Ms ZiYou Rich and wealthy
Money

Yes – I am rich now. And wealthy for that matter. And why labels matter.

In this 21st century of wokeness, it has never been more challenging to call yourself rich. But I am going there. I believe I am rich. And wealthy for that matter.

Why am I going there? Even Jeremy Corbyn doesn’t call himself wealthy, despite all his socialist ideals, that house in Islington and a £138k salary. But I think these labels matter.

Moreover, I believe we should not be ashamed of what we have achieved. Or downplay our accomplishments. Especially if you are part of a demographic that overcame barriers to get here. Our accomplishments should be celebrated.

How do we define rich?

Let’s go back a step. How do we define rich? Most of us will readily agree that a person earning £50k is richer than a person earning £20k. And that poor is the opposite of rich. A poor person has no money, therefore a rich person has lots of money. But how exactly do we define that money?

I propose we use income. How much money a person has coming in each year, before tax. And we compare everyone to each other. Luckily income generally comes in the form of a salary in the UK, that is easily quantified in pounds sterling. So what numerical value of income would make you rich?

John McDonnell hit the headlines with his definition of a £70k income as rich. An annual income of £70k would put you in the top 5% of UK earners, so I agree with his definition. I don’t agree with most of his policies, but I am happy to say his facts here are correct.

Here is the pre-tax income data from the government – note it only includes those who pay tax, so it may be skewed – low earners, tax exiles will be excluded. I firmly believe perspective is the key here, here we have a graph of the full distribution over time.

A busy graph, but lots to tell us.

Ms ZIYou UK Income Percentiles

Overall, I find the income results here humbling. They make me very aware of where I am in the income scale, and how many people make less money – 80% of the population earn less than £40k.

Now if we are considering wanting to define rich in particular, let’s look zoom into the top 5% of the distribution.

Ms ZiYou UK Income Top 5%

We can see that entry to the top 5% has increased over the years from just over £40k in 1999/00 to £70k in 2015/16. But the big take away is the gap widening at the top of the distribution over the years. And this is despite (or because of?) the progressive tax rates at these income levels.

Data Source: Govt Income Surveys.

How do we define wealthy?

Wealth data is a bit more challenging to locate, and thus the data is a bit more dated – with only data up to 2014 being available.

An interesting tidbit from this graph – around 10% of the population are millionaires in pounds. And the bottom 10% have less than £10k.

Ms ZiYou UK Wealth Data

Data Source: ONS Household Wealth.

I worked myself up to top 2% income

I believe perspective is important. Although I’m never a big fan of comparing yourself to others, when talking about numerical amounts of money it is the simplest way to categorise.

Nonetheless, it is extremely humbling to see I am at the very top of the income distribution. I’m around the top 2% nowadays. From my mediocre beginnings, that is powerful.

Moreover, I believe stating this is not bragging, more admitting my current privilege to have a high income – and I believe not to do so would be disingenuous. Too many people that are rich like me don’t seem to realise how unusual their positions are.

Yet am only in the top 15% wealth

Ms ZiYou Income

But when it comes to wealth, I am not as high a performer. I am around the top 15% which I am equally chuffed about. And I would also consider myself wealthy. Unlike Corbyn, I am happy to be described as wealthy. As to most people in the UK I am. Not to mention going beyond these shores to less developed nations.

Rich and wealthy

Being Rich vs Being Wealthy? Are they the same? Are we talking semantics here? Truth be told, I am not sure. Income and wealth do tend to correlate, as one needs the income to grow the wealth.

However, in addition to the factors needed for a high income, wealth also needs a time component. Hence wealth is age-related, and most wealth is held by older generations. And I am only 37 years young.  At the end of the day, you need money and time to grow more money.

Coming to terms with being rich and wealthy

Ms ZiYou Millionaire

An intersection of privilege, hard work, natural talent and luck enabled me to get here. And frankly it is hard to work out which of these was more key – in reality, it was all four.

There is no doubt some luck involved – all the planets had to align on the correct date. And some white middle-class privilege. However, I cannot control these factors or influence them. And neither can I change my natural talents and abilities.

So hard work, and more importantly directing that hard work was the only option I could work on. And on this one, I feel I have put the effort in. I have spent years working on both the quantity and quality of my work. It has been hard but nowadays feels worth it.

Income Class Barrier

I and many people I know have managed to make it there, earning that elusive £100k plus consistently. I think we have cracked the income class barrier. Many people with working and middle-class backgrounds have made it into the top income quartiles.

Hence I believe there is not a class barrier to making it into the top % of income. And I’d actually argue that people in the top income band are much less likely to be upper class – as the upper class have the resources to maximise their tax planning. And income taxes are much higher than wealth taxes. But that is another topic worthy of a full blog post.

Can the middle class ever become top % wealthy?

