By Ross Martin, Accountancy Director at Hive Business.
Your relationship to money is largely shaped by forces outside of your control. If you have a student debt, for instance, it’s not because you carefully appraised your financial options as a first year undergrad and decided that, even though your dad was paying your rent and you could probably get a part time job to see you through, you’d rather saddle yourself with a £15k debt that would follow you around more than a decade later; no, it’s more likely that an older sibling turned you on to the fantastic sounding “best loan you’ll ever get”, and if it hadn’t happened by freshers’ week, one of your new and more enlightened boozy mates educated you on where you’d missed a trick.
Try foisting that kind of debt burden — about a full year’s salary — onto the 18-year-old version of one of your parents or, god forbid, one of your grandparents, and they’d have thought you were mad. “Why do that if I don’t have to,” they’d ask. “Because everyone else is doing it,” you’d reply. Weird relationships with money are normalised in this way all the time. Normal isn’t necessarily good — I bet you know someone that got sucked into the vortex of a multiple credit card black hole, creeping ever deeper into debt even though they were doing really well career-wise. And need I mention the rite of passage that is mortgages? Whether a mortgage will help you attain the lifestyle you aspire to seems irrelevant nowadays; it’s not “shall I get a mortgage” but “can I get one?”
If being able to get a mortgage is a marker of wealth, income is the humdinger. A fly on the wall at any school reunion party will know that the only thing on anyone’s mind, whether they drive at it surreptitiously or just ask straight out, is how much the person they’re talking to is on. But what actually is income? I think a useful way of viewing it is as something that simply enables you to do things. It enables you to access items that would otherwise be out of your reach.
There is no intrinsic benefit from your level of income when you hit the grave.
Maybe it’s helpful to step further back and ask ourselves what money even is. I’m with Yuval Noah Harari, the author of Sapiens, on this one: it’s in inter-subjective fiction, and that’s no bad thing. Collective fictions like corporations and nation states have enabled humans to cooperate on vast scales and achieve extraordinary things. Money is a fiat system, not backed by a physical commodity, and it’s the same with your salary. You can, however, convert your salary into all sorts of meaningful things. If you live in Venezuela you might want to do that sooner rather than later, given that its currency is halving in value every fortnight.
When I was at uni they gave you grants. Most of us got £1,800 a year and ploughed it into kebabs, beer and the unsuccessful pursuit of women, but a friend knew better and instead deposited £250 in every building society he could find and — I probably don’t have to tell you do I? — they all demutualised and began paying dividends out. I think he got £100 each time. My friend had realised that the point of £1,800 isn’t being able to buy another £1,800 worth of what you always buy, it’s the opportunity it represents to invest in something you wouldn’t otherwise have been able to access. Say I earn £100k a year and go to HSBC for a mortgage, they might say they can’t help because I’m self employed. First refusal really affects many people’s outlook so that they start thinking they can’t do what they want, but I happen to know that HSBC doesn’t really suit self employed people and I could in fact access a £500k house when someone on the same income might settle for a £250k house. What’s the difference between us? Certainly not what we earn. Just like there was no difference between the grants that me and my friend received at uni, although that time I was the one who missed the boat.
At Hive we help people seize wealth building opportunities and it always starts with the simple observation that income is the amount of money you receive on a regular basis, whereas wealth is the length of time you can maintain your lifestyle without working. If you’re going to spend a large chunk of your life working hard, why not get hold of good information so you leverage your income to create as much wealth as possible? Without so much emphasis on earning a steep salary in a high profile job, however normal that is, you’ll live longer too, so you can’t lose. Get in touch for an audit of your personal wealth opportunities.
Call 01872 300232 or email us at hello@hivebusiness.co.uk.
