Celebrating the end of lockdown, my younger son took me for a walk to the toy shop. It proved to be an inspired choice, the happiest place in town. Excited children wearing huge grins ran between the displays, suffering sensory overload as they marvelled at all the brightly coloured wonders which had been locked away throughout the long months since Christmas.
Overnight, random stay-at-home order checkpoints had been replaced by roadworks and traffic jams.
All along the high street, smiling shop keepers were opening their stores. A palpable sense of hope and optimism hung in the air. Today the greetings to customers were genuine and heartfelt, no sign of the everyday painted-on smiles and empty “have a nice day” platitudes delivered by rote.
The sounds of drills and hammers echoed throughout the neighbourhood as café owners, publicans, and restauranteurs frantically assembled outdoor tables and chairs, so they too could resume trading.
Epic queues snaked out the door of every barbershop, brow bar, hairdresser, and nail salon. A production line of bad dye jobs, monobrows, and pandemic cavemen filed in. Re-emerging looking well-kempt and occasionally stylish, in a retro tribute to happier days of socialising without fear.
An hour later, we headed back into the morning sunlight. My son beaming as he clutched a new toy.
As we strolled home, I was conscious of just how many storefronts remained shuttered or empty. Two of the shopping centre anchor stores were gone. Their chains joining the ranks of the retail graveyard.
Plans to convert one site into a co-working space had been submitted to the local council. Choosing to rent individual desks by the hour, rather than entire floors by the year, is an apt metaphor for the modern professional working environment. Successful department stores are as quaint a historical notion as secure employment and defined benefit pension schemes. Rare and endangered.
Just three days later, the new toy had been forgotten and normalcy had returned.
Our school holiday expedition to the adventure playground commenced with smiles and enthusiasm.
It concluded with a hangry boy and tired feet. We perched on a bench at the bus stop, watching in frustration as big red bus after big red bus drove by without even slowing. Social distancing capacity restrictions meant a long wait for those hoping to catch a bus mid-route during busy times.
On Monday we had been so happy that we could venture out of our local neighbourhood.
Mere days later, we grumbled about delays. How quickly we adapt and take things for granted!
Opposite the bus stop was a large “help wanted” sign, hanging in the window of an upmarket fast-food outlet. The sign boasted that upon completing a two-week traineeship, new staff would receive £9.00 an hour. Work a few more weeks, get promoted to Team Leader, and an additional £0.60 per hour would be theirs.
As we waited for another bus, my idle mind quickly ran some numbers.
Working full-time, that was about £300 per week after tax. £1,300 a month. A bit over £15,500 a year.
In practice, a commuting full-time worker may take home just £49 per day after tax and expenses.
More than the Deliveroo riders earned, as they filed through the store to collect home delivery orders
But it wasn’t much. Less than teenage me had received from my retail and hospitality jobs long ago, after adjusting for inflation.
Less than half what those big red bus drivers were getting paid to leave us stranded at the bus stop.
Eventually, we gave up. After bribing the boy with some hot chips and ketchup, we dawdled the last few miles home. Along the way, we were regularly overtaken by half-empty big red buses, each displaying “Bus Full” signs in front of the driver.
The simple life
Later that evening, I reflected on my rapid adaptation. If I had adjusted so quickly to my recently restored freedoms of assembly and movement, had my perspective on income similarly adapted?
Or were those wages on offer really as limiting as they initially appeared?
While earning similar amounts, teenage me had managed to buy a dilapidated student car. Backpack around the world for months at a time. Yet somehow still graduate university with some savings intact.
Of course, this was only possible due to the free room and board on offer at my parents’ house. That covered my “needs”. Leaving my menial wages available to save. Invest. Spend on discretionary “wants”. Allowing me to survive at a lower earnings level than might otherwise have been the case.
Like many decisions, this had been a trade-off. Pros and cons. Enjoy subsidised living costs, access to a washing machine, and company when I wanted it. At the price of living by my parents’ rules and occasionally playing Russian roulette with my mother’s “you can cook it faster if you cook it hotter” approach to cooking. Burnt on the outside. Frozen raw in the middle. Just like mama used to make!
It has been decades since my benevolent parents subsidised my lifestyle. However, it occurred to me that over time my investment income streams had gradually assumed a similar role.
Covering my recurring bills one by one.
Until eventually, I reached the point where my needs were met without my lifting a finger.
That thought gave me pause.
Teenage me had worked three student jobs while studying, but my combined hours totalled less than that of a full-time job. Despite those low earning jobs, I had led an enjoyable life of adventure. Chasing pretty girls. Carousing. Going to gigs. Learning. Playing. Socialising. Sports. Travelling.
My income increased once I graduated out of full-time education and low-paying student jobs, joining the ranks of the cubicle dwellers. My living costs increased considerably more so, as the free ride at my parents’ house came to an abrupt end. Inflows exceeded outflows, but by much less than before.