Now, in the UK wealth is disproportionately held by the upper class.  Despite earning in the top 2% income band for many years I am just in the top 15% wealth wise.

Inherited wealth is the reason for this. Similar to most people of middle and working-class backgrounds, I have not inherited any money. My family have no vast estate to pass on to me and no trust funds.  And neither would I want them to have.

At risk of showing socialist sympathies again, I do feel we have an issue with inherited wealth. Why are some people born into extreme wealth? Is it fair that they have material resources far greater than the rest of us? And that level of inequality is passed through the generations?

Gratitude and Celebration

I’d like to end in gratitude for the privileged position I find myself in alongside a celebration.

I am rich. I am wealthy. And I am equally proud of achieving these benchmarks.

Over to you

  • What are your thoughts?
  • Do you feel rich?
  • How about wealth –  do you feel wealthy?
  • Do you feel there is an income class barrier?
  • What about  wealth class barrier?

Thank you for reading – please leave a comment below and join in the conversation. You can also connect on Twitter or contact me privately.

 

39 comments on “Yes – I am rich now. And wealthy for that matter. And why labels matter.

  1. I liked 3652 ‘s definition when he said society always agrees ‘ the rich’ should pay more to solve societies issues . The definition of rich is simply ‘someone who earns more than i do’ lol

  2. I always liked the blogger 3652’s comment ‘everyone says the rich should pay more. And the definition of rich is ‘anyone who earns more than i do’ lol

    There is some truth in that. I used to look at things like the pension tax breaks and think they were really unfair Fast forward to today and everytime they debate reducing the tax benefit of pensions for high earners I’m seething. Like most things it’s a matter of perspective

    I guess by most standards I am wealthy but I don’t really feel it. I don’t know if I ever will

    Id define rich as what you earn and wealth as what you have. Your income can be high but if you spend everything you earn on cars etc then you’ll never be wealthy. There is alot of people in this country that think because their house has risen in value they are wealthy to be that is a huge risk if the housing market tanks

    I don’t think there is a class barrier to wealth anymore. Some of my wealthiest clients are builders plumbers and the like who tended to be blue collar trades equally many people I went to school with haven’t got hugely paying jobs

    Across the board there is a lack of financial education however.

    1. See I’m much more right wing on pension tax breaks – since we have a heavily progressive taxation I think they are fair – as ultimately they are just allowing you to split your income over many more years and pay the tax later.

      That’s interesting FBA that you don’t feel wealthy – what do you think it would take for you to feel wealthy?

      I’m feeling it’s much easier to crack the income class barrier than the wealth one – as I never see a way I could rival say the Duke of Westminster, who is much younger than me for what it’s worth. That level of inherited wealth is just unobtainable for working/middle class people. And his sisters as well for that matter.

      But yes, more education all round would be good – and encouraging people to save and think of the future.

  3. Interesting post! You’re making me curious about where I stand in my own country. I suspect I am not half as high up on the graph, and yet I feel wealthier than I ever have before. I think it is important to identify and talk about these privileges, especially since money is such a taboo subject for most.

    1. I love that comment Kristine – that you feel wealthier than you ever have. I wholehearted agree we need to talk about these things and acknowledge how fortunate we are to be in these positions. I tried to find Norwegian data but doesn’t seem to be too accessible in English.

  4. I was once called rich by an in law because my phone was old and rubbish and his was an iPhone.
    I don’t get the logic but it makes sense.

    Wealth and richness – it’s not just about money. Maybe it’s about power and control.
    Poor no control no power- note how those on benefits have been panicked by changes to universal credit
    Middle some freedom to spend thwir.earnings but they are still forced out.of.their beds to work. And so emphasise that- on a day off they most likely want to have a lie in.
    Rich have power and control of others and much greater freedom.

    1. Hi GFF – I really enjoy your perspectives, they sometimes agree with me and sometimes you really make me think.

      See, I think the definition of wealth is financial – and it just so happens that with money you have more power and agency over your life. I think they are inherently connected to money.

  5. I don’t think you can link being rich to income. I retired early, so did I stop being rich because I stopped working due to the fact I was wealthy? Or do you count passive investment income in which case I’m still rich? But you didn’t count it in your case.

    1. Hi Steveark – thanks for commenting and helping get into these nuances of definition.

      And that is a good point – I counted all my taxable income – but you are right my pension/ISA also have some sheltered income/capital gains and my taxable account also has some capital gains. I have started to play the upper class rules.

  6. Congratulations on your amazing achievements Ms ZiYou. Getting towards the pointy end of those charts involved a steep climb, and to make it into the top 2% of anything is definitely something to be proud of.

    I think there is a lot of perspective involved in defining concepts like rich and wealthy, as they are relative. There is also an element of moving goal posts.

