How 4 families in Australia’s top 1% manage their money

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Have you ever wondered how the top 1% manage their money?

According to the ATO, the top 1% of income earners in Australia start at $237,300 but average $438,100. Inspired by this article from the US, readers asked me to do an Australian version. Below I interviewed some households with incomes above $250,000 for singles or above $400,000 if a couple.

Common Themes

Unsurprisingly when you speak with people in similar income brackets, common themes emerge.

1.) They get advice and have since before they were in the 1%

From early on they sought advice from professionals, well before they were on high incomes. It enabled them to make good financial decisions, budget, invest and as their income grew, they had teams in place to help them grow more.

2.) They have multiple accounts

Instead of having one account everything goes into and is paid from they have numerous everyday accounts, credit cards, mortgages and manage their money between them.

3.) They avoid debt

All credit cards are paid in full every month so they can accrue points but not debt. The only debt carried tends to be for mortgages on their own home or investment properties.

4.) They own their own business

They spent a few years learning what they needed to and working with others, with the business owners mentoring them, then branched out and spent a few years building their own business. They still have mentors or circles for advice though.

5.) A single focus

Each one has a single focus when it comes to their career or business. Whether it be property, business, finance, medicine or construction, they have all been dedicated to their industry from the beginning of their careers.

I spoke at length to many people in this income bracket, not just the ones interviewed below and these common themes continued in all the conversations. Here are the 4 who were willing to share their details, although their names have been changed.

Holly – age 33, married with 2 children living in Sydney

Occupation

In a property firm

How much do you earn?

$400,000 a year

What age were you when you started earning this much?

30. Prior to that, before building the business and while growing it, my average annual income was $80,000. So it was a few years on less money until we got to the tipping point.

How do you make your money?

I was a property valuer for about 10 years then started the business about 6 or 7 years ago.

If you have a partner, do you practice joint finances, separate finances, or something in between?

I’m married with 2 primary school-aged kids. We have joint finances, all joint accounts. When we were earning less we had a proper budget and were strict with finances. Once we started earning more, we didn’t really have a budget because we didn’t need it. We put everything on credit cards and paid everything off at the end of every month. We never had credit card debt. If ever we saw that going up significantly, for example, if one month was a couple of thousand more than the previous month we’d reign it in. But it wasn’t really a budget.

It was only when we bought our most recent home which increased our mortgage quite significantly, that we created a budget. Now we do have a loose amount to spend each month. Our budget is more a guide than hard and fast.

What do you have your money invested (not including retirement accounts)?

Mostly property. We have 4 or 5 investment properties now. My husband is a mechanic by profession so we have a lot of cars and tools and things like that which we have collected over the years and has a fair bit of value sitting in that too. It might not really be an investment, more of a hobby.

With the cars, we have two race cars which are vintage cars and we use as show cars. They have a fair bit of value and the more work he does the more they increase in value. I don’t think he will ever sell them though.

He buys things that need work, fixes them up and resells them. We invest $40,000 to $50,000 in cars which need a fair bit of work, then he will fix them and sell them.
In the past few years, I have started invested in artwork.I select the art based on what I like more than going after specific artists and have around $50,000 worth.

We haven’t really done a lot in the stock market but that is a focus for this year.

How many accounts do you have to manage your financial life (everyday account, savings, offset, retirement, mortgage, etc.)?

Too many! For bank accounts, outside of the business, we have about 8 because we just culled a lot. We have a few mortgages and loan splits, probably 10, on top of those 8 accounts and 6 credit cards. Our money bounces around the accounts week to week.

What’s in your wallet right now? (e.g credit cards, licence, photo, loyalty cards etc)? Do you regularly switch credit cards to take advantage of new bonuses?

I don’t carry my wallet with me. I have a phone with a cover with 3 cards in it (one card for business and two for personal) and I never carry cash.

In my actual wallet, I have a heap of loyalty cards, licences and things like that plus about 10 cents change. I always leave my wallet in the car though and just take my phone with the 3 cards.

What’s one money tip or piece of advice you’ve received that you thought was very helpful?

There have been two really good pieces of advice I have received around business and finance.
One was from my very first boss. Because I was in the property industry, he said to me “You’ll never earn enough in this industry, not for a very long time unless you get lucky to be wealthy, but you’ll learn enough to use your knowledge very wisely to be wealthy if you use it the right way.” Which is advice fairly specific to property and finance industries.

