Tuesday, 11 November 2014

Economic Naivety

Several times  in my life I have exposed myself to absolute economic naivety, while also being occaisionally a bit coy and generally very conservative with 'leverage'.

First of all take school and the last refuge of social mobility. At school and university I followed what I was interested in, but that enthusiasm proved to be a little half hearted when compared to my competition- basically there is always someone with a PhD or an MBA ahead of me. Anyway, the bigger picture is that the three professions plus engineering and math driven chemistry are the only way to get a better lot for yourself, your head above water if you like, and have a better standard of lviing than your working class parents. If you are middle class, then you are on about evens to have as good a life as your rather well educated, well pensioned baby boomer parents.

Outside these proffessions really you are in the area of you-may-as-well have been a train driver or a plumber. You, like me, followed your vague interests and what you got A's in at school and ended up within some form of service industry such as business services or social services. I have by a little bit of design worked more  in industry and with technology so have had some pretty good pay and some really interesting jobs.

Naivety for me is that by in large, you cannot be really laid back about career and personal capital unless you have a base  of either being in one of the proffessions and fully qualified by age 32, or having rich parents. Career is about a risk-payoff investment of your time, and the truth is you have to grunt for a few years before you get your break to the career ladder propper. I have always jumped on short cuts and that means my CV is just anathematic to many recruiters and I need to go direct to decision makers to get decent contracts and now again jobs.

On the matter of risk, people take far higher financial risks on purchase-vanity and wander-lust than they actually do on building personal capital. In the UK the average age of first house purchase average age is 37, and likely rising. For me I just did not like the areas in which I could afford, and in fact if you do not let out the properties to multioccupancy getting over a grand a month for them, cheap and nasty areas are just that! But I did miss the boat of several areas, Aberdeen and Edinburgh where I could be standing on a pension fund of a hundred grand today! Same with my mother, could have used half her invesments on a flat for me at uni, covered half the mortgage renting the second room out and making on average over 20 years, 10% per year compound with a major capital gain in the late 90s which could have sprung me into my all time plan to 'get into property' as so many have.

Several pals have got on the subsidised gravy train of buying cheap for rental to basically housing benefit dependents. That is another story, but a typical advantage of capitalism being depedent on socialist policies and the tory reversal on council housing.

When getting then into your non big proffessions career,  the pay is mediocre and really has not kept pace with any form of middle class inflation since the mid 90s. The going rates for graduates and two year experienced are the same as they were in 1996. House prices and particularily rental prices have of course grown. Student debt has grown.

My naivety is then actually not taking enough risk in capital and leveraging my access to credit in order to get ahead, rather that my risk taking has been a lot to do with relationships to girl friends and to my home land, Scotland. Risk taking is as pointed out, as much emotional as it is black on white figures. Half of the loves of my life have been either poor or financial disaster areas. None have really shown any promise of improving my economic lot beyond what a usual DINKY mortgage set up could offer in the short term.

The other big change in the UK at least has been the perpetual move away from real wealth creation and into the realms of the mortgage, pension, life assurance and consumer credit driven business and the greater business of the financial markets in London and their satellites. So much has become funny money, with the high margin production goods being more and more tied into government spending or as in green energy, preferential taxation.

So you have to choose your education, your career route, your spending  vs investment and even your choice of partner carefully if you want to have even the same standard of living as your middle class/skilled blue collar parents and making the right choices if you do not make it in the professions is a matter of taking an acceptable level of risk and investing in your own ability to make money in jobs and return on investment. 

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