Why 100 Minus Age Rule Doesn’t Work (Shares Vs Bonds Asset Allocation)

A frequent dilemma faced by investors is, what asset allocation is best? What percentage of your portfolio should be in stocks and how much in bonds, and how much, if any, should be in other asset classes? – property, gold, cash, crypto, and so on.

The answer to this question could depend on many factors such as attitude to risk and age. The ‘100 minus age rule’ seeks to answer this pertinent question but does the rule work? Did it ever work?

In this post, we’re going to first look at what the  ‘100 minus age rule’ is, then look at the problems with it, and then suggest some other options so that you can maximise your investment returns for a given level of risk. Let’s check it out…

Stocks vs Bonds

It’s generally recognised that stocks will outperform bonds over the long term. There are many studies that go back several decades, and the Barclays gilt study goes as far back as the year 1900.

We think the conclusion of this study is stunning – see below. It shows that stocks have absolutely annihilated UK government bonds over time. For the 115 years analysed, a £100 investment in equities would have grown to over £2.2m. But the same £100 invested in gilts would only have returned just £36,000. Note that the insignificant rounding we applied to the equity figure was the total return from gilts. I mean that’s says it all – the gilt return is a rounding error.

 

Armed with this knowledge you might think that this means you should invest 100% in stocks, but unfortunately it might not be that straightforward. There have been long periods when stocks have not only underperformed relative to bonds but have also had negative returns spanning many years. This could be a problem if that stock market underperformance period happens to fall during the years that you’re investing.

Government issued bonds such as UK gilts and US treasuries tend to be far less volatile than stocks. This means they can be ideal for investors who cannot handle the huge swings that you often get with stocks.

Not only that, but stocks and bonds react differently to the things happening in the economy. For example, a change in interest rates will have a direct effect on bond prices. That’s not to say they don’t impact stocks at all, because they do, but the impact is not as prominent and is more indirect.

To get to the point, stocks and bonds behave differently and holding both in your investment portfolio can reduce volatility and help to increase the chances of steady growth. This will likely lower overall returns over the long term but may help an investor to sleep at night as it hopefully avoids huge portfolio losses at any one time.

What Is The 100 Minus Age Rule?

As we just discussed, most investors will want to diversify across asset classes because it enables them to maximise return for a given level of risk. The difficult part is how can you determine what asset allocation you should choose.

This is where the ‘100 minus age rule’ helps because it’s so simplistic. The rule of thumb says, you take your age and deduct it from 100. The figure you get should be the percentage that you invest in the “risky” stock market, with the rest being held in “low risk” bonds.

For example, if you’re aged 35, you would invest around 65% in the stock market and 35% in bonds. If you’re aged 40 it would be 60% in the stock market and 40% in bonds, and so on. The idea is that as you age you cannot afford to take on excessive risk, so this method will gradually reduce risk as you get older.

As you get older most people will be more concerned with the return of their money rather than the return on their money. This is because when you’re young, if you lose money you have the time, and probably the health and ability to fix this. Also, you will have more years for stock markets to recover. You won’t have this advantage the older you are.

Why The Rule Doesn’t Work

#1- Designed When Bonds Were Good

The biggest gripe we have with the rule is that it was created when interest rates were good but that’s not the world we live in today. Even when we were younger, we can remember receiving juicy interest payments on cash savings, but today you will get next to nothing.

US 10-Year Treasury Yield Rate

The chart above demonstrates what’s happened to interest rates nicely. It shows the US 10-year treasury yield rate from 1962 – almost 70 years. This rate is the benchmark used to decide mortgage rates across the U.S. and is the most liquid and widely traded bond in the world. In other words, it’s a great proxy for the return an investor could expect from bonds.

A you can see the current rate is a joke – we won’t sugar coat it. Moreover, the long-term trend has been downward and if the interest rates from other countries are a sign of things to come, then rates could get even worse.

A 50-year-old investor basing allocation on the ‘100 minus age rule’ would have half of their portfolio in this lacklustre asset – returning nothing and producing a negative real return.

#2 – Access To Different Assets Now

Another problem with the rule is that when it was first conceived an investor would have likely had access to only their local stock market and local bond market. Today we can invest in almost anything imaginable.

It is possible to invest in almost any listed company in the world, and the range of available assets classes has also greatly improved. To put it another way, we can build a portfolio that just wasn’t possible decades ago. For one, Gold, which historically has been a great store of wealth over the centuries, was illegal to own in the US from 1933 to 1975.

This means that other investments that would have been beneficial to an investor’s portfolio had not been considered when the rule was first formed. Today it doesn’t make sense to stick with just 2 asset classes when there’s so much more choice.

