What caught my eye this week.
A new survey claiming that one-in-four six-figure earners ‘lives paycheque to paycheque’ is bound to rile three-quarters of those who read about it.
The Telegraph reports (via Yahoo Finance [1]) that:
[Survey] respondents primarily blamed cost of living increases (90%), as well as rising mortgage payments (38%) and debt repayments (29%).
In London, 28% of the 1,700 high earners polled said they were struggling to live within their means.
That the study was conducted by RBC Brewin Dolphin – a wealth manager, rather than a poverty campaigner – might raise further hackles.
But according to Carla Morris, a financial planner at the firm:
“The findings of our survey underline just how much the cost-of-living crisis has affected every section of society in the UK.
“Even people who are among the highest earners in the country are living pay cheque to pay cheque, with almost all of them citing the rising cost of living as one of the main reasons for being in that position.”
Now, the obvious – and entirely accurate – response is that higher earners have many more options for cutting costs than those within sniffing distance of the breadline. To put downshifting from Waitrose to M&S or from London to Reading in the same bracket as getting familiar with a food bank is at the least delusional.
Generally that would be my response, too.
I’ve been collating Weekend Reading links for 17 years now. There have been tiny violins playing for the wealthy somewhere in the media in most of them.
However I do think it’s a bit different this time.
Higher and higher
The middle-class cost of living crisis is very real for starters, as I wrote [2] a few weeks ago. Everything costs more. Particularly rents and mortgages – both soaring.
But the woes of the wealthier are being massively exacerbated by stealth taxes.
The Resolution Foundation recently calculated [3] that the freezing of tax thresholds will see £40bn a year more paid in taxes by workers by 2028 – the biggest tax grab in 50 years.
Taxpayers in the higher bracket will by then be paying an extra £3,700 a year in taxes, following a six-year freeze.
And rather than the personal tax allowance rising to £16,200 as inflation – booked and forecast – would imply, we’ll still only be allowed to keep the first £12,570 of what we earn unmolested.
The Accumulator drafted an article last summer on all this that ultimately we didn’t publish. TA’s angle was to frame the stealth tax increases as outright hikes in the income tax rate.
I felt his workings were too convoluted to share. Possibly my mistake, in retrospect, as the direction of travel he identified was bang on.
It’s since been estimated [4] that freezing tax brackets and allowances will have the same impact as a 6% hike in income taxes!
Harder and harder
Just on a household basis, having six-figures coming in apparently puts a family into the rarefied air of the top 5%.
Yet an analysis [5] by Chase Bank in March showed that – with kids – it’s pretty easy to spend the lot each month without going hog wild at lap dancing bars or in a Hermes showroom.
Savings can be made. Monevator regularly features case studies [6] from people who achieved financial success by spending and saving differently.
Fill your ISAs. Sacrifice your salary to boost pension contributions (especially around cliff edge numbers, such as where child benefit and personal tax allowances get taken away). Hope that tax rates come back down by the time you retire. Cut costs and consider moving somewhere cheaper.
It’s all getting more difficult, however.
Britain is a poorer country than it would have been absent certain terrible political choices – and a global pandemic of course. Public services are creaking, and the cost of government debt is ballooning.
Chancellor Jeremy Hunt may find the world’s tiniest rabbit to pull out of his threadbare hat in next week’s Autumn Statement, but I wouldn’t hold your breath. Ideally any tax bungs would target boosting business anyway, especially our stagnant productivity.
I wouldn’t want to start from here if I were him [7].
Have a great weekend.