From my vantage point today, it appeared that younger me had performed an impressive magic trick. Somehow squeezing a whole lot of living out of a very modest income. How had this been possible?
Magic is just science that we don’t understand yet. What was the science behind this particular feat?
As I thought about it, I realised the answer lay in managing expectations.
The expectations part was simple. I didn’t have much, but I didn’t know any different. Modest aspirations pairing well with modest means.
Over the first few years of my professional working life, I continued living like a student. Happiness was drinking with my friends. Going to gigs. Travelling wherever I could get a cheap last-minute fare.
My income steadily grew, but my expectations remained largely unchanged.
Keen personal finance minds would observe that such an outcome yields a steadily increasing savings rate. “It’s not what you earn, but what you keep”.
However, nobody ever saved their way to riches!
The path to wealth is simple, even for those who don’t inherit, marry, or steal it.
First, maximise the value of your marketable skills.
Second, trade those marketable skills for income used to purchase investments.
Third, generate capital growth from those investments. Capital growth is the source of real wealth.
A trap for young players is forgetting that time is a finite commodity. Scarce. Precious. Their focus lured by the instant gratification of small wins. Coupon clipping. Frugality. Low-yielding side hustles. Investing time on activities that focus on the £1 problems, while ignoring their £100,000 problems.
The illusion of control is a powerful attraction. It drives more of our decisions than we care to admit.
Eventually, something changed. I started to want “more”. More things. Nicer things. Shinier things.
I had outgrown my earlier life, and in this I wasn’t alone. The aspiring artists, boofhead footballers, stoners, and surfers whom I had once happily hung out with were starting to get real jobs. Couple off. Breed. Become homeowners. One even joined a Rotary club!
Those who hadn’t adapted now seemed like a sad parody of our younger selves. Failure to launch cautionary tales. Evoking the cliché “if you can’t spot the creepy old guy at the bar/concert/youth hostel, then you are the creepy old guy!”
They hadn’t changed. But I had.
Part growing up.
Part hedonic treadmill.
Part adaptation of my perspective.
My childish hopes were discarded, like a chrysalis after the butterfly emerges. My dreams of captaining the Australian cricket team and dating Julia Roberts were set aside. Simplistic tastes gave way to the siren song of more/better/different. Homogenising with the more refined tastes of my lady wife.
Around this time that feeling of never having much but always having “enough” began to fade.
Concerns about money became a constant, and decidedly unwelcome, companion.
The next decade passed by in a blur of long hours and parenting young children. Grafting away on the daily grind. Spread too thin. Always time poor. Never seeming to have enough.
Net worth gradually increasing, as the compounding snowball slowly gathered momentum. Asset rich but cashflow poor. A feature, not a bug. Helping to keep lifestyle inflation from running away.
Until one day I realised that on any given day my portfolio value fluctuated by more than a year’s average earnings.
The income generated by that portfolio had brought me full circle. A return to a simpler time where I worked only to pay for my wants.
Affording low wages
As I thought about that fast-food job, a curious irony jumped out at me.
After years of hard work and wealth accumulation, I had finally returned to a financial position where I could afford to work in a low paying job. My expectations were no longer modest, but a new equilibrium point had emerged further along the income curve.
I was now in a position where I could afford to compete in a competitive global marketplace.
Compete with migrants and students for a low paying retail job.
Compete with Filipino pens-for-hire, writing at a content farm for a couple of cents a word.
Compete with highly skilled Bangladeshi freelance developers, producing websites for £10 a page.
Yet pursuing such an option feels somehow unseemly.
A bit like the middle-class vultures and poverty tourists who shop at charity shops, scooping up bargains to the detriment of those who can’t afford to shop anywhere else.
Or those who (briefly) volunteer at food banks, so they can skip the COVID vaccine queue, and attempt to avoid mandatory quarantine upon their return from summer vacations abroad.
My inner saboteur chortled, reciting an old saying from those simpler student days of long-ago: “just because we can doesn’t mean we should”.
Which, when I thought about it, cut to the heart of the matter.
Learned and forgotten more times than I care to admit.
Being conscious of the adaptations that we make.
Understanding that more is not necessarily better, and in many cases requires vast amounts of cumulative effort to maintain.
- Deliveroo (2021), ‘Boost your fees‘
- Gov.uk (2021), ‘National Minimum Wage and National Living Wage rates‘
- Gov.uk (2021), ‘The new State Pension‘
- Gov.uk (2021), ‘Universal Credit‘
- Listen To Tax Man (2021), ‘UK Salary Tax Calculator 2021/2022‘
- Stagecoach (2021), ‘Rewards‘
- Transport For London (2021), ‘Adult fares‘
- Transport For London (2021), ‘Bus and tram fares‘