There are a few entrepreneur characteristics that you find more often in the self-made wealthy than in other homo sapiens.

Most entrepreneurs have something to prove to the world, for instance, and the few who don’t usually want to change it.¹

And they all want to be rich, too, whatever they say – if only in that we all secretly want to be rich (even if we’re aware that there are pros and cons to being wealthy).

What about creativity? Tenacity? A head for numbers? A nose for a deal?

These supposed key traits seem to be as randomly distributed amongst entrepreneurs as Mr Potato Head pieces stuck onto spuds in a blackout.

Loathe gritty Duncan Bannatyne and would rather make money like Warren Buffett? Pick your hero and go for it.

Prefer Bannatyne’s hands-on approach to ex-Dragon Richard Farleigh’s airy-fairy theory? The world’s your deep fried Mars bar.

Types of entrepreneurs: The Visionary

Examples: Steve Jobs, Anita Roddick

Anita Roddick

Visionaries are entrepreneurs driven by a desire to change the world – and the capacity to imagine how to do so.

Vision on its own is just daydreaming, so such an entrepreneur needs other skills to make the vision a reality. Steve Jobs boasted the attention to detail of a reigning monarch, as well as a genius for design and consumers’ desires.

But it was his vision that made transformative products like the iPhone and the iTunes store, and so turned Apple into the world’s largest company.

• Key strengths: Imagination, egotism, seeing the big picture, attracting brilliant followers.

The Adventurer

Examples: Richard Branson, Donald Trump

Richard Branson

If Richard Branson had been born 600 years ago, he’d have been a tussle-haired knight with a winning smile, eager for his next campaign.

Branson is in it for the means, as much as the ends. Obviously he likes money, but it’s an enabler and a way of keeping score. It’s the excitement of execution that gets his blood going – and when that’s not enough, he puts his life in danger some other way, such as his balloon rides.

Adventurers may boast crossover traits with other entrepreneurial classes, but they’re primarily adrenalin junkies who you couldn’t pay to give up their ‘fix’.

• Key strengths: Bravery, energy, tenacity, ‘work hard / play hard’ culture.

The Opportunist

Examples: Alan Sugar, Duncan Bannatyne

Lord Alan Sugar

One reason the communists never stood a chance is that nothing moves as fast as money. From market traders to multinationals, plenty of business is inspired by seeing an opportunity – a gap in the market, a product that’s a hit in a distant land – and racing to profit from it.

Alan Sugar in the 1980s is a great example of an arch-opportunist. He only got into electronics by accident, and he no more dreamed Steve Jobs’ dreams of a PC revolution than he imagined he’d shave wannabe moguls calling him ‘Sir’ on the BBC. Yet for more than a decade nobody in Britain did a better job at spotting gaps in the market and making a killing.

Opportunism doesn’t mean thinking small. At one point Amstrad commanded 25% of the European PC market!

• Key strengths: Spotting gaps, speed of execution, cost to market.

The Asset Allocator

Examples: Warren Buffett

Warren Buffett

Some people wouldn’t call Warren Buffett an entrepreneur.

But I would.

Ultimately all successful entrepreneurs thrive because they put existing resources to a more productive use for profit, whether they’re selling a job lot of fancy duvets at an East End market or combining great design and a bunch of previously unconnected bits of technology to invent the iPhone.

Asset allocators are the purest example of this – they cut out the messy production lines and marketing campaigns.

When an asset stripper flogs apart a business to create something worth more in pieces – or when Warren Buffett sees a company’s true worth before the market and directs his capital towards it – I’d say they’re adding value.

• Key strengths: Valuation, number crunching, curious, thick-skinned.

The System-iser

Examples: Henry Ford, Akio Morita

Henry Ford

Some people are brilliant at process. Henry Ford is an obvious example, having pretty much invented the modern production line.

I think you could put a lot of creative industry wealth creators into this class, too.  Such people often think they’re visionaries, but really they’re great at turning creativity into something that runs to a schedule, and therefore can be bottled and sold.

Process is what turns brilliant prototypes into consistent profits. Every penny you can shave off every stage of the production pipeline – or every feature you can pack in that increases value ahead of your cost – builds value.

• Key strengths: Strategy and logic, attention to detail, employee management.

The Specialist

Examples: Bill Gates, Felix Dennis

Felix Dennis

Some people have a calling – a field they were born to. Luckily for them, capitalism enables the business-savvy ones to make a bucket of loot, too.

Bill Gates is a good example. Whereas it’s relatively easy to imagine Steve Jobs running Pixar, the animation house he acquired in 1986, it’s pretty hard to imagine Bill Gates watching a Pixar movie.

Jobs rose to eminence in computing partly because the number of technology-literate people who wouldn’t wear socks in sandals is vanishingly small. In the 1980s, it was close to zero. Jobs was a designer who could have turned his hand to many other different fields, albeit it less mega-successfully. Gates would have been a patent lawyer or an engineer if born a couple of decades earlier. He needed personal computers to unlock his brilliance.

This sounds a bit mean-spirited, but I don’t mean it that way. The world is full of specialists who turn their love and aptitude for a certain field or product or service into something we all rely on, from scientists to architects to artists.

They are lucky that a few can make a lot of money at it – because they’d be doing it anyway, even if they couldn’t.

• Key strengths: Dedication, motivation, knowing themselves.

The Small Business Person

Example: At a corner shop near you

A Subway store, yesterday.

There’s something belittling about the label ‘small business’ that probably begins life in the boys’ changing room at school.

Happily, in the business world size matters but it’s all relative – and having your own modestly statured company is the number one outlet for those determined to be entrepreneurs.

Many entrepreneurs would rather be top dog at a tiny company they own than to be a ‘Senior Divisional Manager for EMEA and Innovation’ at some giant.

The best franchises offer a great take on this entrepreneurialism. Few are the children who dream of selling foot-long sandwiches, cleaning drains, or supplying offices with photocopying paper. Yet plenty of people who have a yen to make money have made fortunes by implementing other people’s systems with a tenacity to terrify the competition.

The average freelancer or contractor is a small businessman or woman, too. In fact, anybody who is not working for a monthly pay slip would do well to consider themselves Me PLC, rather than as a worker for hire. As well as potentially making you more money in the short-term, it might get your mind ready for when you want to expand.

• Key strengths: Flexibility, personal relationships, stamina.

The spare room / free time entrepreneur

Example: Everywhere!

Step into my office... (I wish!)

Thanks to the Internet, it’s probably never been easier to start a side business while staying in your day job.

Making a decent side income, well that’s another matter.

Even the communists at The Guardian have been running a series on being a website mogul, but in truth it’s much harder to make money blogging than it seems. eBay is also increasingly the domain of the big winners.

But there are plenty of other avenues to explore – and the harder or more specialised the better, as there’s much less competition.

Think hard about what you can bring to market. The cost of starting a side business is usually low, and even a little extra income can be worth a lot.

You probably won’t make a million, but a successful part-time business could get you on your way!

• Key strengths: Desire, time management, and caution.

Don’t forget us when you make it

Before you get carried away, please review some of the reasons NOT to start a business.

I always get nasty comments when I point them out, but survivorship bias looms large when we forget that the few famous entrepreneurs – even the hundreds of relative unknowns in the Sunday Times’ Rich List – stand on the broken backs of uncountable also-rans.

So be sure to consider your own opportunity cost.

And then do it anyway.

If you’re really an entrepreneur, that is.

Have I missed out any particularly interesting types of entrepreneur? This is a very broad church, so let’s have your ideas in the comments below! Otherwise read Felix Dennis’ How to Get Rich, which is probably the best DIY guide ever written to grubbing about for treasure.

1. This and the rest of the article is based on my fairly numerous personal encounters with successful entrepreneurs as well as copious reading. Plus the movie Brewsters Millions.

Further reading:

1. UK Entrepreneurs’ Tax Relief raised to £2 million
2. Entrepreneur characteristics

The death of Steve Jobs saw huge media coverage and an outpouring of emotion across Facebook and Twitter.

For those of us who were geeks before most people had heard of the word – let alone before it became a bit cool – it was all rather surreal.

Don’t get me wrong – I was adding to the eulogies, too. Steve Jobs has inspired me since I first encountered the Apple story back in the early 1980s, when I was reading books like The Hacker’s Handbook and programming my dad’s clunky PC to simulate a Pentagon computer. It began a love/hate relationship with technology that continues to this day.

Steve Jobs was the inspiration behind my attempts at entrepreneurship, too. If it weren’t for Jobs, Branson, and a handful of others, I’d never have considered that business could be as revolutionary as art or rock and roll.

Most people saddened by the death of Jobs don’t think about business like that, of course. They simply buy the products and feel a kinship, in defiance of Douglas Coupland’s prescient warning that: “shopping is not creating”.

