What caught my eye this week.
Remember when I said I was going to simplify the compiling of my Weekend Reading links?
Well this one is ridiculously long and took pretty much a day to pull together.1
Is it better for all this heft?
When I first started linking to other blogs like this back in 2008 or 2009, I’d include just a half-a-dozen or so and some well-wishes for the weekend.
Now you need to set aside some time just to read the list of potential articles to read!
I suppose it’s easier than browsing every site for all these stories for yourself. I’m equally sure some would prefer heavier curation.
But simplicity does not come easy to me.
Nearly a decade ago I advocated simplicity in investing as best for most people – yet for some reason I centered my argument around a lecture on anthropological research into child learning behaviours.
Yep, that’s the stuff that made Monevator into the household name it is today!
Simple does it
I’m pretty normal in drifting into over-elaboration. There seems to be a human tendency to make things more complicated than they need to be, whether we’re talking about smartphones, relationships, or investment portfolios.
I did however come across a really great – and simple – piece in praise of investing simplicity (via Abnormal Returns) this week.
On his Movement Capital blog, investment advisor Adam Collins writes:
It took me a while to realize that the solution to complexity isn’t managing it better – it’s avoiding it altogether.
So simple. Go read it!
How I trick myself into achieving financial independence – Monevator
From the archive-ator: Horizontal diversification – Monevator
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2
UK businesses slip into deepest downturn since 2016 – Reuters
Natwest launches new digital business challenger bank Mettle [See also Bó below] – ThisIsMoney
Marie Kondo is moving into selling stuff that ‘sparks joy’. [Discuss.] – Fast Company
Guardian-powered ‘Who Is Rich?’ mini-special
Labour says £70,000 a year makes you rich… – Guardian
Bary Blimp of Bolton thinks he’s “not in the top 5%, not even in the top 50%” on £80,000 a year – BBC
…for the avoidance of doubt, yes, if you earn £80,000 a year you’re in the top 5%… – Guardian
…but the super-rich are on another planet… – Guardian
…or at least in London, where they are ‘rattled’, and seeking old-fashioned security – Yahoo Finance
Products and services
Funding Circle revamps its resale market in bid to improve liquidity – ThisIsMoney
NatWest’s new youth-focused, would-be Monzo-slaying digital bank Bó has launched – Bó
Facebook and iTunes to cryptocurrencies — what happens to digital assets when you die? [Search result] – FT
Explained: the state pension, and how the goals will shift in the future – Money Observer
Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter
Hargreaves hit by transfer backlog in wake of Neil Woodford crisis [Search result] – FT
Nationwide’s restricted-access regular savings account is the last 5% payer left standing – ThisIsMoney
Should you get a ‘petnup’? – ThisIsMoney
Comment and opinion
Compare your progress to your plan, not to other people – Humble Dollar
It’s not how much – The Motley Fool via Twitter
It’s a great time to get a mortgage, but will rates ever be able to get back to normal? – Simon Lambert
Using first-order thinking to visualize spending decisions – The Simple Dollar
Pizza delivery is for millionaires – Mr Money Mustache
Review: Playing with FIRE documentary [Which is now on general release] – Much More With Less
Are banks really magic money trees? [Paywall] – FT Alphaville
Naughty corner: Active antics
Did computing power kill value investing? – Institutional Investor
Jim Simons’ Medallion Fund could have charged 50% a year and still beaten the S&P 500 – Of Dollars and Data
Are US stocks overvalued? – Ed Yardeni
My worst investment ever – UK Value Investor
[Political] regime change and valuation – Musings on Markets
Negative interest rates and the perpetuity paradox [Touches maths I mentioned in comments recently] – Elm Funds
Politics & Brexit
EU citizens aren’t scrounging on the NHS, contrary to government claims [Data] – In Facts
It’s not just Boris Johnson’s lying. It’s the media that let him get away with it – Guardian
Election debate: Conservatives criticised for renaming Twitter profile ‘factcheckUK’ – BBC
The Labour party manifesto in full [The second longest suicide note in history?] – Labour Party
Brexit talks: the brutal reckoning that awaits the UK [Search result] – FT
Three lions on a beach: a sculpture for the age of Brexit – Guardian
Kindle book bargains
How to Win Friends and Influence People in the Digital Age by Dale Carnegie & Associates – £0.99 on Kindle
The Wealthy Retirement Plan by Vicki Wusche – £0.99 on Kindle
Radical Candor: How to Get What You Want by Saying What You Mean by Kim Scott – £0.99 on Kindle
RESET: How to Restart Your Life and Get F.U. Money by David Sawyer – £0.99 on Kindle
Off our beat
The eight-hour workday is a counter-productive lie – Wired
Long read: how our home delivery habit reshaped the world – Guardian
Rituals and routines – A Wealth of Common Sense
Light pollution is ‘key driver of the insect apocalypse’ – Guardian
Extinction crisis: How can we end the illegal wildlife trade? [Search result] – FT
The Google tax – Seth Godin
Forgotten gods – Indeedably
Greta Thunberg, time traveller – Guardian
“About once every generation, the markets go barking mad. If you are unprepared, you are sure to fail.”
– William Bernstein, The Four Pillars of Investing: Lessons for Building a Winning Portfolio
Like these links? Subscribe to get them every Friday!
- If this sounds crazy, consider that I vet everything. What’s more I read at least five posts or articles for every one that makes it here, and these days ever more of that reading is left until Thursday/Friday. [↩]
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]
It occurred to me that the not trusting experts side of brexit is a bit like the not trusting experts side of passive investing, we don’t have glowing examples of predictive skill from experts and economists.
Career based fund managers are like career based politicians and the reputation that economists have, and the financial media sells on panic headlines like the political media does
I would also like to say how many people actually need full fibre broadband? I could imagine some dole claimants with video games…
While I always look forward to a Money Mustache posts, I’m beginning to think he is now moving into skinflint territory. The guy likely is now a multimillionaire. He can afford to treat his kid to an unhealthy pizza in an actual restaurant every now and again. Not every monetary saving is a real life gain. Not to mention the mental overhead of calculating how much money he’s saved with each smugly wise decision.
With FIRE came the chance to ease up a little on cost control and surprise & delight those nearest and dearest to me – not double down on it.
@Matthew — I’d love not to get into politics again until we have another dedicated political Weekend Reading post/rant. 🙂
@C — Hi! I think as this great real-time experiment of watching people document their journey to — and occasionally achievement of — financial freedom rolls on, it’s becoming ever more obvious that most people stay themselves.
Industrious, busy, and frugal people stay industrious, busy, and frugal. People less so on at least some aspects of that spectrum comment on mainstream media articles about how FIRE is impossible.
Meanwhile those who (day) dream of quitting work at 40 often seem to me the most likely to continue until their 70. Some have even gone back to work. Others of us have realized checking out altogether is not for them. Each to their own. 🙂
Re: Mr MMM, I’m just looking in from the outside of course but I’m kind of in mild awe at how true he has stayed to himself. We swapped a few emails in the early days when his blog was small and he was finding his feet. It was obvious to me even then he had something (it took @TA a while to get past all the ‘punch in the face’ type stuff but he loves him now. 🙂 ) and what he had hasn’t really changed. As best I can tell the guy is true to his beliefs and he is infectious.
I think the point of this recent post was that living that way wasn’t about saving $10 on this pizza on this day.
It was about a way of life that is richer for setting things up through a different lens, which includes not defaulting to ordering pizza (and getting in the car, and going shopping etc etc). Also, he agrees multi-millionaires can have pizza delivered if they want, in his title. 🙂
As for skinflint, well did you see he’s giving away another $100K?
Some curmudgeons will no doubt smirk at that and claim they’d do the same in his place. Perhaps. I have my doubts. 🙂
Re: MMM. Did no one else get a “coffee is for closers” feel from the post, without the douchery that scene brings?
Regardless, massively in awe of how true MMM has stayed to his original vision despite the material wealth he’s gained since he began. Someone who is thinking about the long term in a lot of ways.
Barry Blimp sounds like he lives in the South East where £80k doesn’t feel “part of the top 5%”, and he’s probably right, going by these stats
£80k gets you within the top 10%, but you’d need over £100k to hit the 5% territory.
What these stats don’t tell you is what it takes to be in the top. 5% wealth category
Well according to the BBC, you would need to have accumulated £670k to be in the top 10%, which is still a hefty sum.
I’m not convinced that the average £80k earner has £500k+ stashed away.
Obviously, they’d have a better chance if they lived by Monevator principles.
@TI Yes, I’m aware of MMM’s generosity to others and it is to be much applauded. And as you say, there is something admirable about his wider vision and refusal to submit to lifestyle inflation. I just have a little disquiet about a possible inability to spend money freely to benefit those nearest to him and the time spent on being frugal. This is a guy who apparently uses a bench vice to get the last bit of juice out of limes. I can only imagine what it must be like for MMM Jr to be wandering the streets listening to MMM rant about the wastefulness and expense of the world while enjoying a rare ice cream. Still, none of us are without fault.
