Being a 1%
Some of you may know if you follow me on twitter that I’ve recently finalised our numbers for tax year 2018/19 and preparing my blog post for it.
I knew that our income has been steadily growing over the years. They say the first £100k is the hardest and although the number might not be an exact science, I think there is truth in it.
Earning just an extra £2k if you’re on £20k a year is an extra 10% increase.
Earning an extra £2k if you’re on £100k a year is just a 2% increase.
Those extra couple of thousand when you’re earning less can definitely feel at least five times tougher!
I don’t do monthly updates so when I finally got around to finish our annual financial summary, we were both shocked to see our gross income (including employer pension contributions).
We are in the top 0.08% in the world in terms of our individual annual net income. For household income, the top 2% in the UK, and top 5% in the US.
I feel really uncomfortable writing this.
You’ll understand fully why we were shocked and how our income grew so much when I get round to posting our updated numbers.
We automate all our investments so it leaves us with the same disposable income each much. The money left in our bank account at end of each month has not changed much over the years. Neither has our expenses compared to our income.
I hope this post does not come across as a humblebrag. It is not my intention and if I sound like an arrogant pr*ck, it is to do with my limited ability to express myself properly in words.
Rags to Riches?
I wouldn’t describe it as such, although my family’s personal journey to get to where we are today has not been easy.
I was always quietly ambitious when I was younger but lacked confidence. My dad was not the best of people to nurture confidence in me. I remember first discovering how much CEOs get paid. Whilst travelling in the car, I said to my parents: “I will be a CEO one day and buy you both a big house to live in”.
I was still a child.
I can’t remember my dad’s exact words, but I remember how he made me felt.
Crushed.
He turned to my mum and said something like: “That’s just silly. He’ll never be a CEO”.
My mum promptly scolded him.
Maybe he thought I wouldn’t fully understand. They spoke in my mother-tongue and they always assumed I understood less than I really did. I was a quiet child.
Or he just assumed his conversation would be drowned out by the music being played.
I share this memory not to give the impression I have a bad father.
He worked hard to provide for the family. He has been through a lot. Lost family and friends during our escape.
He’s not perfect, but neither I am.
I’ve somehow managed to forge my own way in life, reached middle management level in the Police and, to put it bluntly, earning a ton of money without being a CEO. It might not be much compared to high flying lawyers or people in finance. Relative to my upbringing though, it is beyond my wildest dreams to be earning this much.
However, I do sometimes think to myself, how much I could have achieved if I was more confident and not always fighting my self-doubt.
The guilt of earning lots money
As we are earning more money, I am actually feeling guilty about it. This seems odd, but let me explain.
Guilt 1 – My Parents
My parents are still living in a housing association property (US – public housing). Although we, as a whole family have now bought a house for them to retire to, my parents (especially my mum) refuses to move out.
Their current house is in a deprived neighbourhood. Fly tipping is an issue, people speed and there is evidence of alcohol and drug abuse on the streets. It is not unusual to smell cannabis wafting about in the air.
The new house is larger, in a lovely area, has a nice garden and beautiful views looking towards the hills.
They tell me they want to be where they are because it is what they are used to and don’t need a “nice place”.
So when I return to visit them, I feel immense guilt knowing we earn all this money but they still live in such a rough area. I know this is beyond my control, but it doesn’t help the guilt.
I am chipping away at them and hope they will change their mind in due course.
Guilt 2 – We shouldn’t be this rich. Not yet!
Mrs. CfC ‘s older brother passed away suddenly in 2016 whilst in his 30s. What was meant to be just a common cold turned into pneumonia. It took his life overnight whilst he was still in bed.
In his death, we inherited some money (five figures) which was enough for a deposit to buy an additional rental property. Then last year, as part of her inheritance tax planning, my mother-in-law gifted another property to us. The property was originally intended to provide extra money for my mother-in-law and for Mrs. CfC to support her brother when her mum is no longer around.
However, with his passing, the property he lived in transferred back to my mother-in-law who had originally gifted it to him. This meant that she now had more rental income than she needed.