The genius of Jobs’ Apple was that he made consumption feel like creating.

Once only a small band of Apple aficionados felt this way when they used Apple products, but now half the world does.

Hence the adulation and grief people expressed at the passing of a fairly ruthless businessman whom they’ve never met, and maybe never even thought that much about.

The characteristics of entrepreneurs

One positive side to Steve Jobs’ death is that many more people will hear his inspirational messages. Perhaps a few will then go on to become entrepreneurs.

My favourite of his quotes comes from his now widely cited speech to graduating Stanford University students in 2005:

Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything ­– all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important.

Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

Yet while many will be inspired to ‘go it alone’ by Jobs’ bold words and the driven way he lived his life, others may be less likely to try, because Jobs’ C.V. reinforces a narrow view of what an entrepreneur should be.

People who might be very credible in business could look at Jobs’ showmanship and his manic obsession with quality and secrecy and think: “Nah, that’s not for me”.

But that would be very wrong.

The reality is there is more than one way to skin a cat – and there’s more than one way to skin a hundred cats a week to turn a profit.

There’s no ‘one size fits all’ entrepreneur. Steve Jobs was no pile-them-high box shifter, Richard Branson is no mild millionaire next door, and Warren Buffett is definitely no gruff Duncan Bannatyne.

And that’s worth stressing because the popular media’s view that an entrepreneur must be a swash-buckling thrill-seeker or else a dedicated nerd puts off many people from considering starting a business.

I’m the first to stress the many reasons not to start a business. But thinking you’re missing out on some clichéd entrepreneur characteristics isn’t one of them!

Role your own mogul

We humans love to categorise, though, and we also like to have role models. It’s usually the same for those who start businesses.

True, a few entrepreneurs grow unthinkingly into the role from their everyday activities, while others become entrepreneurs because they just couldn’t work for someone else. They’re unemployable!

Yet even these ‘accidental tycoons’ usually cite success stories – if not outright role models – that they admire.

For this reason, I’d suggest that anyone thinking about starting a business gets reading. After digesting a few good biographies, you’ll appreciate there’s a wealth of different entrepreneur characteristics, and no billionaire can claim to have even half of them.

Here are ten good books – and ten very different entrepreneurs – to get you started:

• iCon Steve Jobs (Steve Jobs)
• Losing My Virginity (Richard Branson)
• Titan: The Life of John D. Rockefeller, Sr. (John D. Rockefeller)
• What You See Is What You Get (Alan Sugar)
• How to Get Rich (Felix Dennis)
• Anyone Can Do It (Duncan Bannatune) [My review]
• Business as Unusual (Anita Roddick)
• Enter the Dragon (Theo Paphitis) [My review]
• Andrew Carnegie (Andrew Carnagie)
• The Snowball (Warren Buffett) [My review]

Like anyone else, entrepreneurs have a huge variety of flaws too, but I think we’re all best concentrating on our strengths and finding people who can compensate for our weaknesses, rather than trying to do everything.

That said, you can flip most entrepreneur characteristics to reveal a potential failing – so risk-takers can be overconfident, numerical people too obsessed with detail or budgets, and so on.

Finally, I don’t think a ‘huge desire for money’ is the defining characteristic for most entrepreneurs.

Obviously it’ll be in the mix for many, but there are quicker and easier ways to make a bit of cash than starting a business if that’s your main goal.

Most people driven primarily by money will go into sales, property, or finance, depending on their aptitude, rather than risk having no money at all due to a failure in business.

And there’s no shame in that, as long as it’s true to their desires. As Jobs (and many before him) also said:

“Your time is limited, so don’t waste it living someone else’s life.”

Part Two will be a spotter’s guide to common types of entrepreneurs. Subscribe to make sure you read it!

Further reading:

1. Types of entrepreneurs
2. UK Entrepreneurs’ Tax Relief raised to £2 million
3. How to make money developing iPad apps

The Money Grower from the Mon£yGrow£rs blog shares some insights on starting a business.

I am always impressed by people who set goals and stick to them. My own life has been less planned, in that wonderful things have happened but more by luck than design.

Some people would call it making the most of opportunities; some would call it sheer good fortune. Either way is OK with me.

In this article, I will tell you how my partner and I accidentally started a business, the ups and downs that have followed, and what I have learned along the way.

From sickness to starting a business

In mid-2003, I had a sudden and severe illness. The repercussions of the illness threw our household out of its normal equilibrium and into financial uncertainty.

Since my health was now my number one focus, I spent large chunks of time researching my condition on the Internet. One day I stumbled across a book by an expert on the subject, which I bought from Amazon. On receiving the book, I knew I had found a way to help me to help myself to get better and went on Amazon and bought all the books the doctor/author had ever written.

Inadvertently, I bought a duplicate copy of one of her books. And that was how our business started.

Instead of returning it to Amazon, I decided to see what would happen if I sold the book on Amazon as a third-party seller. Amazon allows anyone to sell books on the Amazon site and takes a cut of any books you sell.

Within two days, the book sold. Soon I had half our book shelf listed on Amazon – not because I wanted to get rid of my books, particularly, but because I was thrilled at this new way of selling.

Most of the books sold and a few didn’t.

Developing a nose for business

We started going to charity shops and car boot sales where we picked up books for between 50p and £2. Again, most sold and a few didn’t but overall we were well up.

More importantly, we were getting to know our market and refining what we bought.

After a month or so, we discovered remainder books. The best way I can explain remainder books is by giving an example: when the film Star Wars: Phantom Menace came out, the publisher had millions of books printed because they thought the film would be a blockbuster. As it happens, the film was a relative flop and no-one wanted the books so they got shipped off to the remainder warehouses. We wouldn’t touch them either – they were remaindered because no one wanted them.

Conversely, when a book goes to print for say 1,000 copies, the printer may do 1,100 copies to allow for damages. It is cheaper and more efficient for the printer to do one print run with too many books than to do an original run and then another one to compensate for damages or misprints.

Taking the case of the above example, if only five are damaged, that leaves the printer with 95 copies to get rid of – which they send to the remainder warehouse. If the book is a good title and appeals to a niche market then that is exactly what we are looking for. We are value hunters. (Or pigs snouting for truffles, if you prefer your metaphors more graphic!)

From Amazon to an eBay business

A few months later we found some huge remainder warehouses in America that had trade-only online websites. At the time the dollar/ pound exchange rate was approximately £1 = $2, which was fantastic for us as importers.

Our first order was the biggest we ever placed. However although the book prices were very reasonable, we had forgotten freight charges. The quoted freight price was more than double the price of our book order!

Luckily for us, US internal freight charges were more or less included in the book prices. My sister, quite fortuitously, lives near Boston and we had the boxes shipped to her. She then sent them to us via the surface mail, which was dirt-cheap.

Although the boxes took about two months to arrive, we started ordering every two weeks so that once the first two months had elapsed we started getting a steady delivery of boxes through.

A few months after that we started selling on eBay, too, and our earnings from the business outstripped my earnings from my day job.

This all happened within six months of that first book sale.

High rollers (of trolleys)

We were soaring high and gaining every more confidence. I decided that the packing materials we bought from shops on the High Street were a cost that added no value to our customers’ overall experience. Our customers weren’t bothered if we used a 70p envelope or a 30p envelope, as long as their purchases arrived in good condition.

The bloke at our local Post Office told us of a trade-only warehouse that supplied stationery items at wholesale prices. We go through a lot of brown tape and padded envelopes so I rang them up and asked what we needed to open an account. Unfortunately for us, they wanted trade references and headed company notepaper, neither of which we had.

So, during an unusual moment of bravado, I went down to the warehouse and began filling trolleys with heaps of padded envelopes. Padded envelopes are extremely large for their weight, and so our trolleys looked more impressive than they actually were. I banked on them not turning away our business due to our impressive looking haul.

Fortunately, those piles of padded envelopes were enough to persuade them that we were bona fide trade customers, and they signed us up with an account there and then.

There was very little downside in those early days of starting a business. But nothing in life stands still, and we soon found things became more difficult.

Risks to our eBay business

Our Amazon and eBay business does not have any real barriers to entry. Even though we do have a deep knowledge of what books are likely to sell, I am under no illusions that this knowledge can keep us ahead of the pack.

Sure enough, things gradually started to awry:

• eBay made it very easy to check what other sellers have sold. This is like having ready made market research – great for the competition but not so great for the original seller.

• One of the remainder warehouses we used decided to sell some of their books on eBay and Amazon themselves. That cut one of our supply lines.

• My partner chose not to scale our business. In hindsight, I think this was the right decision, because I think it would have been too risky.