#3 – Not All Equity Carries The Same Risk

Not all stocks are created equal. Some are very cyclical and boom and bust with the economy, whilst others are essentially bonds in terms of their risk.

A water utilities company will have very predictable revenues as demand for their product is very stable. We all need to drink no matter what hell is happening in the economy. Therefore, defensive stocks like water companies will have more stable share prices and dividend pay-outs. It seems crazy to lump this type of company with more risky stocks such as a car manufacturer or an oil exploration company.

#4 – No Longer Need An Annuity

In 2015, UK pension rules were changed so that you don’t have to buy an annuity when you retire. An annuity is an insurance product, which guarantees an income.

Instead you can keep your pension pot invested and drawdown on it, but this puts you at the mercy of investment markets. Therefore, it’s really important that your investments continue to work well beyond your retirement age as you may need this money to last for decades. Imagine being aged 70 with 70% of your wealth in bonds producing no return. Your pot will run out leaving you royally screwed.

#5 – Life Expectancy And Retirement Age

We all are living longer. If you’re hanging up your working boots decades before your expected age of death, you need that investment pot to continue growing at a respectable rate above the meagre return provided by bonds.

According to the ONS, a 32-year old man is expected to live until age 85 and has 25% chance of reaching 95. For women they have a life expectancy of 88 and a 25% chance of hitting 96.

#6 – State Pension (Social Security)

We’ve covered this a few times recently but as reminder, governments around the world including the UK are broke. An axe will have to be taken to areas of government spending that are unaffordable, and we’re sad to say the axe will almost certainly fall on the state pension sooner or later.

Consequently, you are fully responsible for your future and you need to grow your own investment pot. To give it the best chance you need to take on more financial risk than what the ‘100 minus your age’ rules implies.

Now that we’ve disproved the rule, What Other Options Are There?

110 Or 120 Minus Your Age

Some financial advisors are now supporting ‘110 or 120 minus your age’. It’s exactly the same concept but ensures you hold more equity than the previous rule proposed. So, for example, a 40-year-old using the ‘120 minus their age’ rule would have 80% in stocks and 20% in bonds. Even at age 70 you would still have 50% in stocks.

We can’t advise you, but this modified rule does give your investments a better chance of surviving for longer.

We also wouldn’t ignore other asset classes. We would be more inclined to split the allocation of the portfolio previously assigned to bonds to also invest in other defensive assets such as gold.

Property could also be used as their values don’t fluctuate as much as stocks and tend to have more reliable income.

Vanguard’s Glide Path

Vanguard use a glide path in their Target Retirement range of funds. We don’t have time to discuss them in any detail now but check out this post if you’re interested in learning more about Vanguard.

 

Vanguard's Target Retirement Glide Path

We don’t know the origin of this particular glide path, but Vanguard must have faith in it as they built an entire fund range around it.

This differs to the ‘100 minus age’ rule as it shifts from equity to bonds more slowly and never drops below around 30% shares no matter your age.

Risk Tolerance (Larry Swedroe)

Instead of basing asset allocation solely on age, Larry Swedroe, an investing guru, encourages us to consider the amount of risk we can tolerate and proposes these allocations:

 

 

Larry Swedroe's Risk Tolerances

An investor who could accept a loss of 35% should split their portfolio 80% stocks to 20% bonds. We really like this method because it takes into account all our unique risk tolerances. As you age you can adjust your portfolio as your risk tolerance decreases.

Build Up A Large Pot So It Doesn’t Matter

Here at Money Unshackled we think that the amount of wealth you build is entirely up to you. If you are in a position where you have to live in retirement constrained by money decisions, then you didn’t build up a large enough pot.

Our plan is to build up so much wealth that we can live comfortably through retirement without worrying about it running out. Constantly worrying about money is no way to live. This would mean we can leave our wealth invested in riskier assets as it wouldn’t matter if the markets were to fall, as the likelihood of the pot running down is practically zero.

This is one way the rich keep getting richer because they’re not constrained by money concerns and their wealth can grow unimpeded. For our younger readers we would urge you to take measured risks while young, so you don’t have to count pennies when you’re old.

What is your asset allocation and why? Let us know in the comments below.

Now go claim your free stock. The Stake platform have a give-away offer of a free stock for every new customer – worth up to $100. It’s a platform for UK investors interested in accessing the US market.

Check out the MU Offers page for the offer link and more info!

Also check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

A 10 Year Plan – School Leaver To Financially Free

Where do you want to be in 10 years? If we’d asked our 18-year old selves that question, the answer would have been “F-ing rich!”. But of course what we meant was Financially Free.