From Monevator
The cheapest stocks and shares ISA on the market – Monevator [8]
FIRE-side chat: high-rolling down under – Monevator [9]
From the archive-ator: Preparing for The Reaper – Monevator [10]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
UK inflation falls to two-year low of 4.6% on lower energy costs… – Sky [11]
…though energy bills are expected to rise 5% in January – Guardian [12]
…and rent is up 9.6% year-on-year – Which [13]
UK retail sales hit their lowest level since the 2021 lockdown – BBC [14]
Rumoured ‘Great British ISA’ allowance could be £5,000 – Yahoo Finance [15]
More rumours ahead of Wednesday’s Autumn Statement – Which [16]
Thousands of parents penalised over child benefit tax trap [Search result] – FT [17]
Hotel Chocolat bought by Mars at 170% premium – This Is Money [18]
LSE Group: when equities are no longer the stock in trade [Search result] – FT [19]
[20]
Can the UK learn from Australia’s pension savers? [Search result] – FT [21]
Products and services
For the first time in two years, lots of savings accounts beat inflation – Yahoo [22]
Virgin Money launches 1% percentage fee remortgage deals – Which [23]
Get £100 cashback when you open an ISA or trading account with Interactive Investor [24] before 30 November. Terms apply – Interactive Investor [24]
Interest rate on the latest NS&I Green Bond is 30% lower – Which [25]
The pros and cons of Hyperjar Cashback – Be Clever With Your Cash [26]
Open an account with low-cost platform InvestEngine via our link [27] and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine [27]x
Secondhand luxury watch prices have plunged – Robb Report via Yahoo [28]
Hedged vs unhedged share classes: what to consider – Vanguard [29]
Homes for sale that make a splash, in pictures – Guardian [30]
Withdrawal rates mini-special
The 4% rule is back on [US but relevant] – Morningstar [31]
Whereas an 8% withdrawal rate is by no means safe… – Of Dollars and Data [32]
…indeed plenty of times it would have failed you – Portfolio Charts [33]
Comment and opinion
When market-timing fails – Morningstar [34]
Don’t take it personal – Of Fortunes and Frictions [35]
Diversification is not a free lunch – Behavioural Investment [36]
Investing behavioural hacks – The Big Picture [37]
Should platforms enable you to buy poor investment products? – Which [38]
When best-laid retirement plans fail – Humble Dollar [39]
Are defined benefit pension schemes all they’re cracked up to be? – Peter Watson via X [40]
How to make retirement less taxing [Search result] – FT [41]
You can’t shop your way to a new self – Vox [42]
Strategies to help retirement spending [Targets advisors but relevant] – Kitces [43]
Spare your heirs mini-special
Let the elephants go – Humble Dollar [44]
Nobody wants nothing – Abnormal Returns [45]
Naughty corner: Active antics
How ‘Canada’s Warren Buffett’ achieved a 23,300% return – CityWire [46]
Hedge fund index replicating ETFs have done ok, but why bother? – Finominal [47]
Goldman Sachs: the hard part of market regime change is done [PDF] – Goldman Sachs [48]
Do you need to be arrogant to invest actively? – Flyover Stocks [49]
‘Super’ multi-manager hedge funds lose some superness [Search result] – FT [50]
US consumer inflation is basically contained – BondDad [51]
Kindle book bargains
Rogue Trader by Nick Leeson – £0.99 on Kindle [52]
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle [53]
The New, New Thing by Michael Lewis – £0.99 on Kindle [54]
The Epic Rise and Fall of WeWork by Reeves Wiedeman – £0.99 on Kindle [55]
Environmental factors
China’s emissions set for structural decline from next year – Guardian [56]
How ‘ESG’ came to mean everything and nothing – BBC [57]
Used EV batteries could get an extra lease of life in solar farms – Grist [58]
Green corridors are saving golden lion tamarins from extinction – AOL [59]
Let forests grow to store huge quantities of carbon, says study – Guardian [60]
Off our beat
The cocktail revolution – Works in Progress [61]
How to kill a superhero – The Honest Broker [62]
Patterns of reality – Aeon [63]
The story of the Zoe gut health business – Guardian [64]
We’re probably getting attachment styles all wrong – The Swaddle [65]
Singapore urbanism… – Noahpinion [66]
…vs the £100m regeneration project in Hackney that’s a ghost town – Guardian [67]
How one manufacturer made a four-day work week work – NPR [68]
Weight loss drug cuts heart attack risk by 20% – Statnews [69]
And finally…
“Just 300 generations after the last ice age, we live in a financial world whose risk horizon is measured in decades, not seconds. Consequently, the investor’s greatest enemy is the Stone Age face staring back in the mirror.”
– William Bernstein, The Four Pillars of Investing Wisdom [70]
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