The other, more general piece of advice was when we bought our first business, which was my husband’s business, a mechanical one. We bought a 20 year old established business. The previous owner said to us:
“Nothing here is broken, so don’t go break it. Don’t spend any money for 12 months, unless it’s essential to run the business. And then after 1 year, when you’ve seen how it runs, and seasonal change and get to know the customers, then make all the changes you want. Change the name, change the finances, go buy the boat, go buy the cars, do whatever you want to do but just spend one year learning about how the cash flow of the business works and don’t go do anything because you don’t need to.”

That was the best advice ever. We spent the first year not spending unless we had to, we just followed their pattern and then we got a few little things at the end of the year, but really the things we thought we wanted, at the beginning of it weren’t the things we needed at the end of that year.

We then sold that business for a profit about 4 years later and gave the same advice to the new guys. And they went and bought all the newest and fanciest in the first year and now they’ve almost gone broke.

Learn the money management thing for a year before you go change the stuff.

Where do you like to splurge?

I’m not big into clothes or shoes, in fact, I only have one handbag. I bought my whole year wardrobe in the sales after Christmas. I splurge on horses, I like horse riding so I splurge on saddles and toys in horse riding, that’s my little hobby.

I splurge on artwork which is something I love. And jackets. I love jackets. I seem to spend a ridiculous amount on jackets, it’s about the only piece of clothing I really get excited about.

Dinners. My husband and I like to go out for dinners. Happy to spend good money on a really nice dinner out. It’s nice to take the kids out now too.

My husband splurges on anything to do with cars.

What are your best financial resources? e.g. recommended books, podcasts, websites, courses, a financial advisor etc.

I look at more business stuff such as The E-Myth which is very good for business owners to learn how to run a business, which directly impacts your finances. Good To Great is another fantastic book.

I haven’t spent a lot of time investing in financial education, mainly because my background and degrees are based on finances.

Do you have a team to help with your finances and how do they help? E.g. a virtual assistant, financial advisor, lawyer, accountant etc.

Sure do. We have a great financial planner we work with. A lot of people think financial planners are only for wealthy people but we worked with ours well before we had a few dollars to rub together just getting our super right and our insurance right. Now that we have more money we look at things like where do we invest and how do we use that money better.

We’ve got a great accountant. In my work and industry we work in the peripheral of a lot of accountants. My accountant is my go-to for everything, but I also talk with a lot of different accountants and go to their networking and events, learning about what they are doing, what they recommend and how all that works.

I have my accountant on speed dial. Anything we do, personally, professionally, everything we run past him. Even when we were looking at buying a new house, I rang him and said this is what we are thinking of doing and he said no!

Every investment property we buy is run past him. He said to me “Your business is for cash flow and property is for wealth. Look at it that way. Build the cash flow in the business, and if you don’t do anything with it when the business stops, the cash stops. Use the property to build your wealth.”

So I’ve always invested in property and done it really tight-knit with his advice. I have a great commercial lawyer we run everything by as well.

Pretty much anyone that sits in this space we work with.

Jane – 37, married with 4 children, living in Sydney

Occupation

CEO of my consulting company – previously was an independent business consultant

How much do you earn?

When I was consulting full time I would earn around $250K. Now that I have my own company, I only pay myself the income that I need – the rest is kept in the business. Plus I have investment income, so my annual income now is around $300-400K.

What age were you when you started earning this much?

31

How do you make your money?

My background is as a Business Consultant – but I now have a team of consultants working for me. When I decided to start my business, my role changed from consulting to building and running the company. I now earn more than I ever used to make on my own and I don’t have to do any traditional consulting work, giving me time and financial freedom.

I also have investments which pay dividends which supplements my income.

If you have a partner, do you practice joint finances, separate finances, or something in between? Please elaborate.

I am married but we’re both on our second marriage so we’ve decided to keep finances completely separate. We share in all expenses but since we earn about the same amount we don’t ever nit-pick on amounts, we just take turns and share the load.

At this stage, I own the home that we live in, so he pays me weekly rent to cover food and expenses. Therefore I pay the mortgage, the utilities, rates, buy the groceries and pay for any maintenance on the home. He ends up paying for things like dinners out and most of our holiday expenses.

What do you have your money invested (not including retirement accounts)?

Everything is in mutual funds. It’s the only way that I’ve found to guarantee steady a steady dividend income stream. I used to dabble in buying individual shares but they always crashed… so I don’t recommend that approach!

I thought about looking into buying a few properties in a few years when I sell my current home, but they can be high maintenance and I don’t really need the extra stress in my life.

How many accounts do you have to manage your financial life (everyday account, savings, offset, retirement, mortgage, etc.)?