There are millions of pathways you can follow to get to Financial Freedom, but these mostly converge into 1 of just 2 super-highways. 2 very different journeys, but with the same end destination.

These routes can get you financially free after 10 years if you really want it. Most don’t, so don’t achieve it. At the very least you will improve your financial security allowing you to control your own life.

Which 10-year plan will you choose?

Route 1 – The Graduate

Overview

This route involves being at the top of your game as an employee, while converting all possible disposable income into investments that will support you financially.

Qualifications Are Everything

If you’re following this route, you want to be the highest paid employee you are capable of being, which means qualifications.

Like it or not, graduates get paid more than non-graduates. A lot more.

Statistics from the Department for Education show the average salary for graduates over their lifetime is £34,000. The corresponding figure for non-graduates is only £25,000.

But the qualification has to be relevant and targeted.

When Qualifications Aren’t Everything

You can’t be a Performing Arts graduate and expect to make decent money – well you can but know you are defying the odds.

All qualifications have a Cost to Benefits Ratio, and many UK degrees are unfortunately not worth the paper they are written on.

We can do some analysis to see which qualifications offer the best returns relative to the cost, essential if you’re to reach Freedom in just 10 years.

Seeing as the broken university system in the UK charges over 9 grand per degree, whether you’re studying Brain Surgery… or Knitwear… at least for starting salaries it’s as simple as looking at which career offers the highest wage.

Starting salaries by industry

Best Performing Degrees

Above is a league table of degrees by cash output from Graduate-Jobs.com.

There’s a £9k swing between the lowest and highest paid careers, though you could have chosen to do either and both cost the same to study.

At the low end are jobs that you don’t traditionally associate with needing a degree, except surprisingly Law, which we’ll come back to soon.

At the top end you have science and finance type jobs. League tables like these were the reason we chose Accounting for our degrees instead of pursuing careers in Knitwear – amongst other reasons.

Keep Going – Professional Qualifications

As well as a good starting salary, you also need speed. For this 10-year plan, you don’t have time for gradual pay rises. This is where professional qualifications come in.

This is a 10-year plan, not a 40 year one, so you need to ramp up that income fast. Best to choose a career that balances a good starting salary with lightning-fast progression.

Jobs in the 3 traditional professions – Law, Accounting and Medicine – typically offer structured routes up the career ladder with further professional qualifications, and a few other careers do too.

It’s why Lawyers all end up loaded, despite starting out as the tea-boy.

Converting Wages Into Assets

You might have built up a killer wage at this point relative to your living costs, but you need to be converting that disposable income into financial assets. This is the exit lane on the Graduate Route.

Most high paid graduates convert their large disposable incomes into a bigger house, big new cars, big holidays and big lifestyle choices.

You can’t afford any of this if you’re shooting for an exit from the rat race. Instead, you need to be buying big investments.

You don’t have much in the way of spare time for compounding in a 10-year plan, so a stock market portfolio of ETFs and index funds won’t be sufficient; but they should do fine for a 20-year plan.

You need big cash-flowing investments with 20%+ annual returns.

Why Property Works

Investment property leveraged with an interest-only mortgage can yield cash returns of 10% per annum, and a further 10% of return from leveraged capital growth – totalling that elusive 20%.

These huge returns are only possible with leveraging by using a mortgage. The property returns mentioned are for carefully selected properties. You won’t achieve this on any and every property.

You might be able to get similar overall returns from picking individual stocks, though these are far more volatile than property.

We use Stockopedia to give us the best analysis and screening tools available for stock picking. It’s how we try to get market beating returns.

Check out the link on the MU Offers page for a 25% discount!

The Snowball Effect

The ideal scenario for someone on the Graduate Route is to buy a rental property with a deposit of maybe £40,000 from their incredible salary, and then set aside the rental profits each month towards the next deposit.

By reinvesting all of your cash profits, each subsequent house purchase should be a few months quicker to save for than the one before it.

Route 2 – The Entrepreneur

Overview

This route shuns formal education and instead involves starting-up and owning a business. You build your own assets, which eventually run themselves.

The Hard Way

Respect to people who go down this route from the start. It’s harder than the Graduate Route, in the sense that it’s unstructured and goes against social norms.

There’s no roadmap to success like you get with exams. You have to chart your own course.

The Plan

Being an entrepreneur usually involves a couple of years or more of zero or negative profits while the business is established, and followed by expansion hopefully into a successful organisation that pays for your lifestyle and then keeps growing.

Expect years 1-2 to involve scraping by on the breadline, after which things hopefully pick up significantly. You should be aiming to outsource all tasks to employees that you hire by the end of the 10 years.