• The dollar started to strengthen against the pound and the books we got from America were not such great value.

• The surface mail delivery option was scrapped, which meant one of our delivery lines was cut.

• If you sell on eBay and Amazon, you are somewhat at the mercy of how they choose to order their search results. Their game, their rules: like it or lump it.

• Charity shops started selling online, too, which meant a further depleted supply line for us.

Also, as the years have gone on the price we get for each book has decreased slightly. That’s natural and to be expected when there are now so many competitors in the market place, each willing to take a quid or so less than the next seller. There is nothing we can do about that, so we focus on value.

• Pricing: Sometimes we see titles that we know will sell. But we also know the prices we can sell our books for. If the price isn’t right, we walk on by. That’s hard sometimes, especially when we are short of stock.

• Patience: There have been many occasions when we’ve been quoted a price for a book title and it’s been too high for us. That’s fine because we understand that the people at the warehouse want to get the best possible price for their books, too. All of the remainder warehouses know about the Internet but their business is shifting hundreds, if not thousands, of books in one go. They are not interested in selling one-offs here and there. Occasionally, after weeks or months, they will drop their prices to levels we can work with and we will buy.

• Research! One of the things about the business we are in is that titles that are popular very rarely stay that way. At one time we did a booming trade in an autobiography about Donny Osmond. The books, which we sourced from the USA, were selling at upward of £30. But when the book was republished and the market flooded with new copies, the price plummeted.

10 tips on starting a business

This all leads me nicely onto the lessons I have learned from starting our eBay business:

1. No one except you cares if your business succeeds or fails. In the early days, you may find your family are keen for you to return to a proper job with a steady salary. (In fact, your business is unlikely to be considered a proper job until you live in a mansion and employ other people).
2. If you are onto a good thing, enjoy it while it lasts but be aware it’ll only be a matter of time before you have your imitators.
3. Change happens. Learn to embrace changes especially the changes you can’t control.
4. Being your own boss brings many rewards but it is hard work. You do everything and are everything to your business.
5. It’s easy to be motivated when things are going well. It’s when things aren’t going well that you need a backbone to stay motivated.
6. If you cannot (or don’t want to) scale up, then you must be constantly on the look out for other ways to add value or breadth to your business.
7. Network with your suppliers, customers and anyone who has a tangential connection with your business. You never know where your next opportunity will come from.
8. Learn your market, cut costs, strip out the fat or non-productive activities from your time, and provide a service that exceeds your customers’ expectations.
9. Never underestimate your costs. When we sell a book, we pay eBay fees, postage fees, tax, and packing materials. They add up.
10. Be prepared to step out of your comfort zone. If you don’t have the stomach for it, self-employment is probably not for you.

So where will we be five years after accidentally starting a business? What about ten years?

I can’t answer that. What I do know is that whatever we have, it won’t look like it does now. Just as we’ve done to-date, we’ll have to bend or else we’ll break, like a tree in the wind.

Check out the Mon£yGrow£rs blog to read more hard won wisdom!

Further reading:

1. Opportunity cost when starting a business
2. Seven reasons why you shouldn’t start your own business
3. Scrapping of the 10% starting rate of income tax

Young corporate go-getters are often amazed at the attitude of their more jaded peers.

They find some people who’ve been ‘enjoying’ the grind for a decade or more feel entitled to goof around to make the day more bearable.

Early in my wage-earning life I met one of them, a pleasant middle-aged bloke – let’s call him Graham – who told me he adopted a ‘two-for-one’ principle. For every two hours he worked, he took one hour off.

Graham explained that the company sucked up so much of his week, and was run so poorly and inefficiently, that he had to strike back for the sake of fairness.

What about the workers?

Graham hadn’t got a raise or promotion in years, and he moaned about that, too. But what really mattered to me was Graham and I worked on the same projects!

Being young and keen, I wanted to get my stuff done, impress the right people, and push on. By either delaying our projects or forcing me to cover for him, Graham was wasting my time, as well as his and the company’s.

Parkinson’s Law says that ‘Work expands so as to fill the time available for its completion’. It was coined in the 1950s in an Economist essay.

Despite this, I liked Graham a lot – he was helpful, friendly, funny, and even wise in an office otherwise populated by Aspergic alien body snatchers. As I got older, though, I became fed up with his sort of attitude – and others who felt entitled to a sick day every three weeks, and malcontents who’d actually sabotage projects as a misguided blow for workers’ rights.

I wasn’t especially bothered by the impact on my employer’s margins of their actions, even if I myself felt (and still do feel) a moral duty to do a day’s work for a day’s wages. I was never a fan of the rat race – I just wanted to work on interesting stuff – and I already suspected that Graham was correct that management buffoonery was at least as wasteful as his own scheduled mini-breaks.

No, what got me was I felt taken advantage of by my own peers. I became sick of covering for people who’d skip work with a mild headache (perhaps brought on by the sunny weather) or those whose lunch meetings always ran until 4pm (perhaps because of the wine…) A couple of years in work stripped away any lingering leftist sentiment held over from my student days.

Older and even more cynical, I now see this work ethical peer pressure is part of what makes a modern company tick in place of the rigid strictures of yesteryear. I felt a rebel, but I was allied with The Man…

…almost, but not entirely. When I saw a chink of light, I ran for it, went freelance, and used techniques such as the 80/20 rule and Eating The Frog to double my productivity and income, while dumping stress like a balloonist ditching ballast.

The Pareto Principle, also known as the 80/20 rule, can change your life. In summary: A few big clients make you most of your money. Your greatest skill is your key earner. Most of your time should be spent doing a few important things. And so on. You’re either in the 20% who try it and live by it, or you’re one of the 80% who’ll never get it.

Nailed it

Completing a day’s profitable work by lunchtime once you’ve escaped from the Kafkaesque drag of office life is a heady feeling. But of course the natural order of things strives to out.

After a few months of spectacular efficiency, Graham re-entered my life – only this time he was the flipside of my conscientious Protestant personality.

Compared to wayward freelancers I’ve known (with vices ranging from Australian soap operas and a gardening fetish to life-threatening substance abuse), my own version of Graham was a home office nuisance as opposed to an agent provocateur.

Looking back, I wish I’d taken a few more of the summer afternoon walks he touted. But mainly he encouraged me to waste countless hours on the newly-fangled Internet. Still, this was when I deepened my interest in investing my own money, and though it now took until 2pm to get that day’s work done, in the long run it was time well wasted.

Moreover, I was wasting time on my terms, and could immediately see any impact on my own finances. The Heath Robinson pipeline of cause and effect of the modern office is stripped when you’re freelance to a hammer and a nail.

Hit insufficient nails with your hammer – or hit them screwy – and you don’t get paid. No blaming another department’s poor tools. Nobody cares.

Poacher poached

I immediately loved being a freelance and I’d recommend it to anyone.

Yet as I write – and this is the grand reveal of this post – I’ve actually been in a full-time job since the start of this year.

Given how much I’ve maligned office life during my four years of blogging, I knew I’d have to come clean eventually.

The good news is I’m not about to recant. My employer is genuinely one of the good ones, but sometimes I still feel like a Native American rounded up and penned in to whittle wooden wigwams on a reservation.

The time wasted on the traditional office routine can be extraordinary. My old routine of getting up when I naturally woke up (invariably between eight-thirty and nine) and slotting breakfast, showering, a spot of lunch, and maybe a bit of laundry into screen breaks – has been replaced by the archetypal soul-crushing London commute that puffs out a near-7-to-7 working day and leaves you scrabbling to squeeze in domestic life at the edges.¹

“I work all day and get half-drunk at night,” said Philip Larkin. Too right – except he didn’t have to suffer the London Underground to get back to his favourite pub.

A fair cop out

Why then am I doing a job? Because I’m field-testing corporate life and rechecking my prejudices just for you – my dear readers.

Okay, not really. The truth is at a certain point last year my hitherto Teutonic efficiency turned into Old Bloc bungling. And as is the freelance way, I immediately saw it in my bank balance.

There were a lot of factors involved in this farrago, most of which are very personal, nothing to do with money or work, and not something we can generalise into a ten-year itch of the self-employed.

Put simply, I looked about and realised if I didn’t get a bucket of cold water in the face, I could soon be graduating from daytime TV and lolling about in the garden to something far more… unproductive.

The Office

So I got a job somewhere interesting, to push skills I haven’t previously tested enough, in an area that interests me.

And it’s been… okay.

Most of what frustrated me before about full-time employment before can still be frustrating, while like the lead character in Douglas Coupland’s Girlfriend in a Coma I’ve also stepped into a new world of grief.

For example, when I was last in full-time employment, mobile phones, email and remote working systems were all still a novelty. As a freelance I used them all to the hilt, and didn’t mind the way they mixed up work and post-work – but it feels more of an imposition coming from an employer.

