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.
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.
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.
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
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
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?