High Income Not Necessarily Equates With High Net Worth?

A TED talk “An honest look at the personal finance crisis” by Elizabeth White (July 2018) is a striking wake-up call for many. White, the author of the book “55, Underemployed, and Faking Normal”, described her ordeal of living on food stamps while maintaining a façade of middle-class normalcy. White is a Harvard MBA, former retail entrepreneur and C-suite executive, conventionally a far cry from this level of financial meltdown.

This is a surprising and poignant revelation.  And she is not alone – let’s look at some worrying trends in the US and Japan, two of the wealthiest countries in the world.

US – Financial fragility among middle-class

An illuminating study from Brookings Institutiongauged the financial capacity of Americans by asking respondents this question: “can you come up with $2000 in 30 days?”  Among the top 10% income earners, a whooping 21% replied: “certainly not able.”  Among those with college and graduate degrees, 30.1% replied the same.

According to a 2018 Magnifymoney.com report, the median savings of the top 10% of income households is US$156,510.  This is inclusive of all savings deposits and retirement accounts. The annual income of the top 10% earners’ starts at $157,5001.  A legitimate worry is whether these high earners would be able to sustain their current lifestyle upon retirement, or when facing contingencies like unemployment, critical illness or divorce.

Another thing worth noting: regardless of income, 29% of households have less than $1,000 saved.

Japan – A country of high earnings but low savings

In Japan, among the top 10% earning households with annual income of ¥15 million and above (around HK$1,080,000), 20% have a net savings of ¥1 million (around HK$72,000) or less2.  Typically, these are households whose earnings are tied up with the mortgage and expensive kids’ education, who find it hard to accumulate any savings. Many of them might financially struggle as they approach retirement age – the average age of this group is 54. They will almost certainly not be able to maintain their current lifestyle in their old age, even with the support of pensions and government allowances.

The Middle-Class Trap

High-income households are tempted to spending more to maintain a luxury lifestyle. The imported cars, the extravagance vacations, the private school for the kids, an expensive hobby – all these are seen as the “must-haves” of the affluent. High-income earners might also be a bit too confident financially, compared to people who earn less – in the Magnifymoney.com report, 41% of above average savers in the US are in fact from the bottom 80% income group.

The Road to High Net Worth

How to avoid this trap? Do the following ways to stay on track to reaching your financial goals.

  1. Live within your means

Even better, live beneath your means.  Keeping up appearances is far less critical than your long-term financial well-being.

  1. Keep a strict income-and-expenditure regimen

Have a long-term financial plan, then work out your monthly expenditure budget. Stick to it!

  1. Invest

According to a Citibank report on Hong Kong High Net Worth Individuals in 20183, 72% of this group’s wealth is invested in properties, the rest in stocks, bonds, and cash holdings. This explains the importance of investing.  While 55% of these HNWI earn an income from employment, they preserve and grow their wealth by investing.

Making a good income is an excellent first step towards financial independence. Now convert your hard-earned dollars into solid wealth with a good dose of forward planning and discipline!


  1. “Distribution of Household Income 2014”, U.S. Census Bureau, Current Population Survey 2015
  2. Data from Table 7.1, Savings and Liabilities, Family Income and Expenditure Survey, Japan Statistics Bureau. “Net savings” refers to savings minus liabilities.
  3. High Net Worth Individuals refer to those with investible assets of HK$10 million or over (excluding owner-occupied property)


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