But to be honest, I now see it’s not them, it’s me. I suspect if full-time office life annoys you, then it will always annoy you, whatever your urgent motivations for returning to the workforce.

For others, a secure place of work is a comfort. Most of my colleagues seem pretty satisfied with a day’s pay in exchange for the routine and rigmarole. They don’t appear to share my fear that I’m tossing away precious time like sending glinting 50 pence pieces tumbling into a dark and deep well.

Even old Graham knew his place. For all his griping about the waste of corporate activity, office politics that make Labour Party scheming look like a chinwag between Ghandi and Mother Teresa, and about the bizarre doublethink that sees nobody at work saying what they mean and even fewer doing what they say – for all that, Graham was a corporate creature. He was finely tuned to work’s ecosystem, and to its 47-week seasons. He’d starve outside of it.

Me, I’m from the high plains. I’ve come down to the city seeking work, weapons, and perhaps a few tattoos.

But one day I’ll go home.

1. To be clear, I mean I wake and start preparing to go to the office about 7, and I eventually get home around 7, too. I do not work all 12 hours in an office. I am not mad.

Further reading:

1. The Micawber principle
2. The number one money maker for 99 per cent of people
3. Do you hate your work?

Update: The March 2011 budget enacted the following tax brackets and allowances as expected. The three pieces of news on income tax: 1) The personal tax allowance will rise again in April 2012 to £8,105. 2) Personal allowances will rise with CPI, not RPI, which will continue the stealthy tax increases. 3) Income tax and national insurance is to eventually be merged.

Most people know their height, their shoe size – to be frank, most men spent a sweaty teenage moment measuring themselves with a ruler.

In contrast, an awful lot of people have no idea where the different tax brackets start and end, nor where their income sits within them.

I find that pretty ironic given how much time we spend at work, wishing we earned more money, not to mention all the debates about public services, taxes and spending.

Like nearly every student with a soul, I was a leftwing tax-and-spender before I got my first full-time job. Then I started work, saw how much money was taken out of my meager reward for ramming my head repeatedly into the coalface for 40 hours a week, and, economically at least, my head turned rightwards. (It also spurred me into getting into a more fun line of work!)

If you’re not a socialist at 20 you haven’t got a heart, and if you’re not a capitalist at 30 you haven’t got a head.

With the country confronting a towering national debt and the righteous mob on Question Time rejecting all specific proposals to tackle State bloat, you might think it’s a wonder that income taxes haven’t risen yet.

And you’d be right to wonder, because although it attracted little popular comment, in 2010 income taxes did rise.

From 6th April 2011 they’re rising again. Yet just like last year, nobody seems to have noticed. That’s because income taxes are rising the modern way, by stealthy adjustment of the 2011-2012 tax brackets and ignoring the reality of inflation.

Let’s get back to basics and look at the numbers.

2011-2012 income tax allowances

Everyone has a personal level of income that we’re allowed to earn before the government starts taking its share via tax.

What this sum is for you depends on your age and your total income in the tax year, including income from all sources such as pensions, investments and so on.

Here are the basic allowances¹ for 2011 to 2012, plus last year’s for context:

The hiking of the basic personal allowance to £7,475 is the good news on income tax this year. A higher allowance potentially reduces tax bills (though the changes we’ll get to below will outweigh the benefit for higher earners), and it is rising in line with the Coalition’s aspiration that the first £10,000 you earn should be tax-free – an aim I for one support.

Those approaching or gallivanting within pensionable age have something to cheer, too, with their personal allowance rising to £10,090.

If you’re on a much-coveted six-figure salary, things aren’t so good. As of last year, anyone with an income over £100,000 sees their personal allowance reduced by £1 for every £2 of income above the £100,000 limit. This applies irrespective of age, and further increases higher earners’ marginal rate of tax.

For more details of the more Byzantine age-related allowances, see the income tax allowances page from Citizens Advice Bureau.

2011/2012 tax brackets

The rate of tax you pay depends on your total income from all sources – salary, gross cash interest, dividends, pensions, property letting income, and so on.

Add it all up to get your total income, and then subtract your personal allowance from the table above to see which tax bracket you fit into:

For example, if you will earn £40,000 in 2011/12 from all sources and you’re under 65, then your taxable income is £40,000 minus your basic allowance of £7,475, so £32,525.

That will put all your income within the 20% tax bracket, as it’s less than £35,000; you’ll pay no tax on the first £7,475 you earn, and 20% on the remaining £32,525.

Two complications:

The special savings tax rate of 10% is for savings income only, and so is only really relevant to those living off their capital and/or their spouses (in which case make sure you have investigated HMRC’s little-known form R85 to get your interest paid without tax taken off). If you have non-savings income above this limit (basically, you have a job or income from some other source) then the 10% starting rate for savings doesn’t apply.

Dividend income from shares is taxed differently again: there’s a 10% ordinary rate; a 32.5% dividend for higher rate taxpayers; and as of last year a new dividend additional rate of 42.5% for any lucky Monevator readers earning over £150,000 a year. (Note the rate you pay in practice is lower – see my article explaining tax on dividends for more information).

A fiscal drag

Provided you know roughly what income you’ll get from your day job plus other sources like share dividends, you should now have a pretty good idea of what tax you’ll pay in 2011-12.

Are you feeling het up about it? I hope so!

Most middle-income earners are paying more tax than they might have expected to a few years ago, and they don’t even realize it.

Check out the table above and you’ll find the 40% tax bracket in 2011/12 starts at £35,001, whereas it previously began at £37,401. RPI inflation is running at near 5%, yet the higher rate band wasn’t raised, but lowered!

According to the Institute for Fiscal Studies, 750,000 more people will be paying higher rate tax next year as a result.

Remember too that this follows the freezing of the higher rate threshold last year – whereas in the good old days it used to go up with inflation.

True, the personal allowance has been raised. But the net result is most people earning over £42,475 will be a higher-rate taxpayer in 2011/12. Had the threshold been raised with inflation over this year and next year as usual, rather than frozen this year and then lowered next year, then a back of a napkin calculation says you’d have to be earning at least £46,000 before you paid the higher rate.

And it gets worse.

National insurance also goes up on April 6th

You remember they’re putting up National Insurance in 2011, don’t you? Yes, you do. Oh – as they said on Father Ted – you do you do you do.

Okay, of course you don’t. I admit I’d almost forgotten.

The National Insurance rate is to rise from 11% to 12% for employees, and from 8% to 9% for the self-employed. Effectively it’s a 1p in the £1 income tax rise.

Lower earners are cut some slack, in that the threshold for National Insurance is rising to £7,225.

But higher rate tax payers (mostly those earning over £42,475, remember) will see an extra 2% National Insurance deducted off their pay above this level, as well as the 12% that will be deducted from earnings below the threshold.

At 2%, this so-called ‘higher rate national insurance’ has doubled, and it means purported 40% tax payers are now paying 42% on earnings in the higher rate bracket.

Resistance is tax-efficient

Perhaps you think all this is a fair price to pay for the banker-brokered recession, the Brown government’s overspending, and to curb how deep the subsequent austerity measures need to be to keep interest rates low in order to bail out those millions who over-stretched and won in the housing bubble.

I’m not sure I do, though – and I’m certainly not going to leave a tip.

As far as I’m concerned, a total tax take approaching 40% of GDP is plenty for the government to be getting on with. Cut stupid spending beyond that and focus on real need instead.

However, I’m also a law-abiding citizen; in practice, resistance means taking sensible steps to avoid paying more tax than you have to.

To start with, use as much of your ISA allowance and/or a pension to shelter your savings in the years ahead, and take steps to manage capital gains tax.

Higher rate taxpayers in 2010 might also want to consider making last minute contributions before April 5th into a pension. Done carefully, you can effectively get the 40% tax you pay wiped out via a reclaim on your self-assessment form, though remember you’ll probably pay some tax when you withdraw the pension income later.

Even I, a confirmed pension-o-phobic, now prefer to lock away some of my money for 20 years in a pension rather than chuck it away pay 40% tax on it.

I’ve previously used VCTs to reduce my income tax bill, but as my income has increased in the past 18 months and I’ve already got more than enough horridly illiquid VCTs, I bit the bullet and opened a Self Invested Personal Pension (I’ll write more on why SIPPs and recent changes to legislation have made pensions more palatable in a future post).

Taxing matters for the hardly rich

If you live in Hull or Anglesey, perhaps it seems rather mean-fisted of me to be earning a higher-rate salary and yet trying to shelter every penny I can from tax.

To which I say: Let me take you by the hand and lead you through the streets of London. Or at least take a look at what £250,000 buys you in terms of a home down here in the South East.