Where the Graduate Route ended in a big pile of investments that were propped up the whole way by salary income, the Entrepreneur Route can build assets from almost no initial capital.

You’re building assets using your time rather than your money, though it helps if you have some capital to put in too. It is both your job and your Freedom Fund.

If this business also produces excess cash, then that can also be invested into such things as stocks or property.

Getting Out

Unless you can sell your business for a fortune and reinvest the winnings, the most likely exit lane from this route is hiring employees to run the business for you.

10 years should be ample time to turn a start-up into a small business run by 2 or 3 employees, though we’d hope for bigger success than this.

The trick is to only choose a business model which has significant expansion potential. It doesn’t really matter what the product is, what matters most is that the delivery method must be scalable.

Most people will class owning a single shop that you run yourself as a business.

But do you own a business, or are you the business? Can the shop be run without you? Do you own a shop, or a job?

If you were interested in retail, instead of opening a shop you might open an online retail store, or make it easy on yourself by selling your designs through established networks like Teespring or Etsy, like we do below our YouTube videos.

You don’t see us selling mugs in a high street boutique, stood behind a till!

In theory we could sell 100,000 mugs by having an online presence, with zero overhead costs. Maybe on the high street you could shift 20 a day, while paying crippling rent and business rates.

Thinking of a business idea is too hard, people always say. It’s not really – it’s implementing it that’s the challenge, and committing to it every day.

You just need to look at the world and find a product that needs improving on, or a problem that needs a new solution.

If an idea can’t be scaled up using the internet, forget it and try again. You’re only making it harder on your future self for trying to find the exit lane.

Any business idea for Financial Freedom in 10 years must be capable of removing you from the driving seat.

Other Considerations

Location

Whichever route you take, you want to make sure you’re following the path of least resistance. Where you choose to live does have a big impact.

You don’t want to be tossing all your disposable income on bills and living expenses when you could be investing them into your property portfolio or business instead.

Using your biggest living expense, your housing cost, as a proxy for earnings power, there is a clear North/South divide.

According to CompareTheMarket.com, while the average salary for Southerners at £26k is a little higher than those of Northerners at just over £21k, the disparity in average house prices is far scarier; £144k for the North vs £328k for the South.

Better still, some entrepreneurs manage to lower living costs by living in a more affordable place, and yet sell products and services in affluent parts of the world.

Mission Accomplished – What Next?

If you’re committed we believe 10 years is all it takes to turn your life around; from a school leaver with nothing to being either financially free, or free enough so that your life isn’t controlled my money decisions.

Your next steps for an Entrepreneur could be growing that business further until you reach millionaire status, or if you followed the Graduate Route, starting again down the Entrepreneur Route – made far easier now by having passive property income to fall back on.

What other routes to financial freedom are there? Let us know in the comments below.

Also check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Your Opportunity Fund – Career, Investing & Side Hustles

Everyone gets opportunities to make more money. But most people either aren’t equipped to take them, or don’t see them. Missed opportunities keep you poor.

Money opportunities can be small and incremental, like buying a stock when it’s cheap or changing jobs. On their own they won’t make you rich, but taking your opportunities day after day will soon add up.

The problem is, to take advantage of most money opportunities you need to already have some money to fall back on – enough cash and investments to give you the balls to take a risk.

This is your Freedom Fund, which looked at through a different lens is really an Opportunity Fund.

This article should help you to capitalise on the opportunities that life throws at us, and tell you why you need an Opportunity Fund – and why having one of any size makes the difference between being too afraid to make money, versus having the confidence to get rich.

Your Opportunity Fund

At its heart, the Freedom Fund that you hopefully have stored under your metaphorical mattress is there to pay you an income and also to allow you to take advantage of life’s opportunities.

If you see an investment worth buying, or a career or business opportunity worth taking, the fear of loss will stop most people.

A Freedom Fund – or Opportunities Fund as we’re calling it today – is there to be used to pursue opportunities. Not risked recklessly, but used in a targeted way.

Opportunities to make or save money come along daily and can compound to make you much better off, but you need to be zen enough with your cash situation to risk putting some on the line to make more.

With our own Opportunity Funds, we’ve found we grow more relaxed about making money the bigger it gets.

What An Opportunity Fund Buys You

#1 – Better Jobs

At the smaller end of the scale, your Opportunity Fund gives you the confidence needed to change jobs or change careers, as you have assets and maybe even investment income to fall back on.

It’s all about being able to politely tell your boss that you no longer have need of their employment, and will be going off to pursue better options.

Finding a new job is a chore, and finding a good one that’s worth trading your life in for should be given some serious effort to find. It’s not something that’s easy to do whilst already in a job.