Personal Credit cards (Visa + Amex)
Main banking account
Company account
Company credit card

The mortgage is through a small institution which doesn’t have any banking or offset facilitates.

Superannuation / Retirement (in a high growth industry fund)

What’s in your wallet right now? (e.g credit cards, licence, photo, loyalty cards etc)? Do you regularly switch credit cards to take advantage of new bonuses?

Credit Cards per above – all my credit cards earn FF points
Lots of loyalty cards (I am a big fan of cash back rewards – plus Woolies gives FF points)
Drivers Licence
Opal card
Gym card
Medicare/Health insurance card
My own business cards (lots of them!)

I don’t often change credit cards but I will be switching soon to a new Amex to get more Qantas FF points as the banks will no longer support that product.

What’s one money tip or piece of advice you’ve received that you thought was very helpful?

Pay for things in cash or if you use a credit card to get the points, pay off the card in full every month. Don’t spend what you don’t have, other than for appreciating assets such as real estate.

That includes big-ticket items. If you can’t afford it now, you certainly can’t afford it in a few months – you’re better off saving for things and then purchasing. Debt costs much more than just the money you pay at that time of purchase!

This also extends to services like Afterpay – do not use it, it’s a trap!

One more piece of advice…

If you have income which is not PAYG or franked (ie already taxed) then make sure to put half of that away in another account to pay taxes. The last thing you want is for tax time to come and you don’t have enough cash to cover your tax bill!

Where do you like to splurge?

We have a yacht which is very expensive to maintain, and we also race it so there is a cost to campaign. We also host lots of social engagements onboard – but we love entertaining so it doesn’t feel like an expense.

I used to buy lots of clothes and shoes – but I now have everything that I need so my main splurge is in fitness (I have a gym membership, weekly PT session, plus membership to a kickboxing gym) and then I need weekly Osteopath sessions to recover from all of the exercise! The total investment is around $250/week, but I’m in the best shape of my life and I feel great so I feel the investment is worth it.

We also have 4 kids in private school (we each pay for our 2 children) so that takes up a huge amount of our income. (My darling ex-husband doesn’t pay for a thing because he thinks I earn too much and therefore I should have to pay for everything. Another piece of advice for high-earning women – marry someone with the same earning capacity as you!)

What are your best financial resources? e.g. recommended books, podcasts, websites, courses, a financial advisor etc.

My only financial advice has ever come from my father. He is incredibly good with money and has taught me everything I’ve needed to know. He is very conservative – and when I previously took a risk against his advice I found myself in debt which took me a couple years to pay off.
In the next few years I will have more funds to invest, and as that happens, I will sit down with my father and discuss the options for investment so I can make that money work for me and my family’s future.
For those without a financially-savvy parent, I highly recommend getting advice from someone who has built their own wealth – many financial advisors are not financially free themselves, so be wary of any advice.

Do you have a team to help with your finances and how do they help? E.g. a virtual assistant, financial advisor, lawyer, accountant etc.

My Accountant is also a financial advisor who has helped me structure my business to align with my personal income. His firm takes care of all my regular filing with the ATO and provides me with advice as required.

For the rest of my finances, I have full control – I manage my own company accounts using Xero (checked by my accountant) and I ensure I know where every dollar is at any point in time. I check all my accounts regularly and also look at my credit card charges to ensure they are all accurate.

Peter – Age 53, married with 5 children, living in Melbourne

Occupation

CEO own medical business with multiple branches.

How much do you earn?

I take a wage of $400,000, although the business earns considerably more and pays for much of my lifestyle.

What age were you when you started earning this much?

43

How do you make your money?

My income comes from my business. I started in the medical industry straight out of university. In my twenties, I bought my first business, followed by another and so on until I got to where I am now.

I have 4 investment properties too, however, they are more about capital growth than cash flow.

If you have a partner, do you practice joint finances, separate finances, or something in between? Please elaborate.

We’ve been married for 28 years. All our money is combined. We both work in the business, though my wife also took care of the children when we were younger and growing everything while juggling it all. We agreed from the beginning this is how we would manage our finances and family.

What do you have your money invested (not including retirement accounts)?

I have 4 properties and the business which has 5 branches.

How many accounts do you have to manage your financial life (everyday account, savings, offset, retirement, mortgage, etc.)?

We have 4 everyday accounts, two savings accounts, 2 personal credit cards, 2 business credit cards and mortgages with various institutions.
Plus we each have a superannuation fund.