This is probably why we have unconsciously avoided looking at how much we were earning last year.
It brought a feeling a sadness.
We shouldn’t be earning this much.
Not now.
Not yet.
He should still be here with us and get to see his little nephews grow up.
Our plan was a 7 year one and although we might be already be FI with the inheritance, we will remain steadfast and stick to our original plan. We will work just as hard, if not harder as if we didn’t receive this inheritance. We are 2 years into our 7-year plan and we hope the excess wealth we build can be put to good use to positively impact the environment and the people around us.
Guilt 3 – Comparing ourselves
I know the saying: “comparison is the thief of joy” – Theodore Roosevelt.
But when I looked at the poll I did recently, 50% of 1,019 people who voted were in survival mode financially. Whilst I understand that there may be some sampling bias here (people who need help with money are more likely to be on PF sites), it still made me feel bad.
Here I am writing about and celebrating each milestone as we get closer to FI, yet many of my visitors are struggling to get by. Is it unfair to potentially have way more money than my neighbour?
This is part of the reason why I have teamed up with other bloggers who will be providing some content to my site in areas I have little experience in. Things that I hope will prove more useful for those on the lower income spectrum. Watch this space.
Don’t worry, I will continue to write my usual stuff and guff as well.
When Mrs. CfC read this post, she has expressed the following guilts which on reflection I also share.
Guilt 4 – Accepting rent from mother-in-law
Despite there being nothing illegal or dodgy about inheritance tax planning, we still feel a great deal of guilt accepting rent from her. This was the family home Mrs. CfC lived in and grew up in. Now that mother-in-law is retired and intends to spend the rest of her life there, it seems heartless to charge her rent.
But this is what we have been advised and it is what mother-in-law wants to do because it makes financial sense. I’ve mentioned this before, but she is an amazing lady; both in terms of how much she cares about family, but also how well she’s done financially on a nurse’s wage.
Guilt 5 – Accepting free child-care from mother-in-law
We can afford full-time childcare. We discussed recently the possibility of hiring a live-in nanny from next year onwards once Mrs. CfC’s maternity leave ends. We haven’t decided what we’ll do yet, but mother-in-law continues to help us out with free child-care. This is despite her having to take the Mega-Bus from Essex up north. A single trip which takes her about 5 hours door-to-door.
By the way, she is in her 70s!
Fiercely independent, active and looks great for her age. I would place her as being in her early 60s.
She can afford to take the train, but being the frugal lady she is, she prefers to save the money and take the bus. Us offering to pay for the train ticket or give her money for the child-care is a battle we cannot win.
Despite the distance, she wouldn’t have it any other way. She loves spending time with her grandchildren.
Guilt 6 – Not enough foreign adventures with mother-in-law
Mother-in-law loves travelling. She used to go on all sorts of tours and excursions around the world. She even had a bucket list at one point. Since her son passed away, she has lost the travel bug and enthusiasm to adventure. When she told us recently that she had booked a trip to Nepal with a friend, we were so happy!
With work and a young family, we wish we were able to travel more with her. Our worry is that once we properly pull the FIRE trigger, she will be too old to fully enjoy the experience. As a result, we are intending to start taking trips away with her from next year. It might delay our plans a little bit, but it will be worth it.
Guilt 7 – We are benefiting from her wealth too early
Mother-in-law has spent her entire life working and saving to have a comfortable retirement. She used to pull double shifts as a nurse so that she could invest in property.
Many people only start getting inheritance much later on in life. It doesn’t feel right that we are benefitting from all her hard work whilst we are still in our 30s. She has more than enough income to live the life she wants, travel and quality care later on in life if she needs.
She is not purposefully depriving herself. She is only gifting away just enough to be tax efficient. Yet, we still feel guilty.
Keeping it real as our net-worth grows
I often read and hear of stories about how people change as they come into money.
Lottery winners.
Trust fund babies reaching the point when the money is released.
Huge pay rise.
Massive inheritance.
I don’t believe my values will allow our growing wealth to alter who we are. Together with our life experience and the guilt I described above, I just won’t let it happen.