In our view, with jobs it’s best to first quit, then give 100% of your time and brain power over to the search for a replacement, climbing higher up the career ladder as you do so.

We’ve only been able to do this because we had Opportunity Funds to catch us, and genuinely believe our strong career paths were made possible by the comfort of having that cash buffer.

#2 – Better Investments

You want to be in a position where you never again have to turn down an investment opportunity because you’re living on the breadline.

It’s not just poor people who live like this – half the middle class families that we know are living pay check to pay check.

It can take time to learn how to start investing, and it would be disheartening to not be able to put theory into practise.

If the FTSE 100 falls to 10-year lows, like it did in 2020, you know in your bones that you should be putting some of your spare cash into buying a FTSE 100 index fund while it’s cheap.

But if you don’t have an Opportunity Fund, you can’t do what’s necessary to help yourself – in this case reallocating some resources into the FTSE 100. It’s just another chance you missed out on to get ahead.

With a decent sized Opportunity Fund you can also take advantage of riskier investments like small-cap stocks and property. Those with a small or non-existent Opportunity Fund must take safe harbour in less volatile and less rewarding investments instead.

With property, it’s more about the investment being expensive to buy in the first place, and that it may need funds to maintain.

If you go through an untenanted period, or the roof leaks, you need a pile of cash to fall back on. It’s the type of investment you’d only buy if you also had some spare cash set aside for (possibly quite literally) rainy days.

#3 – Better Side Hustles

Side hustles are becoming more popular as a way of making extra money in these troubled times, with the Independent reporting that 20% of people already do things like dog walking and selling old clothes and gadgets to top up their bank balances, and a further 25% wanting to start a side hustle.

These are the types of hustle you might do if you had no capital behind you. After all, anyone can walk a dog or sell some junk.

But side hustles are not limited to the financially challenged. If you’ve first built up a decent sized Opportunity Fund, you could start a far more profitable side hustle.

With a bit of investment into monthly web-hosting fees you could open an online shop to sell your bits and bobs – by buying a van with a nice paint job, some equipment and paying a helper or 2, you could have a dog walking business catering for hundreds of dogs.

Essentially, if you commit yourself and your finances to a side hustle, it can turn into a business that replaces your job.

“But a new business is not guaranteed to make enough money to live on”, most will say. Exactly. This is why the confidence boost of having an Opportunity Fund is essential for taking the leap.

A lot of money management is psychological. You might have the best business idea in the world, and a plan for how to implement it, but if there’s a slight risk that it won’t make money immediately you probably wouldn’t do it.

Fear of potential loss always takes priority over excitement of potential success. It’s just human nature.

#4 – Better Business

At the larger end of the Opportunity Fund spectrum, a successful small business owner might be too scared to hire their first employee.

Do they wait to hire someone later when they can more easily afford it; or do they hire someone now while they can’t, but trust that the value created by the staff member will mean they pay for themselves?

It could be the difference between a business that grows fast versus one that stagnates.

If you have some small amount of cash set aside so you can survive for say 6 months without any payback on this employee, it’s a different decision from if you were living hand to mouth without any savings.

#5 – Better Experiences

It doesn’t have to all be about making more money. A big Opportunity Fund gives you better opportunities to have fun.

Perhaps you’re given a once in a lifetime chance to sail the world, or a mate asks you to tag along on an excursion to Antarctica to see the penguins.

Or maybe you’ve got the chance to go to the World Cup final, or your favourite singer is doing one last tour.

How Big Your Opportunity Fund Needs To Be

The answer is that any size is better than nothing. A small Opportunity Fund of £10,000 might give you the confidence to change career.

A pot of £100,000 might give you the confidence to move 30-40 grand into a rental property to leverage some of your returns by using mortgage debt.

A pot of £500,000 might kick out enough passive income that you never have to work a day again and can spend your time starting or investing in businesses.

While a pot of £10,000,000 will have people coming to you to throw equity at you, Dragon’s Den style.

Getting Started

The hardest part can just be getting started building that initial fund. If you were able to just save aside a few extra hundred quid a month it could soon make all the difference.

You’d be able to start taking advantage of small-scale money opportunities which further compound your wealth.

One thing we’ve both been trialling is matched betting, a risk-free process of scooping up cash bonuses offered by bookmakers by placing bets on both outcomes of an event. We’ve each made around £500 per month from it, but some people put more time into it than we can and make over £1,000 monthly.

To do this we’ve been using OddsMonkey – they collect all the bookie bonuses in one place, hold your hand while you scoop them up, with specific walk-through guides and tools for all offers.