Would we say MMM feels guilty about spending on himself? I imagine guilt it a huge hurdle but also when you have been frugal a long time you’re aware of value more, but remembering that you no longer need to chase value is difficult too – we are institutionalised into (not only work) but into permanent frugality
@ Ti – ok 🙂
More thoughts on mmm – his identity as a blogger now depends on an image of frugality, his identity as s human might depend on his charity giving, and you also have to wonder that if someone shuns lifestyle inflation if they are judgemental of others? However I think we should not feel guilty if we feel the price is worth it since we need the wealthy to spend for our economy – the rich guy who buys a yacht is creating shipbuilding jobs, hiring staff, and these people all pay tax when they earn and spend
MMM is the epitome of keeping it simple, and that is why he works on every level. And (trying to avoid politics and failing) @Matthew, “I would also like to say how many people actually need full fibre broadband? I could imagine some dole claimants with video games…” So the cities should be the only place to benefit from full fibre, drawing business to themselves with ever larger gravity and perpetuating a two tier economy??? If we left it up to the market, that is what would happen. I’m sure video games will be played uniformly across the land if on a per capita basis and that kill shot on COD will not be quicker 🙂
@jimjim – putting infrastructure in before the market deems a need is kind of like building a motorway in the middle of nowhere and hoping houses and factories will build around it
Wgat kind of businesses are we talking about that would need high bandwidth and decide it was compelling to set up in a remote place? Even if an individual business benefitted would it be profitable/worthwhile for the taxman?
One for Monevator readers on building a more defensive portfolio (AQR). In short, add defensive stocks, trend-following and just own a smaller equity percentage. Avoid options due to cost. I also found interesting that trend-following zigs when private equity zags since 2011.
@TI Glad you included Mettle in the weekly links. I built/building a good chunk of its functionality! 🙂
I’m not certain that nationalising fibre broadband is good investment. With the advent of 5G, and who knows 6G or 7G?, it will be possible to use your smartphone as a mobile hotspot and connect to that with the same high speed access. A bit like if we had nationalised steam train manufacturing companies in the 1960’s.
Nevertheless, for people and companies in more rural areas existing broadband provision is simply dire, and as for ultrafast, have a look at https://www.ispreview.co.uk/index.php/2019/03/uk-finally-joins-2019-ftth-ultrafast-broadband-country-ranking.html
Thanks for the weekend reading links
“Facebook and iTunes to cryptocurrencies — what happens to digital assets when you die?”
Definitely something to consider
Re Defensive Portfolios-it seems to me after a lifetime of investing and looking back over my shoulder that very few of us have the ability to outsmart the market
Starting again with hindsight bias I would buy a World Equity Index Fund and World Bond Index Fund -2 funds only
Low cost ,simple and easy to understand
I don’t even think that if it’s 70/30 or 30/70 matters if you start young enough
Then work hard at the day job and save as much money to then invest as you can
It has been a massive fail in Australia and 5G is overtaking it.
People forget that the likes of Google and Amazon are built on the infrastructure installed during the dot com boom. All those fibres across the Atlantic and North America were built with private funds, many of which whose original investors lost their shirts. Those investments are voluntary, but in the end everyone benefited. Investors and companies went bankrupt, loans, shares written off.
When the state invests in failed infrastructure, that debt doesn’t get written off. It sticks around, to be paid off by us, our children and grandchildren.
The infrastructure inevitably either depreciates to nothing, or is privatised with the residual value benefiting private capital, a direct subsidy from the public to the private sector.
I know which I prefer.
It’s easy to see how Barry can fall into the trap of thinking he is an average earner, no doubt his friends and peers are doing similar work and have similar rewards. He opens his paper and sees footballers earning in a week what he earns in a year. He turns on the TV and sees people jetting off on exotic holidays.
What he doesn’t do it go to the ONS to see what the real median wage is (£585 per week).
We can criticise him but should realise the people posting here are the outliers, most people get this information from the media and if it turns out to be garbage then the criticism should fall on the media.
Living in the rural north, and having “superfast” BT (put in with government subsidies), (which took a lot longer than it should have) that runs at 14mbs if we are lucky, it drops out regularly and it is impossible to stream 4k video, and is lumpy at 1080p. The last mile and a half are old copper that is worse in bad weather. The “business” (Education) I work in has a gigabit connection and, when the whole thing runs it is not nearly enough.
I would gladly pay for a faster connection, If B4rn ever get to my doorstep I will jump at the chance… https://b4rn.org.uk/about-us/ … Gigabit to premises, bring it on. Waiting for 5G is pie in the sky as we have not even got stable 3G here. Broadband is becoming an essential around these parts when looking for a house and this is slewing the market. Most people would put up with a sceptic tank and gas-in-a-bottle or oil heating, but not poor internet connectivity.
I can understand why Barry Blimp might feel like he’s not wealthy (comparison to his peers, the super-rich, etc.) but surely you must be quite out of touch to think £80k doesn’t put you in the top 50% off UK earners! If you want some global perspective – put your salary into here: [http://www.globalrichlist.net/]. If you want to see your position in the distribution of the UK for net household equivalised income, the IFS has a good tool: [https://www.ifs.org.uk/tools_and_resources/where_do_you_fit_in].
@TI – I have voted both Conservative and Lib Dems in the past but this is the first time I’ve considered voting for Labour as an option (though I still need to put some time aside to read all the manifestos properly). I just wondered what your main concerns are with the Labour party policies?
Am I the only one that read the MMM post and related/enjoyed it. The guy is living his life how he wants to live it. He’s not having the “homemade” pizza to save money, its just easier and more convenient. I’m having an Asda stuffed crust oven pizza tonight. Love it, one night of the week where haven’t got to get loads of pots and pans out. Just bang this in the oven with some chips and is ready in 20mins.
@Matthew “@jimjim – putting infrastructure in before the market deems a need is kind of like building a motorway in the middle of nowhere and hoping houses and factories will build around it”
Isn’t this called town planning. Surely this is what more modern countries do?
@jimjim – it sounds like the main issue for you is that they’re not providing what you’ve paid for, in which case i hope this helps, although you may’ve already done it;
If you get that hopefully it’ll feel like enough, for most people anyway
Could the school get a second line? Perhaps the internet demand of schools will cap out at some point, I cant imagine what, beyond youtube, would demand too much per user, and that it’s more about numbers of users?
Or perhaps 3g used to help with the school network?
Although i did find it slow to back up family videos to the cloud at 0.9mbs up (10mb down), although it’s not really a problem
@GMRD — As mentioned to @Matthew above, I’m enjoying the non-political comments about more personal finance matters this week and suspect others are, too. (Well I suppose Bolton Barry chat is sort-of political, in a meta-sense.) So I’ll just briefly clarify that my editorial comment in brackets re: Labour was a reference to Gerald Kaufman’s famous description of the very left-wing 1980s Labour manifesto that saw Labour unelected until Blair had brought the party back to the center. This is easily the most left-wing since that, and arguably more so.
Perhaps I’ll relinquish and do a political Weekend Reading the Saturday before the vote and we can have a ding-dong about it then. But as I say, really keen to avoid several weeks of comments being election-related — some regulars enjoy this mud-wrestling (as do I) but I think it’s a turn-off to most who come to Monevator for more direct investing/PF related matters.
I would argue a high-quality infrastructure for the flow of information is as vital to a 21st century economy as infrastructure for the flow of water, energy or goods/people (rail/road) was in the 20th century.
BTopenreach is functionally a private monopoly in large swathes of the country, taking large subsidizes from the government. It’s crowding out competition from non-fibre technologies in rural areas. It already acts like a bureaucratic nationalized entity. BTopenreach is simply extracting rents from the rest of the economy at zero risk to itself. Either BTopenreach has to be nationalized or the market needs to be opened up.
Realistically, it’s also very difficult for the private sector to build mass infrastructure. They don’t have the time horizon or cheap long-term funding. I cannot evaluate whether nationalizing BTopenreach is a good investment but it’s not implausible. On the asset side, you own a company that has an effective monopoly generating dividend streams. On the balance sheet side, the UK government can issue 50-year Gilts at 1.18%, well below the inflation rate, locking in a PV profit. Seems win-win.
I have zero confidence in a Corbyn government and if he ever got a majority, I doubt Gilt yields stay low. It’s another reminder, however, that the Tories remain so ideologically obsessed with dismantling the state that they don’t even see that private monopolies are an issue. It underlines their constant preference for rentier capitalism vs. genuine free markets.
@jim – motorways (and other public services) are generally only built when there’s established demand (environment aside) – you start off with B roads/ copper wires
As cities grow the supporting commuter belts will grow, and each city probably came to prominance for a geographic reason/ resources. I think when you are far from london, you get local capitals, like Bournemouth is bigger than you’d expect, and like in the USA/ other big countries you do get regional capitals where the main one is too far away
@Matthew, 14mbs will butter no parsnips in today’s world, you need 25mbs for 4k Netflix… https://smarthomeflow.com/netflix-4k-guide/
I can only see the size of the pipe needing to be bigger in future. If you are happy with 10mbs bully for you, Google launched it’s fully online gaming platform this week… https://store.google.com/product/stadia?gclid=CjwKCAiAzuPuBRAIEiwAkkmOSMsBaVKI4IDSZKLgWRLnC2sBS2VzWPJI-8sZwcLHyYm5uKzk7TzH_RoC1q8QAvD_BwE
This will need 4k… to be any fun… What do you think that the future holds for bandwidth???
