A surprising discovery.
My bank account suddenly contained a non-trivial sum of money. Funds I had not deposited there myself.
For the first time in about 20 years, I had been paid.
A benevolent payroll fairy in a distant land had magically calculated salary. Allocated pension contributions. Deducted taxes. Their efforts producing the bank balance I now saw before me.
It was a strange feeling. Seeing this number appear, entirely divorced from my own efforts.
I thought back to past roles I have held.
My paper route was piece work. The boss didn’t care whether it took an hour or a day, the payment was the same. Work and remuneration were indelibly linked. Money changing hands only once the job was complete.
Retail and hospitality jobs involved selling myself by the hour. Employers purchasing my time, to use wisely or squander as they pleased. Remuneration tied to attendance. No hours worked meant no pay.
My business involved a combination of piece work and prostitution. Some engagements billed based on time and materials, like my student retail jobs of old. Other engagements charged based on outcomes, measured by achieving delivery milestones, similar to the paper route. In both cases, my invoice provided a tangible link between the work I had performed and the money the client owed.
Salaried employment is different. There exists no clear relationship between remuneration received and hours worked, outcomes delivered, or effort expended. A curiously incongruous arrangement.
Paid regardless of performance. Deliver miracles or go through the motions, the number is the same.
An unchanging amount paid irrespective of attendance. In person. Remotely. Overtime. Outside of hours. Out sick. Away on holiday.
Pull my weight? Exceed expectations? Carry the team?
Or become a passenger? A professional meeting attendee? A salary collector in the literal sense?
Fast track or pedestrian plodder? Innovative outlier or member of the sheeple? Workaholic or idler? The payroll fairy doesn’t care, her magic calculations produce an identical pay packet either way. The salary was the salary. Is this what equality looks like? A snapshot preserved for posterity of the confidence, luck, market conditions, and negotiating skill at the time of hiring.
The longevity afforded by each approach may vary, some proving more sustainable than others. There are no guarantees however, a job is no more secure than its notice period. Sometimes not even that long!
Whatever the path chosen, for salaried employees that disconnect between value and remuneration is all too real.
My inner saboteur chortled in subversive disbelief. How had this madness ever become the dominant form remuneration? As my elder son is fond of saying, “what a scam!”.
Pot of gold
I pondered my bank balance for a moment. Perplexed by the newfound pot of gold it contained.
For five years I had been semi-retired.
A purpose built investment portfolio generating cashflows capable of supporting the majority of my family’s lifestyle costs. Supplemented by seasonal winter working hibernations.
The duration of those brief forays into the working world were determined by guesstimating what additional income would be required to bridge the gap, then “doing it for the money”. Once my coffers were replenished, I would escape back to the comforting semi-retired lifestyle I had carefully crafted.
This approach led to defying conventional Personal Finance wisdom in several areas.
A non-existent savings rate. Instead of spending less than I earned and investing the difference, I earned just enough to cover my spending. Each additional dollar of investment income generated was used to purchase control of time that would otherwise have been consumed by earning a living.
No budget. Budgets are comforting lies we tell ourselves about how good we are going to be in the future. A useful tool for beginners, their utility quickly outgrown, much like stabilisers on a child’s bike or “L” plates on a novice driver’s car.
When it comes to budgets, the only certainty is their inaccuracy. How inaccurate is determined by our own honesty, luck, and ability to navigate those “life happens” events which randomly occur with monotonous regularity. I prefer evidence-based decision making to wishful thinking. Self-awareness informed by comparing actual outcomes against how we choose to perceive our financial acumen.
Little surplus cash. Extracting only what I needed from my portfolio to cover my lifestyle costs meant there was rarely much padding in my bank account. I had contributed no additional capital to my portfolio throughout my semi-retirement, my version of what the cool kids today might call “Coast-FI”.
A token contingency fund. When daily portfolio value fluctuations exceed your annual living costs, the opportunity costs associated with maintaining the traditional 6-12 months worth of expenses in cash exceeds the piece of mind such a cushion may bring. A credit card is my immediate emergency fund, while my well diversified portfolio is more than capable of absorbing the shocks and paying the bills.
Which, when combined, meant sitting on a pile of unallocated cash was a novel experience indeed.
The payroll fairy told the tale of the pot of gold using a payslip. Chronicling what financial accountants might consider to be a gripping fairy tale. Brave heroes. Dastardly villains. A noble quest full of sacrifice, problem solving, and overcoming adversity. Concluding (hopefully) with a happily ever after ending.
The story begins with a legend of vast riches. Whispered rumours and shouted boasts that spread throughout the land, wherever those who profit from recruitment congregate to gossip or headhunt.
