How rich is really rich?

It’s one of the great Australian dreams. Every Saturday night, thousands of Australians try their luck on lotto, hoping their numbers will come up and they will become an instant millionaire.

For many Australians, winning $1 million dollars would make many of their problems go away. But does $1 million really make you rich?

Unfortunately, a million dollars ain’t what it used to be – many property owners living within five kilometres of a major Australian city would fit the bill, based only on the value of their home and the money in their superannuation fund.

So how much money do you need to be classified as rich?

It’s a vexed question, but a recent survey of a group of 1,001 Americans with investable assets over $1 million (that is, assets excluding the family home and retirement savings) and average wealth of $3.5 million, might provide a few answers.

The survey found that 42% of respondents did not feel wealthy and when asked what amount of money would make them feel wealthy, the answer was very specific: $7.5 million.

US investment firm Fidelity Investments, which conducted the survey, says there are some good reasons for the $7.5 million benchmark.

Those respondents who said they did not feel wealthy tended to be older and could see the end of their working life rushing up to meet them.

“Every person in the survey is wealthy,” Fidelity executive Sanjiv Mirchandani told Reuters.

“But they are still worried about outliving their assets. Wealth is relative, and to some extent the more you have the more you realise how much more you need.”

It’s a lovely problem to have, of course and it’s not a surprise that the findings have been lampooned in the US media in recent weeks.

But while $7.5 million would be beyond the wildest dreams of most households (and this correspondent) there is a group that would consider $7.5 million to be pocket change – the members of the world’s rich lists.

These wealthy entrepreneurs have a very different idea of just how rich you need to be before you are truly wealthy – and having a fortune with eight digits isn’t necessarily enough.

With this in mind, let’s try and classify the different wealth ranks that the rich list members – or would-be rich lists members – might fall into.

Unlike Fidelity, we’ll use net worth rather than investable assets (as that’s what rich lists are based on) and start from smallest to largest.

Bear in mind, this is an attempt to classify wealth from the point of view of the very rich, and some readers will think these wealth bands are way off. I’d love to hear your thoughts in the comments section below.

Well off

Research firm DataMonitor classifies “mass affluent” as having more than $50,000 in investable assets and says this group is set to grow rapidly in size across the Asian market in the next few years. This mark might work in Asian countries, but it feels very low in terms of Australia. Perhaps a better definition of affluent for Australia would be having net assets between $3 million and $5 million, taking into account a valuable family home, a portfolio of investment properties or shares and decent superannuation savings.

Merrill Lynch Global Wealth Management says there were 173,600 Australians with over $1 million in investable assets at the start of 2010-11, which suggests our “well off” category has at least this number of members.

Wealthy

The next step up might stretch from $5 million to $20 million and would likely include entrepreneurs with a successful mid-sized business, or a well-respected senior executive with substantial equity and/or a long career of highly-paid roles. They can afford to use accountants, lawyers and advisers from the top end of town and may be near the end of their career.

Examples might include well-paid executives with stakes in their business such as Domino’s Pizza CEO Don Meij (who owns $18.2 million worth of shares) or Woolworths boss Michael Luscombe (who owns $14.2 million worth of shares),

Rich

This category would stretch from $20 million to $180 million – outside the rich list, but not far off. Most of these people would own a successful mid-to-large business or stake in a large business that they have founded, although some may be high-earners such as entertainers and sportspeople. People in this band would also own substantial property assets and have a portfolio of other investments.

Examples might include Andrew Bassat of Seek (who owns a stake worth about $90 million) or singer Kylie Minogue, who is said to be worth over $40 million.

Super rich

The cut-off for last year’s BRW Rich 200 list was $185 million and that’s where the super-rich category should start. These people will own a largish business (or a stake in one) or a large portfolio of investments, particularly property.

Examples could include anyone on the lower half of the rich list – Greg Norman (who has an estimated fortune of $285 million), Chris Corrigan ($225 million) and Flight Centre’s Graham Turner ($365 million).

Ultra rich

Now we are getting serious. This category starts at $500 million and goes up to $1 billion and is almost entirely restricted to company founders who own or have sold their business.

Based on the BRW Rich 200 list, Australia has just 46 members of this club, including John B. Fairfax, Paul Little and Ron Walker.

Billionaire

A very, very small club. There are just 30 in Australia and just 1,200 around the world. Almost exclusively, they are company founders of large, well-known businesses, or are the descendants of the founders. They’re typically older (most in Australia are heading towards or past 70 years of age) and often own multiple businesses – Gerry Harvey (retail and thoroughbreds), James Packer (gambling and media) and Paul Ramsay (healthcare and media) are all examples.

Mega billionaires

Welcome to the 11-figure club. This is the very top of the tree, where only those with more than $10 billion are welcome. Warren Buffet, Carlos Slim, Bill Gates and Larry Ellison are the mainstays, along with a number of members of Wal-Mart’s Walton family and luxury king Bernard Arnault.

Australia doesn’t technically have a member, although Gina Rinehart (officially valued at $9 billion in February by Forbes) is filling out her application form.