@matthew, I assume from your comments you haven’t spent much time in the rural outreaches of the country, otherwise I think you’d have a little more sympathy for JimJim.
I live in a small market town about 25 miles from a decent sized city, and have to pay through the nose for the BT ‘superfast’ broadband, which mostly works, but not always. Mobile signal is even worse. And I’m not even in the rural hinterland. It may surprise you that businesses do exist out in the sticks, and many many people aspire to set up by themselves, particularly in remote places where there aren’t really many employers within a reasonable travel time. Clearly, markets aren’t going to work well in sparsely populated areas where costs are higher and demand lower. That doesn’t mean we should basically ignore everyone who doesn’t live in a big city.
“…you own a company that has an effective monopoly generating dividend streams”.
But I thought the idea was that broadband would be free for all – so no income nor dividend streams.
From an ‘investment’ point of view, I think the question is – will the cost produce a comparable benefit? And what represents a ‘comparable benefit’ would entirely depend on your point of view. Maybe it would be better to invest in 5G and just give away mobile phones?
I can’t agree with you. Fast broadband is not some luxury item in today’s world, it is a fundamental piece of infrastructure. We run two businesses from a rural location, both involve sharing large files with customers, and an increasing use of virtual meetings. After a fairly recent upgrade to fibre to the premises, it has been practical to expand our geographic reach and to spend less time on ‘trains, planes and automobiles’ for client meetings.
This has increased our quality of life and our economic impact on our locality.
If the current and future world is built on fast communications, failure to provide it means people who don’t have it lose the chance to participate. Yes we could all move aour businesses to big cities, but a) we don’t want to. and b) many cities have poor broadband as well. Just listen to the complaints from people on new estates in and around London who can’t get fast broadband because it is not seen as an economically critical utility.
It is like much other infrastructure of societal benefit. The private sector might build it or it might not, but most countries have learned not to depend on private investment for mission critical infrastructure. For example, the economic advantages to the North of England of upgrading the East/West rail links are obvious (the so-called Northern Powerhouse). If it was economically viable for them, the private sector could invest in the upgrade, but they haven’t. Despite the overall benefit to the economy, we will wait a long time for private companies to invest because many of the benefits accrue elsewhere. We need Government commitment, investment and guarantees to make it happen.
If we see fast broadband as a piece of critical infrastructure (and I do) then the same argument applies.
@The Borderer – 5G and whatever comes next is essentially a ‘last mile’ solution. You have to get the signals to the masts and that needs fibre. And as we go to higher generations of mobile, the range of each mast comes down and we need more masts that need to be served with more fibre. So there is a big fibre infrastructure roll-out required for 5G anyway. In terms of absolute data capacity, fibre will always beat radio transmission. That’s why all of the world telecoms backbone is fibre. The decision on FTTP vs FTTC+copper vs mobile phone is one of cost to install and cost to operate vs capacity demand and customer price sensitivity.
We are lucky. We got FTTP by some random accident of geography, public funding and Openreach engineering plans. We would have been happy for the moment with 30Mps from FTTC, but 1-2 Mps ADSL with frequent dropouts and total failure when it rained heavily was seriously cramping our participation in today’s economy and society. We don’t even have a decent 3G signal so mobile was out of the question.
Believe me this stuff matters to the rural economy. The digital divide is real and needs to be addressed for the progress of the nation.
@old_eyes, thank you. Much better put than I managed.
The word @Old Eyes… Keepin it real
@Old Eyes, it would be interesting to compare what BT are charging you for your bandwidth with the B4RN model I linked earlier… A social enterprise Vs a public company with a virtual monopoly and state aid?? https://b4rn.org.uk/
@old eyes – in the same way that infrequent busses are a problem for rural businesses I can appreciate that a lack of infrastructure limits business, but surely this is a consideration when deciding where to place/keep a business? You wouldn’t put a factory on a dirt track and the expect the rest of the country to pay for a road. Likewise you wouldnt put a farm in london and say that the land is too expensive – local factors factor into the decision.
Its a good cause though to be sure, but the best cause? – the most efficient use of limited resources?
Capitalism does sadly leave people behind but ultimately decides what is worthwhile, it could well be the case that government does see intervention as worthwhile/profitable, and does see the taxes it’ll get from your growth, like it thinks with HS2
But I do think rural businesses should have the option to pay for what connectivity they do need, and expect the speeds advertised, perhaps regional pricing or breaking up openreach into regions would help somewhat
@Borderer. I’m not particularly enamoured by the “free broadband” pledge. Free services tend to create supply-demand imbalances (cough NHS cough). Nonetheless, I’m not a fan of private monopolies either, especially those being given state funded subsidies. Essentially, the UK economy takes the risk but BTopenreach takes the profits. That isn’t equitable.
It would be better to open up the market and in some cases there is room to do that in non-fibre technologies. The problem is that where fibre is optimal (and it mostly is), it doesn’t make sense to have two or more fibre networks replicating each other.
My preference would be to see the government take a stake in the fibre network provider. Not necessarily outright nationalization. The government needs to earn some return for providing what is effectively an implicit guarantee. This is not a private risk-taking company but actually a parastatal. It doesn’t follow that broadband should be free. We don’t get free network rail travel or free water, energy etc.
Agreed, we pay for road use, gas, electricity, water and as I have said, I would gladly pay for a decent service for fast broadband. It is a crucial service even at household level and how a business would run without it is beyond me. As is how any business would function without the road network, which is pretty much as you describe above.
I would have been more sympathetic to the “your choice” argument a few years ago I suspect. After all rural businesses are getting other advantages such as lower property costs and cheaper housing for workers so likely less pressure on salaries.
However as has already been argued digital infrastructure is no longer a nice added extra. We are only in the first wave of how all this stuff will be deeply integrated into the structure of our societies. Eg. When all the roads are smart and ubiquitous autonomous cars are chatting to each other as they speed along at 200mph you don’t want a pileup on the edge of Cornwall because the internet blinked out. 🙂
Secondly, if anything good came out of the benighted EU Referendum it was the demonstration/increased awareness that much of the country feels (and probably is) to some degree left out of the progress of the past 10-20 years. Tackling digital haves and have nots at least takes away one road block to more distributed economic development.
I’d like to take issue with Adam Collins’s portfolio of four ETFs. Having lived through the collapses of Icesave and Northern Rock banks, I’d advocate greater diversity to spread the risks along every link in the chain – brokers, investment houses (Vanguard, iShares etc., not wealth management!), regions of the world (probably covered by the four ETFs) and even investment wrappers (i.e. invest in unit trusts and investment trusts as well as ETFs).
What ZX said.
As a professional valuer, I’ve no issue with the nationalisation of Openreach. Set up an agreed process, keep the politics out of it and leave the experts/court/tribunal to agree the valuation. I’ve done this dozens of times, I’ve also valued plenty of expropriation cases. Of course, that’s wishful thinking. But deep down there’s no reason why such a process can’t be relatively painless and quick.
Specifically, on utilities, I’ve also valued plenty of utility/infrastructure businesses. I don’t think there’s a clear cut case between private or public ownership. Both can work or not. Some are good, some are bad. I needn’t repeat the arguments as they’ve been covered above.
With Openreach specifically, the lack of investment and a toothless regulator has been incredibly damaging. Simply put, without significant change, we will not meet fibre roll-out targets. BT have not invested enough and there’s a huge shortage of engineers. To give just one example, my brother-in-law is an Openreach engineer and has to cover a 50km area due to the severe shortage of manpower and resources. He spends more time driving than working and works overtime every week. A lot of that is down to the standard rent-seeking and monopolist actions by BT. But importantly, their investment in resisting Ofcom rather than investing in better service.
@TI (22) – Thanks for clarifying the editorial comment in brackets, I can fully see the comparison you were making. On the comments: I totally agree – it is great to have something other than B****t dominate the weekend reading thread!
@Matthew (24) – You are right on the whole that most towns/cities grow ‘organically’, however there have been a dozen or so towns in the UK that were built over the last half century specifically as a result of the New Towns Act 1946 where essentially the road and rail was built first (or already existed) and then entire new towns were built and populations relocated (usually to the displeasure of existing residents).
On the article about Marie Kondo – it does seem a bit hypocritical for her to be encouraging fans to buy more products (although I understand why she is trying to diversify the monetisation of her brand)! Surely her fans should be finding people, experiences, products, etc., that spark joy in them as opposed to buying products that spark joy in Kondo?
According to Torsten Bell, director of the Resolution Foundation: “You may need to earn only £80,000 to join the 5% club for earners, but that’s unlikely to ever be enough for you to join the top 5% club by wealth. To achieve that, you need housing or savings of almost £1m – which you’ll probably have to inherit or marry rather than earn. That’s the result of our stagnant incomes but soaring wealth of recent years.”
