answer varies from one country to the next throughout this article. In oil-rich countries, such as the United Arab Emirates, that number will remain high. In developed countries, that number may be lower but reflect generations of wealth that a family has acquired.
On a global scale, if you have $745,000 in income, assets, investments, and other things, you’re in the top one percent. So if you have a house that is worth $750,000 and is fully paid off, you are in the top one percent, whatever your income is. If your income alone is $745,000 and you have no savings, you are in the top one percent but with a thin margin.
You can request that your wealth be used to buy a fancy coffin, but you can’t take your money with you when you die. Moreover, remember that while having enough money to have a comfortable shelter, food, and clothing is certainly a component of a “good life,” the moments that make up each of the days that you live don’t consist of money but instead of memories.
Memories are created by doing meaningful things with the people that you love. Make sure that in your efforts to build up wealth and secure a good life for yourself and your posterity, you are not neglecting the most important people in your life.
The axiom says that money cannot buy happiness, and it’s true. Money can buy many things and help you have a comfortable life; after all, who wants to go through winter without adequate shelter and heating? Yet there are some things that you have to look for outside of your income.
Studies consistently show the happiest people are not necessarily those who acquire the most money but rather the ones who give it away. They support causes that they see as worthy. Some choose to donate money to charities that support the homeless, while others contribute to environmental causes. Others give towards children’s issues. Whatever they consider valuable, they find meaning in letting their money go towards something greater than themselves. In doing so, they help to build wealth for all of humanity.