14 Dec 2012, 12:40pm
personal finance
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  • The ONS has discovered you get richer as you save

    The Office of National Statistics, bless ’em, has discovered that there are a load of rich gits in the South East of the country. Puzzles me why they are so surprised; after all the SE contains London which is home to 10% of the population of the country and the population density of the south east of the country is high because everybody wants to work in London, and also Britain is in a cold northern climate and most people don’t want to freeze either.

    snowSee that white stuff on the ground? Makes it a bit parky round these parts, which is one of the reasons Brits all cram down in the southern part of the country ;)

    See that white stuff on the ground? Makes it a bit parky round these parts, which is one of the reasons Brits all cram down in the southern part of the country 😉

    It’s got the Grauniad’s dander up, because the top 10% of these rich gits have 40% of all the wealth. To be honest, what surprised me was that they didn’t have more of it, from the whole we are the 99% crowd I’d have expected 1% to have 99% of all the loot.

    99% t shirt

     

    So how did these rich gits get rich? Looks like it has similarities to how anybody else does – they save. How do I know that? On page 6 Fig 6 there’s a chart

    people get richer as they get older, up to 55

    Well, I’ll be damned. Looks like they are saving money, pretty linearly over time. That’s the funny thing about saving, your total wealth goes up over time. So the Guardian can damn well put away the politics of jealousy for a moment.

    By the way, I’m not in that top 10%. But their existence doesn’t upset me in the way it seems to upset the Grauniad. I am not in the lumpenprole category either, I am somewhere in the amorphous mass of punters who are neither fish nor flesh between the 50% mark and the top 10%.

    It also reminded me the time a quarter of a century ago when I was in the Broadcasting House bar sinking Fullers E.S.B. listening to a bunch of tossers talking about how much the price of their houses had gone up. I was thinking of how I was then going to get on the Tube back to TV Centre, then get on my bike and cycle back to my one-room bedsit with the salt roound the perimeter to stop the black slugs invading. And like the massed hordes at housepricecrash I spent too much of my time thinking it all wasn’t fair. Because I didn’t allow for the fact that I was standing at the beginning of my working life. The young are rich in some ways, but not in money terms, because they haven’t accumulated wealth.

    London was a fantastic place to be twenty-something. It’s a terrible place to build wealth as a twenty-something on a slightly-above-average wage because it’s a damned expensive place and there’s lots of stuff to spend money on. However, some of my colleagues did manage to buy houses in the city, but I was spending too much to be able to do that. There is a truth written in the lines of that graph that very few young-uns want to hear.

    The way to become a rich git is to spend less than you earn. For a very long time – decades, not months…

    Now where’s the fun it that, eh? There are other ways, but most of them are either illegal or some variant on that. It isn’t pre-ordained, because somewhere along the line you neet to get the clue, and you need to avoid some serious mistakes that are too easy to make early in life, in particular having children too early or with the wrong people. Look at the change in that graph for the householders just before retirement – about 35% of 55-64 year olds are in the top 10% wealth decile, compared to the vanishingly small percentage of the age group I was in when I was sinking that E.S.B.

    That’s why the greybeards hold so much of the money. They’ve been putting it away, for years, and taking opportunities to make money using money which also get easier as you get older.

    I am not in the 55-64 age group, but my earning years are now behind me. If you are young, your earning years still lie ahead. I am probably richer than you are at the moment, but I have little potential to increase, where you have a working life ahead of you. I have converted the kinetic energy of my human capital into the potential energy of financial and material capital. You have yet to do that, or you are in the process of doing it. It doesn’t look like that at the start- the young Ermine in the BH bar didn’t see the perspective, and so it looked not fair.

    Unfortunately  the world isn’t fair, we don’t start our working lives with the endowments of the capital we will build up over time. There are compensations – as a young man it was easy for me to look at the situation I was in and decide to leave the city of my birth for better prospects elsewhere. It would be harder for me to move now. The young have more opportunities to look for work even further afield now. I have never worked for an overseas employer, and yet that is not uncommon now, and if I were starting anew this would probably be the way to go for me.

     
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