A fabled treasure that can only be claimed by single victor.
Accessible only after being bartered and haggled over during an epic trial of interviews and salary negotiations. A battle that sees a scrappy lone underdog take on the vast might of a megacorp, that fearsome tireless beast who possesses the resources, strengths, and management shortcomings of a small army.
Taking on that foe is not for the faint of heart!
Our plunky hero risks their deepest darkest secrets being exposed during background checks.
Being damned with faint praise, as former colleagues cower behind faceless human resources departments to issue terse employment references which seek to avoid lawsuits for defamation, libel, slander, and unfair restraint of trade.
Having their diplomacy skills and sanity pushed the limit by inane textbook job interview questions: “if you could be any animal, which would you be and why?”
Constant vigilance is a must, as their sneaky corporate opponent attempts to deploy sleight of hand by changing the rules, shifting the ground, and altering the game after it has begun.
Testing the hero’s values.
Pushing their boundaries.
Probing their limits.
What are they willing to sacrifice for the prize? How much compromise are they willing to put up with?
The truly gross part of that magic salary number is that it is a mirage. Shimmering tantalisingly on the horizon. Unobtainable. Forever out of reach. Even if our trusty hero beats the odds and carries the day, they will never receive the amount of treasure they battled so valiantly to win.
What starts out as a vast sum quickly gets eroded and white-anted away.
Disheartening deductions and vampiric tax collectors demanding their due.
Each serving to skim off or whittle away some of that lustrous reward.
Income tax at 20%. Then 40%. Finally, 45%.
National Insurance claiming another 12%. Then 2% more for good measure.
That generous looking benefits package delivers a painful sting in the tail, as taxable benefits in kind.
Delayed gratification further reduces the accessible pot of gold. Pension contributions, the pursuit of fabled “free” employer matches, and salary sacrifice each chipping away at the prize.
The end result is a pot of gold far smaller than the legendary treasure used to lure the unwitting hero onto their adventure.
Risking our triumphant hero becoming bitter and disillusioned, should expectations not be managed to cope with the inevitable let down that occurs when underwhelming reality brutally dispels rose-coloured dream.
Battered. Bruised. Sceptical. Slightly worse for wear. Wiser for the experience. The victorious protagonist lays claim to the salaried position and commences work. Trusting that sometime later, the benevolent payroll fairy will magically visit in the dead of night to leave a deposit in their bank account.
Bestowing a modest pot of gold that began life as an inspiring salaried fairy tale of untold riches.
My fairy tale payslip made for slightly demoralising reading.
The gross number tantalisingly proffered at the top was far larger than the net number ultimately paid out at the bottom. A bit like sexy time at the conclusion of a successful date, when the removal of a well-tailored business suit, or the shedding of padded push-up bras and shapewear, leads to a significant reallocation of assets bearing little resemblance to initial hopes and dreams.
My previous life as a business owner had allowed the distribution of profits in a strategic manner to legally minimise taxes. The vampiric tax authorities received their due only once per year, in what felt like an eye-watering sum at the time. A necessary evil that was swiftly forgotten.
The tax elements being deducted from my recurring salary were new. Disheartening. Difficult to avoid. A feature of the permanent employment system, not a bug. By the time the payroll fairy has visited a few times, the aggregate amount of tax deducted will have exceeded those one-off annual payments of old, with very limited options available for their minimisation. “What a scam!”
Pensions were another unfamiliar deduction.
My reticence was part personal foible, part historical anachronism.
A combination of decades worth of geographic flexibility. Indecision. Serial migration. And a deeply held wariness of the regulatory risks associated with locking away funds behind age restrictions, on the vague hope that a future government will honour the tax-advantaged promises made by their predecessors.
The same government who had been forever moving the visa goalposts, making my pathway towards residency and a passport far from certain and ever more difficult. Who then threw that hard won passport on a bonfire of self-serving hubris and populist folly, reducing its utility and value by 27/28ths.
Which brings me back to the pot of gold I found sitting in my bank account, that for the first time in many years contained more than I required to cover my family’s lifestyle costs.
New funds that could be saved or squandered. Invested or enjoyed. Donated or destroyed.
The default option would be to simply pour them into my perpetual money making machine, causing the wheel to turn that little bit faster.
However, first a re-examination of the many assumptions, expectations, and future plans that underpin my financial arrangements are in order. Testing what I thought then with what I know now.
Some will hold true, proving just as valid as they did originally.
Others will be found wanting. Solving problems I no longer have. Conflicting with my priorities or interests, both current or those in the foreseeable future.
A timely reminder that what once was may not always be.
A nice problem to have.