    Would an elderly pensioner who owns their home outright, yet struggles to pay for the heating in the winter be considered rich? What if the house was worth more than £1m? Asset rich, cash poor? Certainly wealthy, but I’d argue far from rich.

    How about a the clichéd doctor who earns a fortune, but spends a fortune? All the greatest hits: big house with an equally big mortgage, car loans, credit card debt, etc. They aren’t rich, probably shouldn’t be considered wealthy either.

    For mine, I think rich is having sufficient free cash flow to do all the things you want to do without needing to think about how you will pay for them. The larger the gap between where you define “enough” and your free cash flows, the richer you are.

    Personally I define wealth as being able to afford the luxury of choice about how and where I invest my time. That control is funded by having sufficient income streams, or a certain net worth, to be able to (mostly) say no to the things I don’t want to do.

    My definitions are very subjective, and would be difficult to meaningfully compare. However I think the concepts of rich and wealthy are subjective too, very much in the eye of the beholder.

    Thanks for the interesting thought exercise!

    1. Hi Indeedably – it is such an interesting thought exercise seeing how we define these concepts. And who also puts their hand up an agrees they are rich and / or wealthy.

      I do like your definitions – I pass as rich on them easily and wealthy as well to be honest. I don’t work for fun – as in if I didn’t need the money I would not do this work. But I do work I enjoy and am happy to trade my time for the money they offer.

  7. Hi Ms ZiYou

    Your achievements are most impressive as you have come a long way and of course, you should not be ashamed of your accomplishments.

    Me, I am not rich and bar a big lotto or premium bond win, I don’t think I ever will be. But that’s ok, I’ve no aspriations to be rich. My definition of rich is something along the lines of having enough cash to be able to spend on anything you want/want to do without having to worry that the pot of cash will run out.

    I’m not wealthy either, although I am wealthier than I’ve ever been. I might consider myself wealthy when I hit my FIRE number but I guess it’s all relative. My definition of wealthy is unlikely to be the same as someone else’s definition.

    I’m among that 80% of the population earnings-wise and although it would be nice to earn more, I’m fine with that. What I earn is enough for my lifestyle and for what I want to achieve in the future.

    1. Thanks Weenie, that’s so kind of you.

      That’s a cool definition of rich you have there “having enough cash to be able to spend on anything you want/want to do without having to worry that the pot of cash will run out.” it really fleshes out the nuances of how desires and wants are inherently connected to feeling rich.

      Moreover, I love your happiness and contentment – having enough for your lifestyle and goals is a great achievement, many never manage to get to that stage.

  8. I like to hide away from the fact that most data I see are household data, and if you get two people earning similar amounts those numbers really dwarf mine. we haven’t really talked about the super rich yet those with inherited wealth and also tech entrepreneurs. so, no I am just middle class with high savings, definitely not rich. hehehe.

    1. Hey Coco – I’ll file you on the middle class with high savings but not rich bucket then!

      And indeed, unless you are literally the Duke of Westminister there will always be someone above you.

  9. Hi Ms ZiYou,

    I’ve always thought the two terms were synonymous so never really got what people were talking about when they said someone is rich but not wealthy. But I get your point on distinguishing high earners to people with high net worth.

    I feel both Rich and Wealthy (because they mean the same thing to me) in that I have decent money coming in, can afford to save some of it each month, and have a net worth high enough to put us in the top 50% of your graph, and rising each month. Can’t really argue with that.

    Also world wide I’d guess we are in the top 1% for both income and net worth. Like you say, it’s good to acknowledge this privilege and be thankful for it on a regular basis!

    I’m actually surprised that the bottom section of the net worth graph isn’t far more in the red, although it’s quite hard to see as it’s so zoomed out. It would be “good” to zoom in on that section to see exactly how negative those bottom few percentage actually are, I was under the impression that a lot more people are in a lot more debt than that graph suggests in this country. Maybe a lot of consumer debt that would have otherwise shown up is offset by house equity, but surely there must be millions of renters in debt up to their eyeballs that have no other assets that should show up here, if the media is to be believed (hah!).

    Cheers!

    1. Hey MsZiYou,

      Interesting post, and good to hear others opinions. To me wealthy has always meant having enough cash coming in/ hanging around that you can make a moderately expensive purchase (TV/ washing machine etc) without needing to worry about the consequences. I guess I fall into that definition now.

      Rich… There’s always someone richer than you (unless you’re Carlos Slim/ Bill Gates etc). My income is somewhere around the 90th centile, wealth somewhere around the 5th. Coming from a family which was very asset-rich cash-poor in the distant past with tales of our downward fall from grace I suspect my view is pretty warped. To me rich means people who can maintain their lifestyle without working. Even that I’m not sure about, but I guess by that definition most people with a FIRE fund would be rich!

