Moving Up

I am 28 years old.  I was born in 1988.  The Internet is a very interesting thing for me because it makes it easier than ever before to see what other people have done with their lives.  I have been educated through Primary School, High School, College, and University.  I have GCSEs, a Diploma, and a Degree to show for that.  I have had quite a few jobs, some better paid than others but none were paid anything beyond what I would consider a modest or at best average wage.  I've made a few investments over the years, played around with stocks and bonds but never made anything substantial from those apart from banking shares which I sold to partly fund my University education which I started in 2006 - I often look back at that and think how lucky I was that I had to sell them out of necessity as 2 years later those shares were pretty much worthless thanks to the financial crisis - and they are as yet to regain their pre-crash value.

As far as I am concerned as I have stated before I believe the "Middle Class" is a delusion and the reality is there's one question: "Could you quit your job and live the rest of your life on your own wealth without any assistance?" to which there are two answers, yes and no.  If you answer yes then I consider you upper class, and if you answer no I consider you working class for the plain and simple reason you are expected to work - whether you do or not for various reasons is another matter entirely.  By that definition I'd consider myself working class. 

Within that broad definition I've experienced the extremes of that band, from literally having no home, to living a very comfortable life.  Right now I'm somewhere in the middle, not living day to day penny to penny but not a million miles away from it either.

I've lived a life where I have been lucky to see both sides and find myself in the middle.  I know things could be a lot worse and I know there's still scope for me to do better than I am, so I still have hope.  When it comes to the idea that I or people like me could move from this class into the upper class however I take issue because I don't think that's really possible, or rather probable, and I don't think it ever was.

In my view the idea that you can work your way up to that, was a con that was sold to people to keep them content with being where they are - in many ways it epitomises the question based "You're free to leave at any time but do you mind telling us why?" type of scenario where you're told you have a choice and a chance but when you put that to the test there are many obstacles put in your path specifically designed to prevent you.

Now I know many will argue about whether you work hard enough for it etc.  I've heard all those arguments before and to be honest the people that spout them tend to be people on the higher end of my definition of working class.  It's never people who are upper class who have said that to me.  In fact the people I have met who are upper class live quite frugal lives to the point where if you did not know about the money they had in the bank you'd think they were living day to day penny to penny - which is often what "new money" tends to reject.

"Old Money" is a term that is used to refer to people who have wealth that was made a long time ago, generally speaking several generations back in their family.  These people come from money and they have been taught how to keep it - by avoiding spending it as much as they can.  "New Money" are people who have recent wealth, either made in their own lives or in the previous generation or before.  These are people who generally don't share that mentality either because they experienced what it was like not to have money and then want to lead a life of luxury where they spend in excess for themselves, or because they don't want their children to experience that hardship and essentially spoil their children in excess.  Either way new money in most cases never holds onto it for very long.

That deals with those in the upper class, but for those in the working class who think they can work themselves into the upper class, that to me is very much a delusion.  I have seen people who express the "milestones of the middle class" as life achievements - owning your own home, owning multiple cars, earning twice or more the average salary, sending children to public school [fee paying school for anyone outside the UK], going on multiple holidays annually, or owning a holiday home.  To me this is all a delusion because the vast majority if not all of these things are achieved through debt.  If you buy a house through a mortgage, that house isn't your asset until you've paid the mortgage in its entirety.  If you want to sell before the mortgage is paid you can, and you repay the outstanding figure.  Now the thing is you can't spend a house.  So really that asset isn't liquid.  That's wealth on paper not wealth in practice - potential wealth.

When it comes to the value of your home, the only reason to buy a house and pay the mortgage over the course of your life time is for the asset value at the end, at which point you will leave it to your children who will have the option of either selling it to get the money, or living in it.  If they choose the latter then that wealth remains potential, not practical.  If they choose the former then that wealth is swapped for yet another lifetime of debt.  If you don't have children then when you reach the end of your mortgage and the asset is yours then you are left in a position where you need to make the same decision as your potential children would have.  Do you sell the property to get the money?  Or do you remortgage to unleash the equity?  In the latter instance you swap the value of the house for yet another 25 years of debt which in essence means all you have done is regained the money you spent 25 years paying in the first place with a bit more on top due to the increased value of the home - which is entirely negated by the debt of the new mortgage.

If you choose to sell the property then you acquire the new capital value of the property in wealth which will be more than you paid for it in the first place so that is the only true profit.  However, as other properties rose in value at the same time, or perhaps at a faster rate depending on where geography, then the chance of moving "up" into a larger house without another mortgage on top is slim to none.  The option of moving down into a smaller house to be able to keep some of the profit liquid to spend is another choice, but again the value of that house then becomes paper based and potential value rather than liquid wealth, and the excess that you kept as money to spend will only be a profit if that amounts to more than you paid to the mortgage of the first house, which unless you downsized drastically, wouldn't be that likely.

So what does it actually achieve? 

If you want to move from working class to upper class the only real paths to achieving that are through enterprise and investments.  Property is not a viable investment unless you invest in it to provide an income - buy to let - as in that case the mortgage of the property is paid through the rent not through your own money.  As for enterprise the potential to make money in business is something that never goes away but it is something that not everyone will want to pursue.  You have to be driven if you want to start a business and make it work.  If you don't put the effort in you want get a return.  Business is one of the few ways to make money over time because just like renting out property, the source income ultimately is not your own money, but rather it is the income generated by someone else which in turn is passed to you.  When you run a business yourself you can increase your salary accordingly as the business performs better causing your personal wealth to rise.

The question that sparked this whole post was whether or not it is possible to move from one class to another.  I think the answer is technically yes, but I think that ultimately the vast majority never will.  With 1% of the population sharing 95% of the wealth, and the other 99% sharing the remaining 5% of the wealth the odds are stacked against you.  If I was to estimate for what percentage of the population could actually move from one class to another, I'd probably choose the figure of 1%, that only 1% of the population who fit the definition above of working class could actually move from working class to upper class [with a world population of 7 billion assuming a 99/1 split that would be 69.3 million people worldwide] - that's only those who could, that doesn't mean they will.  The number that will, I would imagine, would be smaller still. [For the sake of argument if you say 1% again that would be 693,000 people worldwide will move from working class to upper class in their lifetime].  If you take a lifetime to be 70 years as most copyright law likes to assume then that amounts to 9,900 people around the world each year move from one class to the other.