Higher-rate taxes are no longer the preserve of the wealthy by any sensible definition. And so nor is tax avoidance (as opposed to illegal tax evasion).

Finally, if you are proper income-wealthy – that is you’re earning over £100,000 a year – then you’ll need specialist advice or a lot of long nights with boring documents. The political imperative to meddle with the tax system for maximum democratic output has made taxes above that level about as predictable as a silver orb flying about a pinball machine I’m afraid.

The bottom line is taxes are going up from April, and you’ll have less money than you might have expected, especially as wage growth is running well behind inflation, and VAT got hiked this year too, so most things cost more. Take cover, or take the pain.

Further reading:

• Hargreaves Lansdown has a great page on all the various tax bands.
• Use this calculator to see how much more tax you’ll pay in 2011/2012.

1. Special allowances apply for elderly married couples and blind people. See this HMRC table for details

Further reading:

1. Do you realise you’re paying more income tax?
2. Reduction of basic income tax rate from 22% to 20%
3. Warning: UK personal tax rates are changing, and you need to know how

Jobs aren’t ideal for most of us, but they’re our number one moneymaker. It’s counter-productive to hate work when it mostly has to be endured.

Besides, the alternatives – extreme early retirement, starting your own business, or death – all have downsides.

For some reason, however, more and more people seem to be finding the very nature of modern work intellectually intolerable.

Is this due to the changing reality of work? Or is it due to the growing post-Boomer-era feeling of self-empowerment – and dare I say self-entitlement?

Why you hate work

I’ve been having this very discussion over on Monevator reader ermine’s excellent blog. In Digital Taylorism – Why our Jobs are Getting Worse he writes:

When I started work at my current company as a lowly grunt Assistant Engineer, I had the authority to fill in a purchase requisition for up to £500 without higher level authorisation, and that was about right for the level of work. It wasn’t generally abused, either.

Now I have to get authorisation from the next level up simply to buy a rail ticket, and that next level has to get the okay and a reference number from some other part of Business Operations. I don’t know what you have to do to buy pens and paperclips these days.

He goes on to explain that he used to find software development a creative process, but now finds it as rigid as any production line. He quotes a Guardian article that itself quotes an academic paper on the subject:

[From now on] “permission to think” will be “restricted to a relatively small group of knowledge workers in the UK”.

The rest will be turned into routine and farmed off to regional offices in eastern Europe or India.

Ermine’s post follows a coherent and consistent line on his blog – modern life is rubbish, it’s increasingly justifiable to hate work, and he’s determined to get out.

It’s well worth a read.

Work was never all that for most people

It’s my contention though that work was mostly always rubbish for the educated classes, and that it’s only nostalgia that causes people to believe otherwise.

As for the ‘working classes’, only a fool would want to die at 50 after three decades working underground in a pit, or to sew buttons onto jeans in a factory all day.

I understand the sense of community that went with those jobs, but even that was a corollary of a far tighter social straitjacket than any modern workplace will lock you into.

The music changes, the technology too, but young and idealistic people keep getting older, and in my view that’s why people hanker for a crummier past.

As I commented to ermine:

In my view, you’re really describing how big corporate companies were a fun place to work 20-30 years ago, but aren’t now.

But these days the bright jobs are in start-ups or finance or working for yourself.

The old days, whether tugging at Mr Mainwaring’s forelock or working down a pit or being a shop girl in Woolworths, were no fun.

At least you don’t die at 50 of coal dust inhalation now if you’re a bloke down a pit, or have to put up with the boss calling you a ‘silly girl’ between pinching your bum in the typing pool.

Graduating to office politics

Another mistake when comparing then and now is to believe the hype about education and social mobility.

The small number of 50- to 60-somethings who were educated in the grammar school system after passing their 11+ and who went on to university were cut from entirely different intellectual cloth to the great mass of the near-50% of students that now enjoy higher education.

That’s not to disparage people trying to better themselves – it’s a statistical fact.

All students from across the eras were not created equally. The 11+ passer was the elite achiever of his (or more rarely her) generation – the equivalent of today’s multiple A* student who aspires to earn a fortune in law or The City or medicine. And if anything, those that climbed out of the comprehensive school system were even brighter.

It’s therefore madness to compare the average earnings of that small number of graduates from 30-50 years ago with the vast body of graduates today and to be surprised at their declining average fortunes, when the talent pool is so different.

Similarly, it’s dangerous to conclude jobs are getting worse because lots of graduates find themselves doing rote tasks once employed.

Plenty of people graduating now would have been in the typing pool or junior bookkeepers or the equivalent 30 years ago. They wouldn’t have moved along the same escalator of progress enjoyed by the educational elite that dominates the chattering classes. They wouldn’t have been thinking much in their jobs 40 years ago – and they’d have had to call the boss ‘Sir’ and wear a suit in summer, and beg the bank manager for a mortgage and a lot of other restrictions, too.

The problem is fairly average students have been sold the lie that they can do and be anything they want. The average wage in an average office that awaits them is a big comedown for the thousands who graduate with degrees in theater, music technology, photography, or marine biology.

Besides, post-Industrial Revolution progress has been about taking something done by specialists or artisans and finding a way to do it using less skilled operators and machines so it can be mass-replicated at a lower price.

Those bemoaning how much software engineering or surveying have become routine tasks perhaps don’t realize that it’s financial engineering and architecture – or even interior design – that are attracting the truly smart thinkers today.

If we’d stood in the way of this trend, we’d still be buying woolen waistcoats for a month’s wages and darning them two decades later.

(Just ask your nearest Luddite).

The 1970s: Just as easy to hate work (and your boss)

Of course, as I discovered when I challenged the strange draw of sweatshop manufacturing or the equally perverse hatred of free trade, the idea that our jobs are getting worse is probably too deeply embedded in the popular imagination to be easily assuaged.

People forget the downsides of yesteryear – the numbing computer-less record keeping, the drab offices, the strict hours, the routine bullying and sexism, the choking paternalism (and cigarette smoke!), the one-company-or-you’re-out career paths, the lack of Facebook at your desk – to focus on today’s vague existential problems, which are a lack of self-fulfillment or intellectual stimulation.

But even these woes are nothing new.

One of the best TV sitcoms ever was The Fall and Rise of Reginald Perrin. Adapted from a novel of the same name, it was all about a middle-aged, middle manager’s inability to find happiness at Sunshine Deserts – a bland corporation on a featureless trading estate on the edge of the commuter belt.

Not only was the hero Reggie driven deranged by those supposedly halcyon bygone days – when the format was updated in 2009 it didn’t really work, because the new Reginald Perrin was free to flirt with his female co-workers, play with email, and work from home.

As for the non-spiritual annoyances – the overly enthusiastic upstarts, and the boss promoted beyond his competence – they were just the same as ever.

The hollow middle-classes

I’m not dismissing anyone’s views about work out of hand, and there is certainly a discussion to be had here.

Even The Economist has been on the case, citing a study called Job Polarisation in Europe that purportedly shows the middle-class being hollowed out:

In the 1970s and 1980s employment in quintessentially middle-skilled, middle-income occupations—salespeople, bank clerks, secretaries, machine operators and factory supervisors—grew faster than that in lower-skilled jobs.

But around the early 1990s, something changed. Labour markets across the rich countries shifted from a world where people’s job and wage prospects were directly related to their skill levels. Instead, with only a few exceptions, employment in middle-class jobs began to decline as a share of the total while the share of both low- and high-skilled jobs rose.

On the face of it this backs up the critics’ case, but I’d need to dig a lot deeper into the research before I accepted the conclusion that IT has replaced swathes of back office middle class jobs, to the detriment of that cadre of employees.

I don’t deny computers have had this affect (I saw my father do it at company after company, like some Grim Reaper of the CPU-powered Apocalypse) but I don’t accept the outcome was bad.

While they may have had some prestige to them, most jobs replaced by computers were routine. Moreover, the introduction of IT enabled more people to do more interesting stuff – witness, for example, the huge explosion in magazines and newspapers in the 1980s that occurred once desktop publishing had freed writers and designers from the tyranny of the typesetter and the print shop.

This benefit is reflected in the hollowing out study, which shows higher earners making up a greater total share of hours worked. I’d say this was due to people moving up the food chain, in refutation of the dumbed-down work hypothesis.

As for the also-increasing total hours of lower-earning work that’s seemingly come at the expense of middle-class incomes, well yes, there’s no doubting call centers and retail have replaced some rungs on the corporate ladder, but as I’ve argued those lost jobs were hardly great, anyway.

There could be other trends at play, too, like more women entering the workforce but choosing to take on less intense employment in the service sector, and so swelling the total lower-paid hours worked.