For instance at time of writing, one bookie has an offer for £100 in free bets – OddsMonkey will walk you through how to grab this free cash, plus hundreds more offers like it.

Check out our matched betting page to read more about it and get discounts for matched betting services that you won’t get by going direct.

Other Ways To Grow Capital

Other than taking advantage of easy income enhancements, you can build up your Opportunity Fund by keeping more of what you make, which can often be done by just making better spending decisions.

Even saving up a few grand will get the ball rolling, which can then grow itself by investing it, as well as using it to grab opportunities as they arise.

Most people we know waste money on frivolous crap – it’s fine if you’re happy to take that enjoyment now, but accept that it removes your ability to take advantage of lifestyle enhancing opportunities in the future.

One of the best arguments for paying down your mortgage early is so you can free up money each month to spend on opportunities without fear.

We’ve countered this argument before by saying it’s better to lower your mortgage payments by extending your term, and use the money saved on opportunities while you’re young.

But both are better financial decisions than blowing that money on a new Range Rover.

Having an Opportunity Fund is a choice. Some people have big cars – others conservatories, holidays in California, or designer handbags.

The people who get ahead can have all of these things too, and more. They just get them later… after they’ve first built up an Opportunity Fund.

Money Leads To More Money

The old saying that you need money to make money isn’t true, but it certainly makes it easier or perhaps more accurately, makes it faster.

Money leads to more money – if you allow yourself to take your opportunities as they come.

What have you been able to do with your cash that made your finances better? Let us know your stories in the comments below!

Also check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Do It Yourself Or Pay Someone Else?

The Financial Independence Retire Early Movement or FIRE as it’s often known preach doing almost everything yourself with the intention of saving money faster, but we on the other hand believe that outsourcing is the key to freedom, happiness, and growth.

But it’s not just the FIRE community that have this ‘better to do it yourself’ mindset. From our experience, we’d say that most people would rather save a few quid and do soul-sucking work themselves, than pay someone else. You can’t build an empire on your own, and even if you’re not setting out to conquer the world, outsourcing chores will give you more time to do the things you love.

The FIRE community wish to free themselves from wage slavery, but their ambitions don’t go as far as freeing themselves from mundane chores. We agree that chores are the lesser of the two evils but they’re still grim tasks that can be outsourced. Why settle with doing anything you dislike?

In this post, we’re going to look at outsourcing from both a business and an individual perspective. Should you do it yourself or pay someone else? We’re going to look at the reasons to outsource, the types of outsourcing, and when to outsource. Let’s check it out…

No Respect For Time

We all know that our time on this earth is limited and yet the vast majority of people will squander it, whilst behaving in a way that worships money as if it’s a limited resource.

These people are doing it all wrong. We all need to treat time as if it’s precious and treat money as if it’s endless. You can’t create more time but both high street banks and central banks can and do create money at will. This is the frightening truth.

People all around the world are trading their limited youthful time today for small sums of money that governments can create freely and seemingly without restrictions.

Saving Pennies Is A Losing Game

Those who do not outsource any tasks because they’re trying to save a few quid are playing defensively. But you’re playing a losing game and have no chance of winning when all you do is park the bus.

Playing defensively doesn’t work because you’re not growing income at a fast-enough rate. The only way to win is by going on the attack. You need to bring in more money and convert it into wealth – that is, assets that are likely to grow in value rather than shrink.

Focus on Increasing Income

You need to focus on growing your income. Just as businesses are forever looking to grow profits, so should an individual. The reason to grow income as a priority is that it will buy you more time.

Most people recognise that if they build their income higher, whether that’s through a side hustle, business or even through progressing in a job, they can afford to outsource tasks, thereby freeing up precious time. But almost all of them say they’re too busy to put in the additional work.

They’re not lying – their schedules are chock-a-block. The problem is that their schedules are jam packed with other people’s priorities and low value tasks.

So, what are the Reasons To Outsource?
Number 1 – Outsource To Free Up Time To Reinvest

Outsourcing tasks will free up time, so you can be more productive elsewhere. Say you spend an hour a week doing the gardening. For the sake of this blog post, we’ll assume this is a mundane chore that you hate.

If you were to outsource the gardening to a professional could you reinvest that spare hour each week, maybe into drafting a business plan or developing a new skill, so that it increases your income above and beyond the cost of paying someone else?

In the home, you probably have a chores list longer than your arm. In addition to the gardening, you could outsource the cleaning, the cooking, the washing up, the ironing, food shopping, window cleaning, DIY, managing bills and whatever else springs up.

You can take this outsourcing to the extreme if you wish. Many wealthy people, especially successful business owners, choose to outsource all parts of their life.

