Why a spare million dollars won't put you on the rich list

Being a millionaire just means there's a new level of things you can't afford, writes Sylvia Pennington.

Back in the day, ''millionaire'' and ''rich'' were considered synonyms, but it's not so straightforward in 2012, when six-figure salaries are commonplace, and a spare million dollars buys only modest suburban comfort.

Most of us would have no trouble picking out the well heeled in our midst, but identifying what puts them into the wealthy club has become more subjective than ever.

James Gerrard, a financial planner at PSK Financial Services in Sydney, says having $1 million to invest in addition to the family home is the minimum you need to join the high net worth club.

You'll be joined by a swag of baby boomers and the odd Gen X and Y who've come into money early or done well with a business venture.

"People in this category include pre-retirees who've sold something, been made redundant or accumulated steadily over the years," Gerrard said. "It's rare for those under 50 who haven't had a windfall, inheritance or floated their own start-up to have this kind of cash."

Thirty-something accountant Daniel Pluta agreed. A partner in his own firm alongside wife Natalie, he describes his own position as "comfortable". The pair have restrictions on what they spend, chip away at a mortgage and adhere to "some sort of budget".

Pluta says being wealthy means not having to do any of this - and having enough put by that working is optional.

"You would need to own your own home and perhaps a holiday house fully paid off, some investments in shares and plenty of cash reserves," he said. "Being wealthy is a mirage - the closer you get to it, the further away it is. As you accumulate wealth there are always new things to spend it on and a new level of things you can't afford."

For Peter Maniaty, the creative group head at Sydney advertising agency Euro RSCG, it's less about the balance sheet and more about the vibe.

"For me, it's about happiness and a lifestyle that's genuinely free from financial anxiety," Maniaty said.

"By this definition I don't consider myself to be wealthy, even though I earn a reasonably high income. If my wealth was a pair of shoes, they'd be a size too small. Yes, I can squeeze into them but it's not especially comfortable. Oh, and there's a constant threat of blisters."

For those not yet at the point of living off their interest, a family income of $250,000 will gain entry to the working wealthy club, Gerrard said. This sum - typically in the form of a $200,000 breadwinner's salary and a $50,000 top-up from a partner working part-time - gives a combined net income of $14,500 a month. It's enough to cover the $6500 payments on a $1 million mortgage, living expenses of $5000 and leave $3000 for the slush fund.

It's far from a fortune - but certainly enough to pay for a nice home, holidays and perhaps the lease on a set or two of European wheels as well.

And flush enough that you can scrape along without the 30 per cent private health insurance rebate, according to the government's reckoning. Come July, families earning more than $260,001 will no longer be eligible for this concession, while, over at Centrelink, family tax benefits cease being paid when a couple with three children pulls in more than $163,885.

But while $260,000 a year may have you paying more for your hospital cover, it's far from sufficient to get you into a wealthy person's ''des res'' in Australia's priciest market, according to those who sell them for a living.

Hamish Robertson, a luxury property specialist at John McGrath agency in Sydney, said, by real estate agents' rule of thumb, premium properties start at $3 million plus - putting them beyond the means of many working wealthy couples, unless they've had their nose to the golden grindstone for some time.

Heavy-hitting professionals in their 40s and successful, self-employed businesspeople make up the bulk of the premium market, Robertson said, while higher up the ladder again, the really rich roost in super-premium waterfront homes costing $10 million and up. Typically it won't be their only perch; most in this group also own a farm or beachside getaway.

For many wealthy folk and wannabes, stashing the cash is not enough - they need to know they're doing it faster than those next door. This is one reason people seek the help of financial planners, Gerrard said. "People do voice concern as to whether they are keeping up," he said.

"Everyone is looking at the Joneses … They look at what the neighbours have and feel quite poor."

This article Why a spare million dollars won't put you on the rich list was originally published in The Sydney Morning Herald.