By all means hate work, but…

I’m the last person to defend most jobs and office work as anything but a means to an end. I’d like financial freedom to choose exactly what work I do, and I see the attractions of retiring early (even though I’ll likely always do something gainful on the side).

But what I do dispute is that work has got worse. On the contrary, I think for most people it’s got better.

Today’s office drones are fretting about their meaningless roles while booking holidays on LastMinute, chatting on first-name terms to the CEO in the kitchen, and listening to Lady Gaga on their iPods. They can hardly imagine the strictures of yesteryear.

No era is perfect, but I’d rather be a cubicle slave now than a ’60s office drone.

Readers, what do you think? Am I – against all odds – an excessively sunny optimist? Please let us know where you think work is going in the comments.

Further reading:

1. Should you lose pay when snow keeps you from work?
2. Or, why I don’t work 9-5 any more
3. Video: Finding your motivation at work

A successful start-up is about the most inspiring place you’re likely to work, in my experience. If you own the growing company, it’s even better:

• A guaranteed corporate nonsense-free workplace.
• Control of your own destiny.
• The slim but real chance to become a millionaire.

Set against those benefits is the opportunity cost of losing your salary, impacting on your savings strategy.

Crash course in entrepreneurship

One interesting start-up is Crashpadder, a London-based web service that hooks up homeowners with spare rooms with those looking for a temporary bed. It’s potentially cheaper – and friendlier – than a budget hotel.

CrashPadder is a matchmaker between property owners and would-be snoozers

While all start-up business have big risks, Crashpadder is the sort of clever and affordable idea that’s within the reach of most spare room entrepreneurs. I was curious to know more, and Crashpadder’s Josie Anderson kindly obliged.

Monevator: Who is behind Crashpadder?

Stephen Rapoport: Crash Test Dummy

Josie Anderson:

Crashpadder is:

• Stephen Rapoport, Founder. Background in entrepreneurship having founded two previous businesses.

• Josie Anderson, Communications Guru. I left John Lewis to join CrashPadder back in January having spent a number of years managing content for various big brands. I previously worked with Stephen at a web start-up and we’ve been close friends ever since.

• Daniel Hill, Technical Wizard. Dan taught himself web-design in order to help make ends meet whilst he became a world-renowned classical music conductor, but proved so good that he was soon running his own agency.

What is the business model?

Guests book rooms online, paying in full for the stay. We transfer 90% of this to the host after the stay has taken place. We also earn a £3 booking fee from the guest.

Where did the idea for Crashpadder come from?

Stephen was in Sydney during the Olympics in 2000. He arrived the day after the opening ceremony and couldn’t find a hotel or hostel room for love nor money. When a bed was available, it would cost many times what he could afford.

He ended up crashing with one of my colleagues and contributing a little towards the rent, which worked out well – and the idea was born.

Homestays are commonplace across Asia, and even the UK in the past. We hope that this fun, friendly and affordable way to stay will come back in vogue.

How was the business started?

Working from the British Library’s IP centre in mid-2008, Stephen got a basic website live and a business plan written before taking it to various Venture Capitalists for seed capital, which was secured from a High Net Worth Individual.

Did you all quit work straight away?

Stephen gave up his job immediately. For Crashpadder’s first 12 months he lived on the income he made by offering his house as London’s first Crashpadder property. After a time, additional funding was secured, which enabled him to draw a salary as well as employ Dan and myself [Josie], both of whom had previously worked for Crashpadder on a freelance basis.

How is the business going, and what are your targets?

The business is growing fast, increasing revenues by 100% every four weeks since January 1st 2010. We have growth targets in place that reflect this strong start, but we recognise that this rate of growth is unsustainable in the long-term.

The next big step will be a third (and hopefully final) round of investment.

What have you found hardest about setting up Crashpadder?

As a totally new model and concept, it was hard to establish the business operations in a way that is both efficient and scalable. Another huge challenge is one of marketing and communications – we have a sea change of public opinion to affect before we can be considered a legitimate accommodation choice for some demographics.

I’m pleased to say we seem to be overcoming both of these challenges.

What’s been most enjoyable, from an entrepreneurial perspective?

Walking to work in the morning, knowing that everything that awaits is self-selected. The intellectual and commercial challenges inherent in start-up life have been amplified by the fact that the business model is new.

Do you think the gold rush is over for Internet businesses, or are there still plenty of opportunities?

There are huge opportunities, more now than ever. The Internet as a public-facing consumer medium is still only 15 years old – hardly out of seedling stage. Furthermore it is developing technologically at a tremendous rate, making more and more things possible. The transition to mobile Internet in particular will throw up countless new opportunities.

Any last words of advice for would-be entrepreneurs?

Stop kicking your heels and jump in – you’ll know within a month if it was the right thing to do.

Read my interview with an iPhone app developer for more on DIY start-ups.

Further reading:

1. When should you stop growing and start protecting your money?
2. Seven reasons why you shouldn’t start your own business
3. 100 Secret Strategies for Successful Investing

When I was a student, we called them McJobs. Undemanding gigs at a generic pizza place or in a bookstore where no one expected you to smile – not the customers, your employer, and certainly not yourself.

Everyone involved knew you were doing a McJob for the money – all £1.56 an hour of it – and as long as you didn’t vomit into a bin or miss three days in a row for Glastonbury, you’d hang on to it. If you didn’t, there’d be another McJob around the corner.

Yet 20 years on, the McJob is going the way of free student grants, teenage rebellion, and the thrill of finding your dads’ porn stashed behind the tubs of Turtle Wax in the garage.

We’ll miss it when it’s gone.

Faster, stronger, more productive

It’s the competition, you see.

In the globalised, inter-connected, bullshit-fuelled modern world, it’s no longer possible for bright kids to take a multi-year breather, unless it’s for something officially sanctioned like a gap year (deemed improving, despite everyone knowing gap years are Club 18-30 for middle-class kids with a few National Geographic photo opportunities thrown to please Gran).

Due to the intense competition foisted by continual tests in school, ubiquitous A-grades, university for all, and the big influx of talented immigrants, you need to know exactly what you’re doing and where you’re going from the moment you rise from your potty to the day you follow your nose into a modern office.

Get the qualifications, gather the work experience, collect your badges and go, go, go – headfirst into a depressing facsimile of what you were led to believe would be your life.

And boy, you’d better be committed. Even if your job is merely to serve hot brown liquid to commuters at an 85% profit margin.

On track for partner by 40

Pity any poor teenager or twenty-something without a master plan.

While they’re busy wondering what it’s all about (life, I mean), some Hermione with half their imagination is already out of the starting gate, hell bent on achieving Grade 4, Level Six Employee-of-the-Month status in record time.

Far from aggrieved that she’s been turned into just another square peg, Hermione will be all foam and fury if she doesn’t feel adequately shepherded through her career by her employers as studiously as any kid tending his ant farm.

In today’s corporate world, the spiritless Hermiones have taken control, which is why long, gossipy lunches, Mad Men-style gender tension, and genuinely creative and inspiring work has all been outsourced to independent outfits who’ve not yet succumbed to pay scales and route maps.

Once named the rat race, for 95% of people the ordeal of the resultant 9-5(-10) is more like being a hamster running on a wheel.

The difference is nobody expects a hamster to be ‘committed, enthusiastic, and a genuine team player’ when he’s running on the spot to go nowhere.

I’m loving it

If at this point you’re shaking your head, then either:

• You’re under 35.

• You create short films for Pixar, you manage an exciting investment fund (fixed interest doesn’t count), you work with animals or kids, or you do almost anything medical. Congrats! Today’s post is not about you or your life.

• You’re self-employed or you run your own business. (Ditto!)

• You still believe what they told you.

It’s excusable to be young, everyone should be so lucky as to get paid for doing what they love if they can, and becoming self-employed is the most realistic escape pod for most of us. (It’s what I did).

But there’s no excuse for believing what they told you.

I was happy to have a job once. Then I reached 30, and younger, fitter versions of me came along to be happy with it instead.

I’d noticed the wrong people got promoted. I saw that when I was promoted or offered new jobs, it was for the wrong reasons. I realised that sucking up was more important than competence.

Finally, I saw that the average office was a white-collar version of a bukakke session – an orgy of desk-based fluffing, slurping, and spitting behind your back.

What about the workers?

To appreciate how the modern workplace can crush the soul of anyone creative and bright faster than Simon Cowell saying, “Really? Who told you that?” then consider this interview with the boss of Whitbread, the owner of Costa Coffee:

Alan Parker, the chief executive who has been with the chain for 18 years, took a £5 million bonus this year for his work turning Whitbread into one Britain’s most successful companies.

