Just how much is enough?
“Everything would be fine if I won a couple of million on the Lottery,” is an oft-quoted line of the aspirational, greedy, desperate or just plain dreamers; that covers most of us then.
A million used to be deemed sufficient; a tantalising seven-figure sum which, for decades, represented the ultimate financial ambition of many people. For a while, as property values careered upwards, it looked as though a period of mass wealth was upon us.
No longer. The collective value of our net assets have fallen markedly over the past 5-6 years as property prices have slumped in most areas and investment returns remained frustratingly depressed. Folks in their forties and fifties, previously planning to retire at, say, 65, are re-assessing their futures, a process which involves a calculation invariably indicating the need to spend a few more years at least in gainful employment.
But precisely how long? What does it take for most of us to consider ourselves well-off, or even wealthy?
According to the Wealth Sentiment Survey, commissioned by insurance group Skandia International, the worldwide price of happiness is an average of $161,810, or a shade over £101,000 a year.
People based in Dubai require considerably more to make them happy (£172,000), which tells you more about the emirates’ cost of living than any form of inherent, Gulf-induced avarice. Britons, apparently, are prepared to make do with less than half this sum (£83,000), while our German friends would be content with a mere £54,000.
Of course, as we constantly remind ourselves, money and happiness are often mutually exclusive and a bulging bank balance is not necessarily enough to promote a sense of satisfaction with one’s lot, though it helps, a point reiterated in the Skandia report.
So if, on average people aspire to an annual income in excess of £100,000 – I assume that’s a net figure because HMRC will take roughly half of that in one form of tax or another – then how much is needed, in terms of capital or net assets, to make us feel wealthy?
The Wealth Sentiment Survey found that amongst people working in Singapore, for example, the definition of ‘wealthy’ was a little over £1.8 million, with Dubai and Hong Kong only a couple hundred thousand behind. Across Europe, by contrast, our requirements we much more modest, with a net figure of around £650,000 seemingly enough to suffice the average citizen. The global average is £1.1 million in net disposable assets.
Following the survey’s publication, Phil Oxenham, Skandia International’s marketing manager, said: “These figures are, of course, aspirational and for most of us, the important thing is to have a financial plan [to] make sure that we are saving as much as we can to give us financial security.”
While hardly representative, the survey offers a guide to how people across the world define wealth, though it tells us nothing about how they plan to accumulate it. Thankfully, Mr Oxenhall is right to highlight the need for regular financial planning, irrespective of where you might be on the often rocky aspirational road to wealth.
And should you think that an elusive Lottery win solve all of your problems and make you wealthy, consider the following.
Imagine you won £3.5 million on next week’s Lottery and decided to pack work in, pay off the mortgage and other debts and buy a bolt hole in the south of France. Let’s assume you’re left with £2.5 million which you decide to place in a bank saving account paying 3% gross interest per annum. This would generate £75,000, on which your savings interest tax liability would be £15,000, netting you a still handsome £60,000 a year.
The fact that this is well short of the £83,000 figure which would, apparently, make most Britons deliriously happy, emphasises the importance of professional financial planning advice. It’s worth thinking about as you hand over your £1 coin this weekend in the hope of becoming seriously wealthy.
posted on 27 November 2012 09:02 byPJS