      Cheers,
      The Shrink

    2. Thanks TFS – indeed in the wide world we are so at the top of a massive pyramid.

      Cool to see you also identify as rich and wealthy – I am I’m good company.

      Indeed I was surprised at the figures as well, especially the lack of major debt at the bottom. I guess as you say loads of people with consumer debt have house equity and pensions to balance them out.

  10. Just wanted to pick up on the comment “Despite earning in the top 2% income band for many years I am just in the top 15% wealth wise. Inherited wealth is the reason for this. Similar to most people of middle and working-class backgrounds, I have not inherited any money.”

    I speculate (in the absence of any data) that this is much more down to age than inherited wealth. Anyone in a relatively well paid job (doctor, vet, solicitor, accountant, senior civil servant) that bought a house in the south east of England when young, got a generous pension and worked through until retirement age has had 40 or 50 years of compounding working on their behalf, even if its mostly in the form of housing & pension rather than having been consciously built through investments. Something like 90% of the UK’s household worth is in the hands of pensioners and I guess that a very high percentage of the households over the £1million or £2million mark would be over-65s. I suspect that if it were possible to look at the net worth of households of 30-somethings, even allowing for the numbers of 2-adult households, you’re likely to be well inside the top 1%.

    1. Hi cer4t0n1a – indeed that is a really good point – wealth is very much a function of age.

      We could probably reasonably state that most people in the top 10% are >65 or have inherited wealth.

  11. Thanks for this post! I really enjoyed it as a reminder of gratitude. I looked up the income percentiles in my country, and it helps me appreciate what I have and how far I have come. Sometimes I like that we are surrounded by a bubble of people with similar incomes in our work/friends, but it helps to remember that not everyone is as fortunate. Especially when traveling (I recently got back from a trip to Peru), it really hits home.

      1. Thanks Jess – indeed I agree we tend to end up bubbles with people of similar incomes and forget what the overall population is like.

        Hope you had a great time in Peru – and yes, travelling also reminds me how lucky I am also.

  12. As very much a non-socialist, I’d like to make a case for inheritence. If I work and sacrifice my whole life so that my kids can have security, why shouldn’t I be able to pass it along? To make you feel better, there are very few third generation wealthy since most people who inherit wealth don’t know how to handle it.

    But what about people who inherit fortunes? Should people be able to pass billions on? Well, if we said you could only pass on ten million dollars or pounds, how would that change behavior? Would Steve Jobs have created that iPhone you’re using it Bill Gates that latest version of Microsoft if the government confiscated everything after ten million when they’d made that amount long ago? Letting people pass it on encourages people to continue to work hard for the good of others even after they’ve achieved enough for their own security, because you succeed with free enterprise when you take care of the needs of others. You do the best in Socialism when you learn how to best take care of yourself.

    1. Hi SmallIvy – thanks for reading and commenting.

      Sadly you’ll never convince me that the aristocracy deserve their wealth that their ancestors achieved many, many hundreds of years ago and their trusts will pass on for many more.

      And I’m shocked you think I have an iphone!

      1. For those very rare, centuries old aristocracies where force and power was used to build wealth, I’d agree with you, but those are rare. Socialism, ironically, is actually a means that those same type of people use today to setup the same sort of situations. It gives those in political power the ability to extract wealth for others to go into their coffers. Note that Putin and Kim Jong Il aren’t starving. If it makes you feel better, trust fund babies tend to waste their lives, which doesn’t bode well for them in the next life.

        Any smart phone is here because of the iPhone. Even if you don’t have one but have a knockoff, you kind of do.

      2. Out of curiosity, how does the royal family maintain their wealth since they can no longer tax the people? Does their trust invest and sustain them, or is it through tourism, selling palace tours and Prince William bobbleheads? If the latter, they are kind of earning their wealth by meeting a need.

        1. Hey SmallIvy – yes I live in the old world in one of those centuries-old aristocracies.

          The royal family have rebadged their taxing us – it’s is now called the sovereign grant that we pay them every year. And they also have the vast wealth they from all the pillaging over the years – the Duchy of Lancaster and Duchy of Cornwall which are outside the tax system and spin off millions each year.

  13. Perhaps like you, I’m from a very humble background. That being the case, it’s much harder to accumulate wealth for a variety of reasons (I’m well into the top 30% though) incl. no bank of Mum & Dad/Grandparents to take care of the basics or more, fewer opportunities, overcoming unhelpful mindsets etc.

    On the face of it, I probably seem quite poor – but I would consider myself both rich & wealthy. My take home income puts me in the lowest 30%, but that’s partly because I now work part-time and salary sacrifice a large proportion of the rest into my pension. I have none of the trappings of the wealthy eg live in a modest house with low running costs & have no car.

    The choices of how I spend and allocate my income, however, are all mine.

What do you think?