I think many in the Monevator/FIRE community will disagree with that pessimism on wealth building. I think someone earning over £80,000 in income should eventually accumulate over £1 million in wealth from reasonable saving and investing.
@freemantle I’m an 80k plus earner have been for the last 4 years and at 39 my net worth is a shade over 500k. Take out my house equity and its 330k. That change has happened relatively quickly too So actually the majority of my wealth has been generated on less than 50k earnings. Based on conversations with my peers I would agree I’m a total outlier. Incidentally I still don’t feel wealthy I guess because most of thsy wealth (about 400k)is in pensions and my property so not readily accessible
@TI Is your web clock still on British summertime? all the post time signatures seem in the future?
@Tony I agree he doesn’t present as a sympathetic character in the few moments he appeared on TV. But I wonder whether he may be articulating a real point?
I was paid to that level, and owned my own house but I never felt secure or well off.
Never a new(or even newish) car. My 1930s semi was in a lower market side street near Heathrow and we had no expensive lifestyle. The job, in both hours and atmosphere was pretty unpleasant.
Governments of both colours were always changing the rules. Never for my benefit. It was hard to plan, for the future. By hard work and luck I got out at a reasonable age.
I worked with or for some of the people now standing in the election, and I saw nothing that made me think they had the best interests of anyone except themselves.
Maybe chummy on the TV is expressing the cynicism we all feel.
I see from what @TI says about the digital haves and have nots, its sort of an attempt to reconcile leave, and socialism is almost like a response to 2016 bearing in mind that 2016 was after austerity and the b word was a bit like a workers strike – restraining the supply of work for more pay… moving on!
Regarding the extinction link – I don’t like harm to animals but also fon’t believe that preserving a struggling species is morally good – if a species is not well suited to this world life will be hard for it – and evolution has been going on for millions of years, and we suffer less today because our weaker ancestors sadly died off – are we preserving species just for something we can gawk at? Keeping them alive is one thing but I wouldnt force breed them
Infrastructure development can’t just be turned on like a tap. The companies needed to do the work aren’t sitting idly waiting. There’s the requirement specs to be drawn up, the response period, the procurement reviews etc. Then their might be legal precursors ( compulsory purchase etc). When it finally gets the go ahead ( against an unduly optimistic schedule) there’s also skill shortages, material lead times etc to be considered.
Should have been put into motion years ago but….
@Bob Even in London the median wage is well below that (£736 per week). You might have had it hard but most people were earning less than half of that.
If you earn £20K a year you’ll see half your income go on rent, you’ll borrow from your parents when the boiler fails, and you’ll say that life is hard.
If you earn £40K a year, you’ll be frustrated your two young sons are still sharing a room when your daughter has her own, your car needs frequent repairs, you wonder how you colleague at the office can afford to take their family on another two-week trip to America, and you do not feel secure or well off.
If you earn £80K a year, you wish your exhausted partner didn’t feel it was better that s/he worked while you are still paying the kids’ private school fees — but then again you can see the point about saving more so they don’t leave university with student debt — and you wonder if it was worth stretching yourselves to buy that holiday cottage in the lakes even if you do rent it out for 10 weeks a year, but still you’ll daydream about downsizing to go live in that cottage instead, and maybe you’ll appear on Question Time to say you’re not rich — heck, you’re probably not even in the top 50%!
If you earn £150,000 a year you’ll know a bunch of people who earn £250,000 a year and you’ll doubt they work as hard as you — and they’re certainly not £100K more valuable! You’re annoyed because you can’t put as much into a pension anymore due to the taper so you fill your own and your partner’s ISAs to the max and invest in VCTs instead, and wonder what it’s all about while you watch your partners’ old university friends dancing with their kids at a New Year’s Eve party in Courchevel, thinking about how much it’s costing you.
If you earn £500,000 a year then FireVLondon will write a post about how life in London is actually quite financially stretched for you.
If you earn £1,000,000 a year you’ll shudder when thinking about the introduction of punitive wealth taxes, capital controls, and the devaluation of the US dollar and the pound.
If you earn £100,000,000 a year then you’re paranoid your Head of State wants you assassinated or to split your company up, depending on your jurisdiction — but you calm yourself by inspecting your plans for a luxury nuclear bomb shelter in New Zealand.
Round and round the wheel we go. 🙂
I have generally got rather bored with MMM recently, but his pizza post struck a chord. I too make my own pizzas.
He seemed to blur his motivation, he connected it to frugality but actually was it because he prefers it that way? For me it is lifestyle, I (and the family, happily) like my pizzas – if nothing else I am much more generous with the toppings than any restaurant – and I get the satisfaction of making them. When we do use restaurants it is for social reasons, going for a pizza is an acceptable meet-up which suits most people; and when we end up with a gang of teenagers round our place a take-away works well.
But I can see the “wealth” aspect too: wealth of time. Until I retired, a pizza had to be a weekend meal in order to have the time for the dough to rise, now it can be any day.
If we take ‘Barry’, say he lives in London and his age bracket is 40-49, the median full time salary is probably something like 50k (couldn’t find specific figures, but 40-49 earn around 25% more than the overall average). 80k is still very good, clearly above the 50% mark, but the gap is closing and it starts looking less extreme in this context (yes, totally out of touch to the country as a whole). As others have said, he is also probably confusing income with wealth. Most people don’t earn 80k when they start out (if ever), and if you have only been at that level for a few years say you may not have the assets/security behind you yet to feel you should be classed as wealthy. But you have a hell of an opportunity to build assets/security most can only dream of.
Of course many people just don’t want to pay more tax….
@Richard — Question Time Barry doesn’t live in London, he lives in Bolton (or at least he was in the Bolton Question Time, had a regional accent, and gave no indication otherwise, and Question Time I believe tries to curate a local audience, so I think it’s a fair bet).
He was the epitome of a Barry Blimp in the short burst we saw of him — angry, almost shouting, yet doing well financially so why is he so indignant? Clearly far from stupid — he’s earning £80K — but oblivious to the reality he feels so strongly about. Completely confident he’s right and the opposition are “liars” (when in reality he was out by a factor of 10 as to where he sat on the income scale!) and most of all digging in when told otherwise.
I think Labour are wrong to call people earning £80K the “super-rich” as they do in their manifesto. And as others have said, income and wealth are two different things. But that little vignette on QT was very illustrative I think, in myriad ways. But I’m straying into the zone I’ve asked others not to this week, so I’ll shut up! 🙂
Re. the free broadband for all. We all live in a bubble, and as such have been talking about the need for business and those who live rurally to have decent internet access.
But while @Matthew gliby talks about dole claimants playing video games, from what I understand, in order to claim Universal Credit in the first place, you have to do it online. I’ve also read you have to input your job search diary online as well.
So I would argue that those people who require Universal Credit and that don’t have decent internet infrastructure, or may not be able to afford internet, and who may similarly may be unable to travel for either medical or cost reasons, or indeed have no local library or internet cafe within a short distance anyway, would benefit enormously from having free broadband rolled out to all corners of our four countries.
I’d also be happy with a regime change that got rid of these online only rules too. But that’s probably getting a bit political. Sorry @TI.
Anecdotally, everyone currently living that I know, from young children to people in their late seventies, use the internet. The only person I knew who never used it personally was one of my late grandmothers. And even then, family would still show her content from the internet on their phones or tablets. I grew up before it was a thing (born late seventies), and can cope perfectly well if it goes out temporarily, but the reality is with how our current society works it is not only relied upon but needed.
P.S. Sorry for the run on sentences. I can’t help myself.
> put up with a sceptic tank
I find that very hard to believe.
Would you believe a septic tank?
Well how about a spellchecker and a nameless assistant?
According to Rebecca Long Bailey’s speech at the University of Lancaster on 15 November 2019 “the next Labour government will deliver free full-fibre broadband to all individuals and businesses by 2030”
I do not for one moment argue with the importance of high speed connectivity to every corner of the UK.
I simply question whether nationalising Openreach is the way to achieve it, and whether full fibre is necessary in every home at the taxpayer’s expense?
@TI mea culpa for the “L” word.
Actually, i would recommend her speech as worth reading https://labour.org.uk/press/full-text-of-rebecca-long-baileys-speech-on-labours-british-broadband-announcement/
mea maxima culpa
@kel – 56k dial up modem should be enough for UC claim/job application, or if that keeps timing out nowadays then 10mbs should certainly be more than enough for those basic purposes
@max – I once read someone say they had physics skills instead of psychic skills!
Interesting article about how computers have arbritaged away value alpha more than growth
Interesting read on BBC this morning – Cryptoqueen: How this woman scammed the world, then vanished
Never heard of onecoin before reading this (don’t keep up enough with the news clearly). I was tempted to buy something crypto back in the day bitcoin exploded but kept to the maxim if the taxi driver is saying buy it then it is a good sign not to. Stick to the slow and steady portfolio!