Asked if it was time for his employees to share the rewards, the normally smooth Parker prevaricated. “We are looking at improving employee engagement at all levels,” he said. “We take employee morale very seriously.”

Did that mean pay rises? “Engagement has gone up,” he replied, before confirming the pay freeze was lifted.

Let’s repeat that again in slow motion and close-up, with Parker’s mouth opening and closing like a dreadful goldfish of the deep.

“Engagement has gone up,” he replied.

At this point I suppose I should discuss how the average worker just wants this and that, and how ‘engagement’ is a poor parody of the other.

But I can’t be bothered. Really, I’m feeling in a Bolshie mood, and that Karl Marx had a point.

If capitalism had a soul, then all the boring and awful jobs would be the best-paid jobs, and fun careers like playing football for Man United or running hedge funds or being George Clooney would pay the minimum wage.

Instead, capitalism has a sense of humour.

Doublespeak but no overtime

Whitbread CEO Alan Parker’s job isn’t good because he gets paid £5 million a year. That’s an awesome bonus.

Parker has a good job because he’s in charge, he can make things happen inside his company, and because work excites him when he wakes up and never leaves his side.

Compare that to the average worker in a coffee shop. He or she will spend all day making coffee, be abused by customers, and even has to put up with patronizing garbage about ‘engagement’ – with only a piss poor level of hitherto frozen pay to compensate.

While the CEO is moving little plastic figurines depicting his various executives around his industry battle map, his employees are choking on their cappuccinos at the thought they’d come to work for anything other than a day’s pay.

A coffee chain CEO thinks his staff are facilitating a third space encounter for beverage-based mini-break client experiences or whatever waffle it uses to describe fleecing the drones as they make their way to their corporate slave ships, foolishly hoping a shot of caffeine might make another day of being dragged down by the Hermoines a smidgeon more bearable.

But his staff think they are selling coffee.

And they have to sell it like they love it! Like arriving to work in Unit 41B at 8am every morning is almost as good as being the fighter pilot, poet, brain surgeon, or lap dancer that they once imagined they’d become.

They have to love their little part of the big picture, even if it’s not a job anyone ever dreamed about except in one of those “Would you rather have syphilis or crabs?” type daydreams.

If they don’t pretend to love their dreary career convincingly enough, then sooner or later somebody else will come along who can.

McJob R.I.P.

Tune out, drop in

Ignoring for now the downsides, the revolution in art, culture, tolerance, and opportunity that happened in the 1960s occurred because bright people could drop out.

There were plenty of McJobs to clock into half-asleep while you were being a part-time hippy, and a clever person with a degree and fast tongue could sweet talk their way into a career in Bloomsbury or on Madison Avenue when they were done with peace and love.

A disappointing career in a dull office was never the be-all and end-all, but we knew it and admitted it back then.

In contrast, last week I met a top-flight Oxford graduate who has already done nine months of unpaid intern work – racking up huge debts living in London in doing so – and who insists she needs to do more.

She hasn’t had a job yet. I wonder how long she’ll feel engaged for when she does?

Readers, I suggest you consider these new realities of work, and start building a freedom fund pronto. Live cheap, and consider working with your hands or doing something else that keeps you from the Hermiones. And never leave a job you love, because there aren’t many left out there. What do you think?

Further reading:

1. Do you hate your work?
2. Should you lose pay when snow keeps you from work?
3. Video: Finding your motivation at work

Does a high salary make you happy? To answer that question, we need to backtrack a little bit to our discussion about friends and wealth.

I’m convinced having rich friends can make you richer. But I’m even more sure having rich neighbors will make you work harder.

Just try buying a flat in London for less than £250,000. You need to strive simply to own the ceiling above your head. (Forget owning the roof – decent houses cost far more than a quarter of a million quid).

To get a mortgage for a £250,000 flat, you’ll need to earn at least £60,000 a year – assuming you’ve begged or saved £30,000 for the deposit.

£60,000 a year is a high salary:

• The median full-time weekly wage is £489 as of 2009 (Source: ONS)
• Only 10% of workers earn more than £971 a week
• Even in London, the median full-time weekly wage is £627

£1,154 a week: that’s the salary of our London flat hunter on £60,000 a year, who is looking at the cheap end of the London property market.

It’s well into the top 10% bracket. Yet he or she is likely to be laughed at by a central London estate agent!

Here comes the science bit

Incredible though it may seem then, depending on your aspirations it’s very easy to feel poor on £60,000 a year in London. The UK’s wealthiest people live here, and a row of terraced houses could re-finance the Greek national debt.

In contrast, you can feel pretty flush in Scotland or Wales on £35,000 a year.

This relative affluence is the sting in the tail of surrounding yourself with people with more money than you:

• You’ll get richer, but you’ll feel poorer

It also reveals the problem with chasing a high salary as a means of finding happiness. Discussing recent findings from The University of Warwick, researcher Chris Boyce says:

“Our study found that the ranked position of an individual’s income best predicted general life satisfaction, while the actual amount of income and the average income of others appear to have no significant effect.

Earning a million pounds a year appears to be not enough to make you happy if you know your friends all earn two million a year.”

This is the key problem faced by bankers. Despite their fantastical bonuses, most of them know peers and friends in their company earning far more. Even the top bankers are made miserable by those they believe are earning more elsewhere (although they probably don’t call them friends).

Most of us can’t understand why bankers chase money so greedily, or react so ferociously to any move on their bloated bonuses. That’s because we don’t live in a world where income is everything – and yet ironically that’s also the very thing that makes the typical banker unhappy.

We do all though live in our own social networks of friends and relatives. And as the researchers found out, such networks are driven by ancient instincts that even a chimp would recognize are to do with status and the perception of superiority.

The bottom line on aspiration

Obviously I like to think I stand apart from petty comparisons with my friends. You probably do, too. Yet I wonder how much we can really step outside of such influences, beyond taking radical steps like ditching our rich friends? I can’t deny I do leave an evening out with mine nagged by doubts about whether I’ve made the right choices in my life and my career.

Chasing a fatter salary is no guarantee of happiness, that much is clear. But that’s no reason not to earn as much as you can, provided it meets your other aspirations of self-fulfillment and professional ambition.

It’s just that if you think happiness comes with a high salary, you’ll be disappointed. Focusing on your own high salary will upset your poorer friends, and your richer friends will bring you down. Best to keep quiet and strive to opt out from such comparisons whenever you can.

Further reading:

1. Compound interest turbo-charges your salary, too
2. What is your salary really worth?
3. How to increase your salary without changing your job

The lifetime limit on Entrepreneurs’ Tax Relief was raised from £1 million to £2 million in the UK’s 2010 budget.

This relief enables many entrepreneurs to pay just 10% capital gains tax when they sell the assets they create, rather than the standard flat CGT rate of 18%.

The £2 million allowance is spread over your whole lifetime.

For example, if you sell two businesses in your life for £2 million, you’ll only pay 10% on the capital gains.

Sell a third business and you’ll exceed the Entrepreneurs’ Tax Relief lifetime limit of £2 million. You’ll therefore pay 18% CGT on the gains above the limit.

The Entrepreneurs’ Tax Relief can be applied to:

• Capital gains made on the disposal of all or part of a business.
• Capital gains made on disposals of assets following the cessation of a business.
• Capital gains made by individuals involved in running a business.

Note that the lifetime limit also applies to a company’s shares, providing you own at least 5% of the company (and have voting rights), and that you’re an officer or an employee.

The origins of Entrepreneurs’ Tax Relief

Why does this special perk for entrepreneurs exist, you may ask? After all, the flat 18% CGT rate isn’t particularly high compared to other countries.

The reason is that you could previously sell business assets at a lower rate, and you could also claim taper reliefs to reduce capital gains tax. That old regime aimed to take into account inflation and reward long-term ownership.

When the Government brought in the flat 18% tax rate in 2008, this all went out the window. As a result, small businessmen – think local traders or professionals such as dentists and vets – suddenly faced an effective 80% rise in the CGT they’d pay when they sold up at the end of their careers.

It’s these traditional and established small enterprises who lobbied for this tax break, and who benefit most from it. It’s not particularly designed to encourage the next Richard Branson.

For more official details on the Entrepreneurs’ Tax Relief, check out the official HMRC page.

Further reading:

1. Tax relief upfront is the same as tax relief later: Pensions versus ISAs
2. AIM shares lose their 10% Capital Gains tax perk
3. Capital Gains Tax now charged at a flat 18%

A lot of people say they want to earn more money, but when you talk to them in a few years time they’re not doing any better.

Most people don’t actually want to be rich. Certainly not enough to do whatever it takes to get there.

There’s no shame in that. Being wealthy has its downsides, and there’s much more to life than money.