Don’t underestimate just how much time many chores swallow up. Just the other day I (Andy – MU Co-founder) was thinking I need to do Christmas shopping but it’s a pain – if only I had a personal assistant to delegate this to. Well every successful CEO would just delegate this to his or her PA, so they can focus on what matters.

This leads us to reason number 2:

Number 2 – Outsource To Free Up Time To Enjoy

The end goal is to have fun, so outsourcing tasks to free up time is another great reason to do it. As we said, time is our most precious resource, so our actions are best spent in a way that maximises our free time.

The danger is that you set out to outsource chores with the intention to reinvest the time, but then laziness or distractions cause you to slack – we are all human after all.

It might be okay to outsource to free up time just to enjoy life if you are financially comfortable, but before doing so ask yourself whether your financial position is strong enough to justify it.

Don’t forget that the biggest drain on your time overall is wage servitude. So, from our point of view the priority should be on outsourcing chores to reinvest the time into a side hustle, to the point that you can at least free yourself from a job. Then you can outsource to find more time for fun.

Number 3 – Outsource For Expertise

When it comes to expertise such as a car mechanic or tax accounting, most people will happily pay for it. Here, the risk of doing it yourself and getting it wrong carries a cost that outweighs the cost of outsourcing. So, it’s a no brainer.

Say that you were buying a house. There’s a lot of expertise needed. You don’t want to get this wrong, so prior to buying the house you could go to University and study surveying, property law and banking, all of which would take years and cost thousands and thousands of pounds. This would be ridiculous, so instead you could just pay experts – saving you time, money, and reducing risk.

Types of Outsourcing

At its highest level there are 2 type of outsourcing – you can hire people or pay for automated tools and products that do the jobs more efficiently.

Hiring people is the type that usually springs to mind first. In the home, people dream of paying someone to do their chores, and businesses often first think about expanding the workforce before considering the second type of outsourcing – paying for automation.

We suspect that this order is due to a lack of imagination. In every job we’ve both had, the employees would whinge that more people are needed to do the work. Rarely do they think of ways to automate a solution to the problem. In most cases, a simple tool is available that will rapidly resolve the issue for a fraction of the cost of labour. People typically cost more than automation and are usually worse at doing the job.

In the home, rather than do the vacuuming yourself, you could hire a cleaner, but this would get expensive over time. Alternatively, you can buy a robovac, which will save you a small fortune. Likewise, we would never not have a dishwasher. The time it saves is a lifesaver, literally, as it saves us from wasting precious life-hours washing up.

When To Outsource

There are three trains of thought when it comes to outsourcing.

The first is that you should never outsource, and you should do everything yourself. Earlier we alluded to the FIRE community and most of the general public who think this is the best approach.

“Why pay someone else to do it, when you can do it yourself” is what they tend to say. You’ll find these people installing their own new kitchen, changing their own car brake pads, and when they book a holiday, they will painstakingly piece together all the parts rather than pay extra for a packaged holiday.

Yes, they will save a few quid but at the cost of their time.

The next thought process is to do it yourself until it hurts. This certainly has its merits when it comes to the hiring of people but if there’s a piece of software, product or an automated service that can help to avoid this pain, then we would be inclined to use that before it hurt.

The third and final idea is that you should outsource as soon as possible, as not doing so hurts business growth and you. For example, if you can outsource a task for a thousand quid and it brings in two thousand quid, then it’s a no brainer.

We quickly worked out that we could improve the quality of these YouTube videos by using supporting footage, known as b-roll. We could have shot the footage ourselves, which would have been extremely time consuming and expensive, or we could pay for stock footage.

We didn’t wait until our profit covered the expense. We knew the sooner we improved the quality the faster our audience and profit would grow. If we had waited until it hurt, then our business would have suffered.

In other words, outsource in anticipation of future growth.

When To Outsource – Other Considerations
Should You Outsource Investing?

As a money channel we felt this particular question might be of most interest to our audience.

When it comes to investing there is multiple levels of outsourcing. You could delegate the entire process to a financial advisor. If this saves you time to reinvest elsewhere in your life, then it might make sense. You will pay more for the privilege.

Likewise, you could build your own portfolio of funds or use a robo advisor, and these are also a form of outsourcing as they do most of the work for you. The cost here is negligible, however.

And finally, you have individual stocks, which is the do it yourself approach. There’s no better way to learn than doing it yourself. Picking stocks does carry with it a lot of risk but equally if you are good at it you can make much greater profits.

Investing is one area where you might benefit from taking a more hands on approach, and if you have the skills to pick individual stocks you can outperform the market.