@Max86 … Saw that one after posting, was laughing hard myself, dropping back into the tradesman’s jokes of my earthy past subconsciously perhaps 😉
@Max86… Perhaps mine would be full of Euroseptics???
@TI, The Barry Blimp in question time, according to the I, is a Mr Rob Barber ofBury, Lancashire. Rob “Bullet” Barber, races bikes and is an I.T. consultant.
The average salary in Bury is….
[@JimJim — I edited your four posts to put them all into one. Please try and avoid one-liner posts on Monevator — with our old-fashioned comment style it’s quite clunky and distracting. Thanks! 🙂
I think the slightly wider point is being missed with all the criticism on the chap earning £80k on Question Time.
He’s essentially saying he doesn’t believe his income should line him up for being clobbered by tax
If it was being proposed that people with £300k in wealth should be clobbered as having the ‘broadest shoulders’ I expect all the people on here criticising that gentlemen would be huffing and puffing about how 300k didn’t make them rich… and be attracting scorn from him…
I’m really not sure what proportion of gdp should be spent by the govt, or what on, or how that should be raised. But for a group of wealthy people to criticise a person who’s objecting to it falling on income smacks of a different type of Barry blimp mentality – I’m alright with my wealth, people with high incomes be damned
As TA is writing ✍️ a book some of his older articles get updated and recycled and I love reading below the line on those articles. From looking at what contributors were talking about/ thinking about then ( sometimes 2009) compared to what has happened I 100pc agree with you.
@BarryBlimp… Clobbering anyone with tax is always going to be unpopular.
I work in a place that has two wards with greater than 40% child poverty and another ward very close to that figure, the past decade has seen the use of food banks skyrocket and a county lines drug problem appear to the extent that it is aired on national T.V.
Conversely our average salary, according to the website I quoted earlier, is 29K, much healthier than Mr Bullet Barber, your alliterative cousin, from Bury’s locale. I honestly believe that this “devil take the hindmost” attitude to society can only cause us problems. And while my salary is less than half of Bullets, and my lifestyle is probably more frugal, I would gladly pay more tax to make this more equal. As for wealth, how much is enough? No one I ask can answer that without adding a caveat. Mine is hard won from years of frugality, others have wealth gifted to them, should we tax luck and reward frugality? Is that even possible. Thatchers “death of society” has caused societal problems that need to be sorted or we risk polarising our already fractured society further.
Most of the electricity production is in rural areas, yet we get no discount (would a low voltage intermittent supply go down well in the city?). Most of the water collection falls upon the green areas of our country yet it is used more by households in the city. Our forests clean your air and our land grows your food. My point being it is not helpful to exclude, we are one country, not north and south, town or country. We are interdependent and should be working together for a common purpose to make this country a place fit for all.
Well I’m not sure that’s true on either count. Firstly, several commentators on this article have said that was his point — and in the wider media I’ve seen it referenced dozens of times. In fact in my links above even one of The Guardian articles makes this point!
Secondly, while he was indeed saying “he doesn’t believe his income should line him up for being clobbered by tax”, he wasn’t saying it from a position even approaching knowledge. He was saying it from a position of deep ignorance. He thought he was in the bottom 50% of pay-earners when he was in fact in the top 5%! This ‘other people should pay’ mentality is of course equally widespread on the left as on the right.
As discussed above I don’t want to get drawn into politics, so I’ll just add I don’t believe it’s ludicrous to argue the population of this country is taxed enough already, or that somebody on £80K a year is already paying their “fair share” (awful phrase) of tax. I don’t see any case for big tax cuts right now, but neither much for tax rises; I’m sanguine about a modest increase in borrowing for investment. Of course like nearly everyone I’d like to see the super-rich pay closer to what Barry of Bury pays in tax, but that’s an intractable problem and for me almost a moral one rather than a fiscal one, in that it won’t do much to move to dial on the national coffers anyway. 🙂
I think you’re 100% right here. I have a post idea about this bubbling away, in fact. FIRE-seekers (ack, I’m starting to use the dreaded term myself) are unwittingly in some respects aligning themselves with the ‘problem’ group in society, the 1% / 0.1% (discuss!) of wealth-ers where the big distortions are being seen.
Surely the simple issue behind Bob from Bury’s ‘ignorance’ is the well described bias/heuristic we all have, which is that we tend to believe we are ‘somewhere in the middle’, because we can see people with both less and more than us. Our emotional brains are very bad at quantifying this, so we always think we are not rich, not poor (unless we are really at the extremes of either). It’s basically a type of hedonic adaptation. The rich are always those who have more money than us.
@Vanguardfan In general this is true but if you are going to go on TV to make a point then your should get your figures straight first. I started off defending him early in this thread but the more I think about it the more I realise he has his head stuck up his own arse.
I had a related experience of this reading an article this week (not sure if it made it into the links) that was discussing how much people felt they needed to be truly comfortable and secure.
As I was reading the article I wondered what that figure would be for me, and the number that popped into my head was approximately 2x my current net worth.
I then read on in the article and it said something like “whatever level people are currently at, they tend to believe they need twice as much to be secure.”
*snort* Pretty humbling. 🙂
@BBlimp: Re-reading my comment, I haven’t really justified “not true on either count” with my subsequent comments. Barry clearly does believe he shouldn’t be clobbered by more tax, so that is objectively true. What I’m trying to say is “he doesn’t believe — based on a uselessly ignorant view of his position — that he shouldn’t have to pay more tax”. i.e. With respect to @Vanguardfan’s point, I think one can have a (deeply subjective) opinion, as no doubt I do, too. But one can’t really justify it objectively wildly inaccurate facts.
@TI I look forward to reading that article ! Imagine there was a campaign that ISAs had an upper limit of 250k for eg…
@JimJim – I think defending why your wealth shouldn’t be hit ( you’ve accumulated via frugality) whilst you don’t mind your income being hit goes toward what I was saying – you don’t see yourself as ‘rich’ but were someone to come for your wealth I’m not sure many people would be lining up to agree you shouldn’t pay more…
I don’t think I was defending my wealth, I just stated that I did not see a fair way of taxing it. If the axe falls there will be little any of us can do about it. Taxes are rarely totally fair. How it falls is not up to me (Cyprus had a haircut on bank accounts, was that fair and equitable for all, I doubt it)
If wealth leaves me, my bad luck.
I’m not justifying his ignorance. I’m just saying that it takes conscious effort, type 2 thinking, to override our innate biases. Most people aren’t aware of that and don’t bother trying. But I’ll bet every one of us, even if we intellectually know we are really well off, have some kind of emotional attachment to the idea that we are not ‘really’ rich. I think that also is because we have an unrealistic idea that wealth transforms our emotionally felt internal human experience. As you said before, people remain essentially themselves. Don’t look to wealth to change your life or your personality!
The other bias at play here is loss aversion. Very very few people actively want to lose money to taxation. Like JimJim, I think we desperately need investment in public services and would willingly pay more, that doesn’t mean I don’t look at proposed tax increases and immediately feel a negative emotional reaction. It takes a few more seconds to remind myself that this would have absolutely no real impact on my life. Type 2 thinking again, but many people don’t realise they have to think things through beyond the gut reaction.
I suppose what I’m really saying is, why are we surprised by Bob from Bury?
And the real challenge is, what can be done about it? How can we change people’s reactions? When social media is doing the opposite?
I remember the year I earned £80k: 1999. I’d started in 1998, on a salary of £30k with a £10k bonus. The next year my salary was £40k with a £40k bonus. My boss informed me my salary for 2000 would be £80k and, going forward, I would earn ‘real money’. I felt £80k was ‘real money’. My parents were staggered. It was 6x what my dad had ever earned in a year and I didn’t even do overtime or weekends.
Roll forward to 2019. That old boss was right. I did earn ‘real money’. Statistically, my income has put me in the 1% (and 0.1%) for almost twenty years. My wealth puts me deep into the 1%. Yet, I don’t feel wealthy. These days, I can’t imagine getting our spending down to £80k/annum, yet we view our lifestyle as at best comfortable but in no way luxurious. My colleagues see it as simply cheap and not in a good way.
I feel more stressed about my financial position than I did in 1999. I worry about losing that wealth and financial security always feels just over that horizon. I’m basically far more paranoid. But another old boss told me once “I’m paying you to be paranoid” so perhaps it just comes with the territory.
@TI. Spot on. Except for the £80k category sending their kids to private school. That doesn’t really kick in until you get into the £150k or £500k category. Fees for 2 children at say Brighton College is over £80k. That’s £140k of pre-tax income.
That sort of represents the issue. A family with one breadwinner on £80k simply isn’t able to afford items like private education. They might be comfortable but somehow they find they can’t afford luxury without going into debt. Statistically, they are in the 5% percentile but they don’t feel “rich”; they don’t even feel upper middle class. That’s because they are not upper middle class. The middle class is being hollowed out.