Some people are too lazy to earn more money. They say they want to increase their salary, but they’re not actually prepared to do the extra work or take on the responsibility required.

Or else it’s not the very real risks of starting a business that holds them back, but inertia. They sit in front of their PC night after night ‘researching’, but there’s always just one more website to read, or one more funny pet video on YouTube.

Such people may also fear making the changes in themselves that are required to earn more money.

This mental dimension gives us a clue as to why you see some people work hard and have all the skills required to earn more money, and yet they seem to get stuck, or even worse they get into debt.

Mental beliefs are also why others earn more money without any qualms, particularly those from certain social backgrounds.

Think of the ‘nice but dim’ privately educated schoolboys who end up making a fortune in The City. How do they so outpace their apparent talents?

You’ll often hear it’s because of mysterious ‘connections’. Yet that factor is much smaller these days.

I believe it’s because the public school system (and that social class in general) gives you a sense of entitlement that’s a big aid to getting rich. There’s no question in those circles that you don’t deserve it.

If you want to earn more money and you’re from a different social background, you may need to cultivate more positive mental beliefs for yourself.

My own mental money hurdle

Since I became interested in personal finance, I’ve learned that a lot of mental beliefs can subconsciously sabotage the efforts of people who try to earn more money.

But I discovered the phenomena for myself, when my income stopped increasing one year.

Throughout my mid-to-late 20s, my earnings increased far ahead of my peers in my field. Yet around 30 I hit a wall.

It wasn’t just that I wasn’t seeing my income rising. It was that I wasn’t really pursuing new projects, or new goals, or anything at all that would allow me to earn more money. I was satisfied – and yet I wasn’t.

It was only on a trip home to see my parents that I realized what was going on. I was talking to my dad about his career, and I suddenly realized I had stopped increasing my income when I reached his salary!

He was 60 when he reached that income. I was 30.

I think I felt guilty or unworthy of making more than my father who had worked all his life to get there, especially as my freelance work seemed so much more fun and less ‘real’ than his typical 1960s-style corporate job.

Whatever the reason, once I identified this mental belief, I decided it made no sense. And just as a sickness can go away when a doctor explains you’ve got a trivial illness – “No, it’s not a tumor! Not it’s not cancer!” – the hurdle fell away and I began to earn more money.

Earn more money by identifying your hang-ups

I know that to some British readers this will all smack of a certain brand of pop psychology. But I’m convinced it’s true, especially as I’ve since talked to many friends and family members and identified their mental hang-ups about money.

Often my friends don’t explicitly tell me they have a damaging belief – it just becomes clear from talking to them. Whether I share with them my diagnosis depends on how close we are, and how blunt I’m feeling that day!

Here’s some more negative money beliefs I’ve noticed:

• I don’t deserve to be rich.
• Only upper-class people get rich.
• To earn more money, you have to sacrifice everything.
• To be rich, you have to cheat and lie.
• You won’t be ‘one of us’ anymore.
• If you have too much money you’ll be punished for it.
• You can’t have money and love.
• Money is inherently evil.
• Being rich will stop you getting to heaven/Nirvana/wherever.
• You can’t have money and be happy.
• More money just makes you want even more.
• Your friends will resent you.
• Your lover will use you.
• Your kids will grow up spoiled.
• Your dog will secretly hate you.
• Your cat will know you’re a fat capitalist pig.

Do you have any of these beliefs? Would you rather earn more money?

You need to question your negative money belief and decide whether you think it’s true. If you decide it’s not true, replace it with a new belief.

The interesting thing is there’s a grain of truth in all these beliefs.

Some of your friends will resent you if you earn more money. Some rich people are incredibly selfish. And money doesn’t make you happy.

Yet plenty of rich people have lots of good friends. All entrepreneurs play hard, but some are extremely scrupulous. (And let’s be honest, your cat could probably stand an all fresh tuna diet).

Besides, this article isn’t even about becoming mega-wealthy. We’re just talking about a better income, a nicer lifestyle, and more chance of financial freedom.

Also, once you’ve got past your negative beliefs to earn more money, it’s up to you what you do with it. Money gives you options. If you want to start a charity or give it away to your family, knock yourself out.

In summary, if you’re doing everything right yet you’re unable to earn more money, you might be being held back by negative ways of thinking that stretch back to your childhood.

Should flawed childhood beliefs still be defining who you are? Should other people earn more money or achieve their goals just because they had a different background to you?

I don’t think so.

Further reading:

1. Become your money hero
2. Rich friends, poor friends
3. How much interest do you earn on a million pounds?

Let’s not delude ourselves: You’ll have to do or be more to increase your salary.

But you don’t have to change your job. Handy if you love what you do!

Understand that anyone senior to you must be able to justify your raise to someone higher. Therefore, whining or pleading won’t work (not for long). And if your boss is the owner of the company, he or she will be the hardest person to convince – they know that every penny counts.

You do a great job, but you’ve previously been underpaid? Tough, it’s too late to moan now. You lost that fight when you signed up.

I’m serious! You’ve already been pigeonholed and to get the pay you deserve you have to show you can fly – either for the company, or if you must then away from the company.

While I was employed I consistently earned at least 25-50% more than my peers in identical roles, even ignoring bonuses.

Here are my ten top tips on increasing your salary.

1. Believe you’re worth more money

The most important step. Sounds very self-help-ish, but it’s true.

You need to radiate a belief that you’re a higher earner, and you need to believe it. If you do, more responsibility will come towards you, which is the key to earning more.

2. Know what your job is

When I’ve employed someone, I’ve had a very clear idea what they critically need to achieve. They may do other stuff, it may be great, but if they’re not doing what I’m watching then they could be baking donuts.

Companies can be bad at communicating this stuff. Find out what your job really is, then make sure you’re doing it.

(Hint: your job is not to sit in front of a PC every day. That’s a side effect).

3. When at work, live and breath for your boss

Forget yourself for a moment. Think hard about how to improve the daily working life of whoever decides your salary, and then improve it.

I don’t mean pathetically sucking up, which anyone sensible hates. I mean making their work more effective.

This works!

4. Do the dirty work

Is there a role you’d like and/or you’d be good at, that’s vital, and that nobody wants? Take it – or make it up and then take it.

Sales is a good example; most people don’t want to sell, and selling ultimately makes the money.

5. Find out what you’re really worth

Don’t daydream or get bitter over a fantasy. Cautiously shop around to discover your going rate.

Fact: big raises come when you move. But you don’t want to issue an ultimatum or appear disloyal, if the aim is to keep and improve your current position. You just want to show you’re ready for more, and to be equipped with the facts to set your targets.

(If you discover you’re not actually worth more, take emergency action!)

6. Follow the money, if you can

If your work isn’t a vocation, then try to align your role with profit centers (sales or product delivery) rather than costs (support or product development).

I know, I know, it’s products and services that ultimately make the money. But this is a pragmatic guide. It’s far easier to get more money when you’re bringing it in, compared to when you’re another outgoing.

7. Understand the money if you can’t

If it’s impossible for you to move into sales or management – you’re a star programmer or a graphic designer, say – then befriend the sales team to discover how your output makes them money.

Take an interest in your role in the grand money-making side of things; most of your peers won’t. Use this knowledge to make more money for the company, and parley that into a raise!

8. Be unique

Don’t compare yourself with your colleagues. For a start, it looks bitchy.

More importantly, you’re telling your boss you’re in the same bracket as lazy Rachel or over-paid Bob, even if your point is you’re better.

Sorry, that’s just the way our brains work.

9. Anything else they can do for you?

Perhaps your company really can’t pay your more money right now. Your research from steps 6 and 7 should tell you if that’s true.

Is there some non-monetary benefit that’s of equal value to you personally?

Pension contributions, or extra holiday time, working from home time, or maybe a 4-day week provided you deliver? Something will be negotiable.

10. Find out what’s wrong with you

I’ll admit hearing even constructive criticism is the thing I found hardest when I was an employee. But if you’re not getting a raise and you’re not going to follow my escape pod and go freelance (which solves a multitude of problems) then you need to ask and be prepared to hear what’s stopping you getting the income you desire.

This is after the negotiating phase, so don’t whine or argue back. Listen, learn, fix, out-perform, then go back for more – money, preferably, but failing that more advice until the money eventually follows.

Go for it!

Trust me, good people who deliver what they say they will are incredibly rare.

Most people are half-arsed. Become a good person who delivers, and the money will follow.

If you think I’m wrong, then you’re not good enough yet – or your job is beyond saving and you need to move after all!

Readers: Do you have any more tips on how to increase your salary without changing jobs? Share them below!

Further reading:

1. What is your salary really worth?
2. Compound interest turbo-charges your salary, too
3. Don’t kill yourself over a job