What’s in your wallet right now? (e.g credit cards, licence, photo, loyalty cards etc)? Do you regularly switch credit cards to take advantage of new bonuses?

I carry a planner still, even though I could go electronic. My planner has my credit cards, licence and a few loyalty cards.

I don’t tend to regularly switch credit cards though I have managed to accrue enough points regularly for us to travel for free.

What’s one money tip or piece of advice you’ve received that you thought was very helpful?

You aren’t always right. My wife gave me that advice early in our marriage! I tended to be headstrong and prideful when younger. As a result, I made some deals I should have walked away from, got messed around in a partnership and really put our family at risk.

Once I listened to her advice, I started to consult with others more about my finances and business then things began to boom.

Where do you like to splurge?

We love to travel and I have learnt how to sail. We have a yacht which we use a fair bit and plan to use more now we are looking at retirement properly.

Overall, we don’t view the way we spend our money as splurging. Having done a lot to get to the point we are, we view it as enjoying our life. We both drive cars we love which seem extravagant to others, we built our dream home, have provided for our kids and we’ve taken up some hobbies which seem expensive to others.

As we keep everything within our budget, nothing is viewed as a splurge.

What are your best financial resources? e.g. recommended books, podcasts, websites, courses, a financial advisor etc.

The Richest Man in Babylon was one of my favourite books when I was younger. Coming from a religious background, it was an easy read for me and made sense.

Most of my education has come from experience and turning to professionals rather than books or podcasts etc.

Do you have a team to help with your finances and how do they help? E.g. a virtual assistant, financial advisor, lawyer, accountant etc.

Absolutely. I have an accountant who I have been with for years, a great lawyer and financial advisor. All decisions relating to the business and our finances are run past our team as needed.

Mary – 47, two adult kids, single, living in Melbourne

Occupation

Consultant

How much do you earn?

$500,000 for my personal wage derived from my company. My investments and the company make significantly more.

What age were you when you started earning this much?

26, however, I come from a wealthy family so had the resources available to invest, set myself up and derive income from various sources.

How do you make your money?

I have invested in a selection of companies which I get a percentage of profits from. These all go into my company, which I derive an income from. Separately, I also do consulting on a limited basis for a few exclusive clients.

If you have a partner, do you practice joint finances, separate finances, or something in between? Please elaborate.

I am single and if I were to partner again, finances would be separate. My children live with their father and are adults now, so my money is mine and I like it that way.

What do you have your money invested (not including retirement accounts)?

Various companies I am part owner of, some shares and two properties.

How many accounts do you have to manage your financial life (everyday account, savings, offset, retirement, mortgage, etc.)?

I have a few for the business, but for my personal accounts, I have an SMSF, 4 everyday accounts, a savings account and no mortgage.

What’s in your wallet right now? (e.g credit cards, licence, photo, loyalty cards etc)? Do you regularly switch credit cards to take advantage of new bonuses?

I have an extremely messy handbag instead of a wallet. I tend to throw everything in it from my cards to sunglasses, hand cream, wipes, paperwork.

I don’t often change credit cards as chasing points isn’t something I need to bother with.

What’s one money tip or piece of advice you’ve received that you thought was very helpful?

You become the equivalent of the 5 people you spend the most time with. As such, I have a carefully curated selection of people I associate with regularly who are all on my wealth level or higher.

Where do you like to splurge?

I tend to splurge on parties and I buy a lot of alcohol. I own my house outright, have no desire to invest in properties, I am bigger than I want to be so clothing doesn’t interest me and I love my car. I love to entertain and have been known to spend large sums of money on parties.

What are your best financial resources? e.g. recommended books, podcasts, websites, courses, a financial advisor etc.

My parents were my best financial resource. My father taught me everything about money, investing, buying into companies and how to set myself up from a young age. He also connected me with his networks making it easy for me to follow in his footsteps.

While I wasn’t close to my mother, I learnt a lot from her example, how she managed her business and she gave me advice.

I have an MBA and have educated myself through work in various companies which I found infinitely more valuable than any book or other resources. Learning for yourself is the best way.

Do you have a team to help with your finances and how do they help? E.g. a virtual assistant, financial advisor, lawyer, accountant etc.

Absolutely, I have all of the above, however, while I do have them for advice and managing my life, I know where all my money is coming from and where it goes. I don’t let anything happen without knowing about it. It is my money and my life we are playing with, so I don’t leave it to chance.

What do you think? Is it how you expected Australia’s wealthy to manage their money? What would you differently if you were on $250,000+?

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