The issue here is wealth inequality. If you model wealth inequality as a Wiener process, in the most naive model, the wealth distribution never stabilizes: asymptotically all wealth accrues to a small minority (‘feudalism’). So you need to add in a term to represent wealth redistribution, essentially a mean-reversion term that attracts wealth back to the mean. If you are rich it pulls your wealth lower. If you are poor it pulls your wealth higher. If you then fit that model to historic data, then what is notable is the sign of that redistribution term went negative in the 80s. Trickle down became trickle up.
The neo-liberal economic model is based on a fiat currency system with price stability (i.e. there is only a limited constraint on the creation of money; the primary constraint is the price of money). That system has been hugely successful at generating global economic growth, pulling billions out of absolute poverty. Nonetheless, there is an inherent feedback loop in the money creation system that allows those with negative net wealth to go into further debt, requiring lower interest rates to make it sustainable, which raises asset prices. On a relative basis, that loop causes wealth levels inside populations to bifurcate into poor and rich, slowly eroding the middle class.
Exactly. This is the point I keep trying to make about that QT exchange. 🙂
It’s impossible to prove, but I don’t think he’d have appeared *in the way he did* 15-20 years ago. I called him Barry Blimp from Bury very deliberately.
Of course he could/would have appeared on Question Time defending his income/wealth. But he would not have said, I’d guess, that he was in the bottom 50% of earners, that Labour were “liars” (even when corrected), or indeed taken this line at all.
He would have said something like “I am taxed enough already” or “Labour can’t be trusted to spend the money properly” or “you are hitting the wealth creators”.
This is (not too) subtly different.
How can he be so adamantly wrong, so indignantly ignorant?
Very probably because he spends his time in polarized online echo chambers, seeing a distorted view of the world and repeatedly being told by other denizens that he’s right.
As most of us now do, to a greater or lesser extent.
@ZX, you make my point completely. You know you are wealthy, but you don’t FEEL it.
We are all the same, it’s the way our brains are wired.
This brings us back to MMM. The only way to feel wealthy is to practice gratitude. And frankly you don’t actually have to be objectively wealthy to do that.
And some self awareness helps – noticing that more money makes you feel more rather than less stressed should lead to some conclusions.
As someone barely on a 20k salary and now in my 40th year, I’m not sure I can muster much sympathy for the Barry’s of this country. Browsing the comments about relative wealth, I’m confident that I’m pretty darned poor compared to most readers of this blog.
So to my question: is financial freedom and early retirement only plausible for the rich, ie the 10%, avg 50k+ salary? Put another way, is the advice on this site targeted at a minimum income bracket/class?
I am half way through a wet cold bike ride around Coniston and the surrounding hills, so far I have waved at many fellow cyclists, gone over the fell and around the east of the lake and have stopped for coffe and poached eggs. I feel wealthy. And would still with a little less.
@Nigel made an important point here. It seems unwise to optimise the portfolio just for cost and simplicity, and ignore the tail risks. FSCS thresholds are low, and anyway who knows what can happen in a serious crisis. Just reading “Crashed”, and the GFC backstory really drives this home.
@Nas – If you have tax credits/universal credit, contribute to a pension, you’ll decrease your gross income in the eyes of hmrc, increasing the benefit on top of the standard tax uplift, and avoiding the uc savings threshold. Also you will be accustomed to living more efficiently than many readers, and so don’t need as much to retire, especially if you’re not renting. If you own a house perhaps own it as tennants in common with a will to pass it on directly to children (if it goes to spouse its vulnerable to care home fees)
I do believe that some level of early retirement is possible and you have time for risk, but if it doesn’t pay off in time you may want to consider aiming for a comfortable retirement rather than an early one – you can cram more living into fewer years that way
> Bary Blimp of Bolton thinks he’s “not in the top 5%, not even in the top 50%” on £80,000 a year – BBC
It’s easy to take pot shots at people like this but I don’t think it’s fair and it misses the point.
The really interesting point that most people miss about that BBC article is the shape of the income curve – it’s a hockey stick. It’s not linear and this is what misinformed high earners like Mr Bimp get uppity about. And funnily enough, it’s also what the low earners do too.
To move up a percentile at the bottom end requires earning “only” a few hundred or a thousand pounds more a year. But as you go up the chart, to move from the 80% to 90% percentile, you need to be earning ten thousands more. And the further right you go, the steeper it becomes.
Personally, I don’t want a society where we try to morally or publically shame people who earn more money (or just steal it via more tax) – that attitude has a lot of negative repercussions and smells a lot of envy politics. It doesn’t actually help people on the lower end of the curve either. I think the real problem is how steep that income curve is and just how hard it is for people to dig themselves out of it. Most people earning £28k a year wouldn’t tell you it’s an earth-shattering amount of money – it isn’t. But half the people in the country are worse off than that.
For those of you who also bother to actually read the IFS reports in detail, you’ll also know just how dependent this country is on the top 10% of tax payers, who between them pay almost 2/3rds of all tax revenue.
I’d much rather we had a society where people can support themselves, have genuine opportunity and can advance their own means by all possible methods, so we are all richer and better off – instead of the one we have to today where the majority of people rely on the few to keep everything going.
@AnAdmirer Isn’t the reason the top 10% pay the majority of taxes because the top 10% have managed to make themselves so wealthy at the expense of everybody else. It seems to me many of these problems have their roots in our high levels of inequality.
I never bought that idea of envy politics, it always seemed like a cheap shot to me, especially when many of the politicians advancing ideas for improving the lives of those at the bottom aren’t particularly poor.
@admirer – for the top 10% to conttibute almost 2/3 of total tax take like you say, the top 1% or 0.1% must be earning drastically more than the person exactly at the top 10% – I don’t even think most chief exec’s pay can even explain the income of the 0.1% – is this just asset generated wealth getting converted into the income of the person who is able to get the most from shareholders? Is a lack of enough shareholder power distorting the distribution of rewards?
Give shareholders more power and you’ll give everyone opportunity; bogle helped the world more profoundly than most people realise, but transferring reward from brokers to shareholders didnt mean the value of what brokers do had changed, just that they didn’t have shareholders by the balls anymore – same with boards of directors
@Nas – I’ve been on here every so often over past few years – took a break when it was non stop nonsense on Brexit – but I don’t think it’s an early retirement site. More about having comfortable retirement around ordinary retirement age I think.
Sorry if this is already mentioned in these comments. I suspect that the linked article “Explained: the state pension, and how the goals will shift in the future – Money Observer” contains an error.
The article says, “You can instead pay cheaper Class 2 NI contributions, but only if you are self-employed on low earnings, **unemployed and not claiming benefits**, or living abroad. These cost £156, which is even better value.”
I’m not sure this is true. See https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions where a table suggests those who are unemployed and not claiming benefits should pay class 3, “Unemployed and not claiming benefits : Class 3”.
I’ve submitted this in a comment to Money Observer, but it is stuck for moderation. I don’t want any readers here being misinformed by Money Observer.
@Matthew. 43% of all adults in the UK don’t pay any income tax. With 4 in 10 not paying any income tax, it follows that the higher paid will be paying a significant chunk of the overall income tax take. The top 1%, with an income above £160k, receive 14% of national income but pay 27% of all income tax.
The boundary to get into the top 0.1% is not very high, just £650k. This is the floor for compensation that equity partners at large law firm or accountancy firms (both LLPs). It’s also around the floor for compensation for SIF-coded (significant influence function) staff at investment banks. A hedge fund portfolio manager making a modest $5-10mm in P&L would get paid around that. It’s definately not the type of compensation that FTSE 100 CEOs get, which averages more like £3-4mm.
I retired at 58 (could have been earlier) 11 years ago. I never had a big salary, under 10k mostly. I lived frugally, but comfortably, when I was working, and continued in the same vein. Since the pensions kicked in, I feel I have more than enough income.
@all Compared to the £millions talked about here, my £¼m seems small; compared to the negative wealth of some of my friends, it’s enormous.
@Matthew I would say it’s easier to live efficiently when you don’t have much choice about the matter but I take your point that I could retire on much less than some, eg only £16k assuming the 80% rule.
@BBlimp If I don’t have to continue working past the pension age then I’d settle for that as early retirement. I only wonder whether the relatively small sums I can set aside would create a pot that would generate the £7k pa to top-up the state pension. Maybe it’s just too little, too late for a comfortable old age.
Was Bolton Barry not (badly) attempting to articulate that income is taxed more heavily than capital. That is, earning 80k PAYE does it put him in the top “earners” as the “wealthy” earn through dividends and other lower taxed means and he was bemoaning that PAYE workers are easy targets.
Or am I just being overly generous with my interpretation and he is simply out of touch. Still someone earning £80k is unlikely to find much sympathy.
I guess you started saving in your 20s to get to that 250k on a low income? Starting from scratch at the age of 40 seems an uphill task.
It’s commendable (if rather anti-zeitgiesty!) that people are still looking for generous interpretations of Bolton Barry’s comments, but personally I think you’re trying too hard.
As I said earlier, it would be one thing if he was making a subtler point about relative taxation, capital versus income, overall national tax burden et catera. But he wasn’t. He thinks (/thought) he’s in the bottom half of earners when he’s earning nearly 4x the average salary and is in the top 5%. He sees the world wholly incorrectly and was out by a massive factor, and feels indignant enough about it to rant on national TV.