I also don’t want overconfidence to be my downfall. So here are a few ways I am ensuring that I continue to keep it real as we earn alot money.
- Communicate with Mrs. CfC regularly about our hopes, dreams and values.
- Revisit my stone of life often.
- Remain in touch with close family and friends. They can provide an anchor to my past, who I used to be and how I got to where I am today.
- Slow travel. There is nothing wrong with staying in an all-inclusive luxury resort now and again. We personally prefer hostels and airbnbs when travelling. Once we are FI, we hope to do some slow travel. Where we will be able to get deep into the areas we are visiting and really see what the country is about. A resort, even with ‘excursions’ is a bubble which can limit how much we experience of a country.
- Practice mindfulness through meditation. I’ve been doing this for a year now. It has helped me be happier and more grateful for everything I have.
- I’ve recently started donating to charity. It wasn’t something instilled in us growing up, although my parents gave what they could at church collections. It is something I will continue to do and teach our children to do.
- Writing a book about my family’s history or an autobiography is something I am planning to do. I don’t intend to publish it. Just something to pass down the generations and gift to our rescuers. This will become a key reference point to remind me of what we’ve had to sacrifice to get to where are are today.
- Writing the blog will hopefully keep me in check. If my readers don’t, then the tweeps (folks on twitter) surely will.
- I recently decided that I will start attending FI Local Meet-ups. I haven’t been to my first one yet, but perhaps openly speaking to others about money can also help keep me grounded.
- I’ve saved the best until last. My children will ensure money doesn’t get to my head. Every time I look at them or think of them, my heart just bursts with joy. I think only a parent can understand this feeling. I want to raise them up to be grounded, confident, responsible and caring adults. For me to do that, I need to be one.
There we are.
This was an unplanned post and not really structured. Just some thoughts which I wanted to get down as I was going through our financial numbers.
Money is such a powerful thing. It has the ability to break up marriages and change even the most strong-minded of individuals. I hope that by being conscious of this possibility, it will help keep my guard up and do right with the wealth we accumulate in the years to come.
I need to keep it real.
More from the Blog
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I love this post, and I’m excited to dig deeper into your content. Thanks for linking to my article!
We are in our mid-30’s and are finally at a spot where we don’t have any consumer debt. I work at home as a web developer and my wife Andrea runs a salon business. We are going to be able to start massively increasing our net worth after we complete a salon expansion towards the end of this year. We are grateful for how much progress we can make, but I struggle with constant guilt about how much time we’ve lost with how much we overspent in the past, especially with our level of income. In a way, this is good, because we don’t want to slow down. But living with guilt is not fun.
Other than my father, who is a doctor, everyone else in the family struggles with money. My mom has a 1.5 hour commute each way and is barely scraping by. After I read your post, I was reminded about how this makes me feel. Maybe some day we will get to a spot where we can help out our family. But at this stage we are focusing on making our marriage stronger and communicating more about everything (finances, our relationship, etc.), along with getting to a point where we can super charge our net worth. Thanks for sharing. I’m excited to read more about your story.
Hi Chris. Thanks for sharing your story as well.
I think it’s amazing that you have no consumer debt. Being in the PF space, I find myself surrounded by people who tend to be good with money and can forget that most people aren’t so great. I think it’s important to have these achievements recognised and celebrated.
You seem like busy people. I’ve never run my own ‘business’ as such, unless you count property investing.
The time guilt you speak of is not something I’ve experienced. I started on the journey a bit late as well. Although I wish I had knew about it earlier and started sooner, I don’t think I feel guilty about it. Do I sometimes think about the ‘what if’? Yup. But then I remember to be grateful for what I have now and everything to look forward to in the future. Meditation has really helped with this.
Being in your 30s is still young. There is still plenty of time and you are making great progress, so don’t be too hard on yourself.
I’ve found that good communication has really helped me and Mrs. CfC, but I must admit, it is not one of our strong points.
I can relate to this, and guilt is something that we all have to live with in some way/form or another. It’s important to “listen” to that guilt, because I believe it will steer you in the right direction(s).