Again, this is a guy who gets in a car every day to go to his £80K a year job and thinks that half the people he drives past are earning more than him — and FWIW he doesn’t even live in the more prosperous South East.
It’s uber-delusional — but entirely in keeping with the non-stop nonsense that brought us Brexit. (You’re welcome @BBlimp. 😉 )
@ZXSpectrum — Cheers for the extra info re: school fees. 🙂 I’d note I was talking about both the parents still working (/contributing) but still, when I posted that I had a hunch I was straying way off an area I know well!
What we really need is a reverse £Tax lookup.
I paid £x in tax what percentile does this equate to? Does such a tool exist?
The £income percentile v tax £paid percentile would be interesting to see and chart by population profile.
Barry from Bolton may find himself in the top 5% of earnings but in the top 3% of tax pounds – many wealthier people with dividends and capital gains income would be in a lower £tax percentile v £income percentile.
I’m not sure what the fair answer is – but I’m starting to err on the side of flat %income tax….and even closer alignment of unearned income being taxed similarly to earned income.
@zxspectrum – hedge fund managers like you mention would be a prime example of people having a high income, paying lots of tax, looking like a big contributer to society, when really the money came from assets and deception, I feel some high pay is a combination of deception, shutting out competition, and gaming the rules – we have market failure on this – they are worth more than the prime minister – really? The jobs of mps show you can recruit into important roles without such pay
@Nas – you can still achieve a lot from age 40 and even so from your position investing is probably the best option you have, vs things like overpaying a mortgage, even if investing didn’t get you everything you wanted, it’d probably give you some extra time or comfort. Or go ahead and spend if there is something worth working for, you only live once; your money, your choice.
There’s no use feeling down, just figure out the best route for you from where you are, we support you in that
Well I sent both my children through private schools from the ages of 3 to 18, then 1 through university. My wife and I both smoke and our total household income between us only exceeded 100k every now and then. At the peak of the expense season I was earning about 40k and the school fees for the children amounted to 17k pa. I believe it is a bit harder now, but if you want all that plus upmarket cars every few years you might struggle. It’s a matter of priorities ( oh, and family pressure 🙁 ).
At the pretty standard company I have just retired from, only recent graduates earned less than 30k. Median would be 45k at a guess. Plenty above 80k. This isn’t London.
@Nas. Yes I did start saving young, but I also took a break from work in my 30s. I don’t need or use a lot of the income from the £250k – but I might do when I’m older and in a care home, and knowing it’s there means I can spend without worries.
Spend what you need, save what you can. It’s a judgement call on wants.
Also I’m concerned that @Nas said “to top up the state pension” – do you have a company pension? As you dont want to miss out on employer contributions, even if it invests in inferior funds
Nas could defer the state pension if necessary to increase it, its one way we all can have more income in retirement
@Nas Although Ermine from SimpleLivingInSuffolk once suggested the FIRE community is made up primarily of higher earners, no, I don’t think this site specifically is aimed at higher earners in particular. I’m 42 and earn £22.4k, and I’ve learned a lot from this site over the last 4 years.
The information in the above links helped me a lot. They showed that investing isn’t scary, or hard, or that you need to be the Brain of Britain to do so.
Their Broker Comparison Table helped me choose Cavendish as an S&S ISA provider (I’d go for Vanguard these days), and then later AJ Bell Youinvest as a LISA provider:
They introduced me to Tim Hale’s ‘Smarter Investing’ book, which in turn helped me figure out how much my retirement pot needed to be (minimum £300k private pension for £12k annual income, based on 3% rate of return, and 4% withdrawal rate, retiring in approx. 20 years), along with:
And I’ve used the links from Online Financial Calculators:
Although unfortunately, my favourite one (the Investment Goal Calculator from rPlan) has long gone 🙁 Although I knew that was coming so did a bunch of screenshots with my numbers and assumptions at the time.
Anyway, the point is, don’t be discouraged, run the numbers, and take a leap of faith. Future you will probably be glad that present you did.
@TI You really should make a ‘Beginners Start Here’ page with some of the more basic pages above linked in, so people don’t get scared off before they start. The only reason I can pull these links so easily is because they’re in my bookmarks. If I had to search without knowing what I’m searching for, then I might be of the mind that investing is too complicated, and only for the very smart and rich. Which reminds me I live in my bubble too, if you earn £40k plus, you’re rich by my standards.
@Ecomiser Congratulations! I hope to follow in your footsteps. It’s very reassuring to know that others in similar situations have made it.
“The value of a thing is the price that thing will bring” – this is economics 101. And yet, in my opinion, not only wrong in concept but nowadays totally distorted.
How, for example, can a banker have more value than a doctor? If you had a heart attack would you call for a banker?
Or a pop star, footballer, celebrity, ‘media influencer’ (whatever the hell that is) earn so much more than the most valued professions in society?
I think society has lost its compass on what really matters, and is becoming more and more dissatisfied with the status quo, an example being Barry Blimp from Bury’s outburst on QT. He clearly believed it was not right that he should be considered as one of the top 5% when the evidence all around him shows he can’t possibly be.
And that evidence is continously being propogated by the press and online media.
We simply can’t ‘keep up with the Kardashians’, but are being impelled to try, an endless downward spiral of dissatisfaction.
@Matthew Yes enrolled to the workplace pension earlier this year. 8% matching via salary sacrifice for bit of a boost. Selected passive tracker funds from a short list.
Thinking about putting a few hundred per month into a sipp too but probably next year. Maybe vanguard will be ready by then.
@Kel — Thanks for pulling those links up for @Nas, and for the sound advice you’ve shared. Regarding the beginners page or similar, I agree we don’t do a great job of guiding people in. The nearest thing we have is probably the top page to the ‘Passive Investing’ tab here (scroll down for lots of links, too):
My co-blogger @TA has sometimes talked about doing a 30-day intro guide (article a day) which I believe he nabbed as an idea from Early Retirement Extreme, but we’ve never got around to it. For my part I once tried to turn our entire archive into a structured page that could be read like the chapters and sub-sections of a book! I actually got about 300 links in but lost the will. 😉
The book should help. Eventually…
Thanks again for sharing your thoughts — and of course for reading! Good luck with the rest of your investing path!
Good luck. But a least you’ve come to the Monevator site which will give you a fighting chance. It certainly did for me.
And in answer to your earlier question, there are all levels of wealth and all stages of investment progress here.
“How, for example, can a banker have more value than a doctor? If you had a heart attack would you call for a banker?
Or a pop star, footballer, celebrity, ‘media influencer’ (whatever the hell that is) earn so much more than the most valued professions in society?”
The theory is that the banker provides a service that many of the people that society highly values (the rich) do highly value themselves , and/or by providing services to a huge number of the less well off too (think how much we appreciate the ability to take out a mortgage, or to have a current account, or to have credit when you need it)
The doctor on the other hand (or teacher) provides a profound service to a smaller number of people, and if these people are less wealthy (ie not so highly valued by capitalist society) – then helping them is doing less good than helping a private patient who provides a service that is highly valued, financially.
The pop star or footballer provides tiny snippets of happiness to millions, which in sum total is more good to humanity’s quality of life than helping a handful of people. The social media influencer(or hedge fund manager) sells a dream.
The kid who inherits has been highly valued by one of society’s highly valuable people.
Unskilled work is more valuable in its role/ necessity than it appears but individual workers are easily replaced, which makes them appear less value individually, so you have more elasticity of price with employers in truth willing to pay more for these services if there were a massive staff shortage for some reason…
You can send kids private on 80k, just it is going to be a more obscure school. For example near me there is a big brand school and it charges 13k per term. But there are others that are more like £5k per term. So 15k a year. Two kids is 30k, so this means our 80k earner lives the lifestyle of a 30k earner after school fees. So assuming mortgage and other trappings of 80k it is still unlikely unless your spouse is also pulling in some money.
@Matthew, Extrapolating from that, and believing that value does not equal wealth but today’s society is behaving like it does, Inherited and un-earned wealth will only feed the divide between rich and poor and lead to inequalities. As the amount of wealth in our society grows (It seems to have for a very long time now due to technological development) so under this system inequalities must. Wars seem to sort this out by reducing the number of people who are available to do the actual physical work and driving the value of that work higher. Personally I think it is a little extreme to let it get to that state and advocate state intervention to prevent it.
@jimjim – the children of wealthy/highly valued people are highly valued by those people, perhaps placing a value on the sentimentality in how that kid/spouse emotionally helped the parent to do the valuable thing they did, thus they had a productive supportive role, and the valuable parent judges that they are a more worthwhile cause than charity or hmrc, but people do make errors of judgement sometimes. Nevertheless what the rich have still gets spent/invested in companies, or just available cash deposits for a bank to use to lend from, the money itself does a service.
“Unearned” income is actually earned I think, we are taking risks other people are not, we’re supporting the liquidity of companies when they need liquidity the most, even through secondary markets
@Matthew. Agreed. But the children of the wealthy are only valued by the parents of those children, not necessarily by society, wealth breeds wealth. Trickle down economics may have some mechanism but I would argue it is a flawed one that has only resulted in the increasing inequalities of today’s society. Rights issues are used to increase liquidity, secondary markets are more akin to buying a property and renting it, a poor analogy perhaps but I am at work and could not think of a better one off cuff. Money eventually takes on a life of it’s own and precludes any need to produce to tackle the demands from society. In FIRE we look to get to a point where, for some, we no longer feel the need to produce as we do not need the reward. For others it gives a chance to give back by voluntary work, which, could be counterproductive in driving down some of the lower salaries. Two edges to every sword?
I do have sympathy for Barry from Bolton, even if he’s completely off on where he stands when measured on an individual basis.
I don’t know Barry’s circumstances but if he’s the only breadwinner in his household then he’s paying £6536 more tax per year compared to a couple where each earn £40k (as per the 2019/2020 tax year).
Now, I don’t want the government to tax the couple more, (they are clearly missing a trick there, though). I’d prefer them not to tax Barry so steeply. Looking at income per household is done in other countries so shouldn’t be impossible here.
And don’t get me started on IR35. The government (a right-wing government FFS!) takes the view that a legal entity looks more like a natural person for tax purposes, because hey, the market cannot be *that* free!
@jimjim – the secondary markets give confidence to rights issues, like the secondary car market gives confidence to buyers of new cars that wgat they’re buying has value. The secondary market helps establish the price in a rights issue 🙂
I think errors of judgement do get made with inheritances, due to proximity bias we value those around us more, but morally you could say that an inheritee is more likely to put money to riskier, productive use in the markets, and that once money is invested it is available to companies to access through rights issues, so if they’re not drawing on that perhaps the rich aren’t spending
Fwiw if the rich aren’t spending and are overinvested in unproductive bonds, inflation steadily redistributes that.
Also whoever does sell the asset then goes on to spend/invest I presume
I think we tend to over focus on the extremes of the tiniest minorities
I’m afraid you seem to have missed my point.
You say that society values the wealthy, yes, but why?
Bankers provide a service, yes, but cast your mind back to the financial crisis when we were ready to hang them from lamp posts.
Footballers do indeed provide entertainment to millions, but Cristiano Ronaldo earned more in one month than George Best earned in his entire career. Did he entertain millions so much more?
And so on.
People are being constantly, often subtlety, bombarded by the media with the message that you have no worth unless you have this car, or that smartphone, or the other whatever. “Because your worth it”. And you can have it all in time for Christmas with no deposit.
My point is, that the result is what we value has become totally out of whack with what is of value, and this creates the huge levels of dissatisfaction we are seeing across the Western World.
It is identifying this that singles out the FIRE community, but we are the outliers.
@matthew I’m guessing you’re not a parent? Due to ‘proximity bias’, they make ‘errors of judgement’ in favour of their offspring all the time 😉
Life is not an economic textbook, thankfully.
@borderer – indeed fire people have learned to go from sheep to wolf, I agree its morally wrong to create insecurity to create artificial demand, although I think on the whole the supply of everything is increasing more and it’s difficult to seperate out this immoral behaviour – infact in doing so one might pay more in fees, depriving good companies of investment. At least you could say that dividends from immoral causes do get reinvested into good things, and on the whole the economy does good things, making us all happier than we’d be as cavemen
Modern footballers get more money relative to inflation than George Best etc because they are providing more service – to advertisers, and the people they are entertaining are generally richer than back then (of course not all though!) – hence the money to be made from advertising
One point I forgot @Jim – voluteering is a good thing, but if it’s not valued enough to be paid perhaos it does not do as much good for society as the desk job?
@vanguardfan – indeed I am and I am prepared to make less moral choices for his benefit, as he is to me a surer bet of a good thing than most of society, and I can help ensure his money is deployed as productively as possible
The economic language hopefully helps people doing boring 9-5 jobs feel like they are doing something good, and possibly deploy money more efficiently than to charity or other charitable things like volunteer work or paying taxes
@Matthew: One point I forgot @Jim – voluteering is a good thing, but if it’s not valued enough to be paid perhaos it does not do as much good for society as the desk job?
I think there’s some valid points in your post, but you’re equating financial value with good for society; something I think the vast majority of people would question if not entirely reject as a premise.
Harold Shipman was paid quite generously, lawyers and marketeers denying the impact of smoking for decades after they were proven past doubt made out like bandits…
Even at a less hyperbolic level it seems like a stretch to suggest that someone giving MMR vaccines as part of a charity effort in an impoverished country is doing less “good for society” than a paid nurse in a wealthy country without explicitly basing your argument on the premise that the wealth of the person you are helping is proportionate to the good you are doing.
@TI “Nearly decade ago I advocated simplicity …..”
“The five ascending levels of intellect are, smart, intelligent, brilliant, genius, simple.” – Albert Einstein
@Matthew “indeed I am and I am prepared to make less moral choices for his benefit, as he is to me a surer bet of a good thing than most of society”
To play devil’s advocate, surely this is intervention on your part to help buffer the vagaries of the free market, favoring your own progeny. Why is this different from state intervention to favour the less fortunate geographically for instance 😉
@John… “it seems like a stretch to suggest that someone giving MMR vaccines as part of a charity effort in an impoverished country is doing less “good for society” than a paid nurse in a wealthy country”
Devils advocate again… Would it not be even better if a paid local employee on the ground in that country were used???
@john – good points! And I think indeed there is an ego value to morality as well as what economics can put a number on, but it’s easier to motivate ourselves to do difficult (but appreciated) jobs if we don’t think about it
The nurse who goes to do vaccines sacrifices pay for an ego reward, like giving to charity is purchasing ego and making profitable but immoral choices is selling that ego
Some of this is down to caveman instinct I think, we instinctively help the suffering that we do see because it’s more likely to help the survival of the tribe and yourself with it – this proximity bias too makes us much more sympathetic and charitable when we see images of suffering, rather than simply reading numbers.
Proximity bias might skew what charitable choices we make
@jimjim – good point! I can’t deny there are capitalist reasons to vote in a socialist government to exploit, its difficult to calculate what will yield best – I suppose socialism short term, capitalism long term
You could also argue that brutally the kids getting vaccinated had less forecaseted productivity, due to less infrastructure, health and education, but I think at the extremes it gets difficult to justify, because the morality behind capitalism is only a means to an end – of generically good outcomes for most – how far does the ends justify the means? – at some point I suppose it could break down, in ultra extreme cases like that
As a relative newbie to passive investing I find the Movement Capital strategy interesting. On of the face of it the four EFT selection looks simple, but the balance and rebalancing between them seems relatively complex:
I’d be interested in whether anyone has a similar process for rebalancing?
@TI That index sounds unwieldy as is. I don’t blame you for giving up. But that’s my point, with over 300+ links on here, it’s not easy to find stuff. The completion of the book will probably be the impetus you need to make a basic beginner’s page though, in anticipation of all the new readers you will attract off the back of the book.
I’m obviously not putting my case clearly enough for you.
My premise is that Western society has been so duped by major corporations, the media and the advertisers that we have forgotten what is valuable to a society. And because of this we are unhappy because we can never achieve what we are told is valuable and we must achieve.
Imagine if the sewer workers, refuse collectors, grave diggers and road sweepers, all went on strike simultaneously, and nurses, doctors and care workers came out in sympathy! Life would become utterly intolerable within days, and modern civilisation would collapse within weeks.
Now imagine if star footballers, celebrities, media influencers, movie stars, pop stars and other baubles on the Christmas tree of life did likewise? Nothing whatsoever.
So who is the most valuable to society?
“The value of a thing is the price that thing will bring”.
So why is the least valuable to a society priced so highly compared to the most valuable?
@the Borderer… I agree that from many perspectives that this situation is skewed. This has been going on in society for ever and it is to do with scarcity. Is gold useful? yes, but it is scarce so it is used less as a consumable and more as an asset (I don’t get gold so I don’t invest in it). Economics would have us look at a supply/demand graph to see the “value”. One thing in life I try not to involve myself in is the valuing of things because of scarcity. Talent is also a scarce thing, valuing it is impossible at the extremes. Advertising is as you say, built to drive demand, but the genie is out of the bottle on that one, try putting it back. I tend to only watch T.V. nowadays without adverts as they irk me, and my wants are pretty fulfilled at the basic level so I am content. The power of the workers coming out on strike frightens people with wealth as they know it would be bad for them but they rely upon the abundance of labour (and anti strike regulations) to control this.
@borderer – The uskilled roles are worth more than the individuals doing them, because of labour supply as @jim mentioned, like I said before this causes elasticity of price and employers would be willing to pay more if, say, immigration was less working age and less unskilled (it’s not like you’re getting so many infants and elderly or standard education as our normal demographic, but non-eu is more educated due to minimum income requirements)
A 4 day working week would also cause a worker shortage which would ironically raise the wages of what jobs it doesn’t kill off
I give up.