I’ve always been “good” with money, but in my 20’s that simply meant that I was good at accumulating it – and THEN spending it 😛
These days, I try to spend less, and accumulate more 😉
I don’t think you have any reason to be guilty about the amount of money you make. You’ve earned it, fair and square. Now you just have to make good use of it, and it sounds as though you’re already doing that 😉
When I was young, my goal was to make a lot of money. When I hit 30, I realized that I had reached that goal. I was in the top 5% of the country. It made me feel empty, because I realized that earning a lot of money (and then spending it all) didn’t give me more joy or a sense of purpose. I read this in a book once: If you live for having it all you will never have enough.
Less is more, I guess 😉 So I try to live with less these days. I’m still in search for my sense of purpose, but I suppose that is going to be a lifelong journey. I hope that becoming FI might help though 😛
I think you should do more of these “unplanned” posts. More stuff from the heart is something I strongly believe that the world needs more of 🙂
Thanks Nick.
I can totally relate with making money and spending it all. I was the same in my 20s. Particular during university and a few years after that. I looked forward to buying stuff. Sometimes what the stuff was didn’t matter. Like a little magpie, I just wanted something new and shiny to play with for 5 minutes. It was the process of searching and researching which provided me with the buzz. It was anti-climatic every time I hit the buy button, but the cycle repeated itself until one day I decided it was enough.
You’re right. I shouldn’t feel guilty about the money we make. I was further reassured of this with a kind private message someone sent me. However, guilt is a funny feeling (if indeed that is what I’m feeling). It can be irrational and plays with my mind.
It is something I need to reflect on more to understand the true root of the guilt. But like you say, maybe I shouldn’t try to get rid of it. It’s like a beacon guiding me along.
In relation to sense of purpose. Don’t get me started. I think that might be a lifeline endeavour for me. For today, I feel like my purpose is simply to take each day as it comes, make the most of it and be grateful for it. Such a view makes for a more simple life and a clear head. On other days, I think about how I can make a big impact on the world. This ping-ponging of thoughts is something I haven’t learnt to overcome.
Outsider perspective is important. It’s why I’ve begun to write a bit more of these brain dump type posts. Comments like yours and others help to pull me back before I dwell on things too much.
It’s great that you have such a high income but I fully understand the sadness about how some of it has come about. Underlying all this are the core facts that you have worked hard and invested wisely so I’d say you definitely have earned the income. Too few households are able to discuss money openly and put decent estate planning in place which is a real shame. In my mind it is better to plan ahead and ensure the right money goes to the right people rather than the government being the unintended beneficiaries. My household has a gross income a little higher than yours and it’s been achieved in a similar manner. I feel fine with our income and net worth and I try to “play it forward” wherever possible. I try to advise friends and families on the best deals and suggest budget / investing strategies. For most it tends to go in one ear and out the other but they make their own choices. I’m lucky that my current job pays well and enables me to spend lots of time with my 5 year old son. However, spare time is now more constrained than income so I’ll potentially try to go part time in the near future. I’d like to do some reading or similar volunteering in his school.
Thank you for your kind comments. I think deep down we know we have still worked hard and haven’t ‘wasted’ any of the money that has been gifted to us. I think it must be a pride thing where I feel like I have something to prove to myself and maybe others.
We’re very lucky in the sense that my mother-in-law is very open discussing money. It makes it easy since I am responsible to compile the annual summaries for her to give to our family accountant. Topics such as inheritance are never comfortable because it involves thinking about death. Again, I am fortunate here in that both my wife and my mother-in-law are ‘matter of fact’ individuals. It a reality they accept and willing to discuss because it is sensible and responsible to do so.
In terms of advising family and friends. I don’t do friends. I think I’ve mentioned FI to them in passing but got the impression they weren’t interested. I have tried with my siblings with mixed results but at least I have tried.
I’d love to go part-time in the future. Perhaps a phased approach before I RE completely. Two years beforehand, I might cut my hours down to 30. Then the following year cut it down to 20. Then go on a two-five year career break. Just an idea off the top of my head. We’ll see.