The Stake platform for instance is one of the cheapest ways to access the world’s largest stock market, the US, so if you are considering buying stocks yourself, you could check them out – they’ll give you a free stock worth up to $100 if you use the link on the MU Offers page!

Is Outsourcing Worth The Cost?

If you have a patch of grass that needs cutting but it’s just a few square meters, it may mean the job is too small to be worth being outsourced.

Rather than get a gardener who would charge you the same price if your garden was 10 times the size, it might make sense to eliminate the job entirely. In this case, you could lay down a lower maintenance patio and be forever free from this nagging chore.

Though, it’s worth considering whether you hate the chore or just the time it takes. Can you cut down your work hours at your job instead?

What do you outsource and why? Let us know in the comments below.

Also check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Plan, Automate, Ignore, Get Rich

We honestly believe that anyone can be wealthy. Wealth is not just reserved for an elite group of people – anyone can get it.

You’re watching this video – so obviously you want to get rich – and getting rich starts with really wanting to get there. Money is attracted to those who seek it.

Contrary to popular belief, your ability to become rich is not just down to your intelligence, work ethic, luck, who you know, what you know, your upbringing, and it’s certainly nothing to do with staying within the law. By this we mean you don’t need to be a drug dealer or a criminal to get rich.

In fact, becoming wealthy is not even difficult and can be achieved by following these four steps – Plan, Automate, Ignore, Get Rich!

It essentially boils down to what you do with your money and how you invest it. In this post, we’re going to look at these crucial four steps. Put them into action and you will become wealthy. Let’s check it out…

Getting Rich Has Never Been Easier
Undeniably, getting rich in today’s world has never been easier. With the advancement of incredible technology such as the Internet and the mobile phone, we all have access to the world’s information at our fingertips.

When Phil Knight founded Nike, or its predecessor Blue Ribbon Sports, he had to travel to Japan, trick his way into a meeting with a potential supplier – god knows how he did this with the language barrier, and also struggle to raise finance from what was then a very different banking sector to what it is today. Then of course he had the not-so-easy task of selling the shoes.

Most of us will openly admit that this would be an absolute ball ache to have done any of this, but today we don’t have the same excuses. You can literally do all of these things from the comfort of your home.

Another thing we can do from the comfort of our homes is invest in pretty much any kind of investment on the planet. This gives us a massive advantage over generations that came before us. As a matter of fact, these opportunities are arguably far better than what the wealthiest and most financially savvy people in the world have been taking advantage of for centuries.

The sad reality is that despite this fantastic opportunity most people will either fail to capitalise on it or will get it horribly wrong and will be far worse off as a result. So, what do you need to do?

Lay A Strong Foundation

First things first, you need to pay down your expensive bad debt, build up an emergency fund and then begin to invest. To do any of these you need to live on less than you earn. These are all vital steps but help with achieving these goes beyond what we’re talking about today.

Plan
End Goal

As with any target in life you need to have a good plan for how you’re going to achieve it. A goal to become wealthy is not a good goal because the end point has not been defined. You’re unlikely to reach a goal if it’s ambiguous.

A better goal would be to build wealth of X number of £££s by X Age.

From that end point, you work backwards to calculate the amount of money you need to invest and what you likely to need to invest in. You also need to factor in your attitude to risk.

This is really important as it will show you how feasible this goal is. Let’s say an investor, let’s call him Dave, can invest £500 a month for 30 years but his end goal is £8 million. To achieve this, Dave would have to earn on average 20.1% annual returns. This is highly unlikely from the stock market. That’s Warren Buffett level performance.

After a harsh dose of reality, Dave realised that a more realistic final pot from £500 a month for 30 years might be just over £700k. This can be achieved with 8% annual returns, which seems like a good barometer as this is roughly what the S&P 500 has returned on average over many decades.

Aggressive Versus Defensive Assets

Although 8% returns are more realistic, is a broad stock market index like the S&P 500 in line with Dave’s attitude to risk? This index has on occasion plummeted in value by over 50% and has remained below its peak for years and years, meaning you could be sitting on huge losses for far longer than you can stomach.

Because equities are so volatile many investors will build a diversified portfolio across asset classes.

The S&P 500 might be considered a more aggressive strategy but you can temper this volatility by also investing in less risky or more defensive investments such as bonds, but this could also include cash, insurance products and commodities like gold. The problem with investing in a more defensive basket of assets is that it will highly likely lower your overall returns over the long term.

If we assume that a portfolio mixed between aggressive and defensive assets returned 4% annually and the monthly investment and timeframe remained constant, then the final pot would be just £344k. When you factor in inflation of say 3% annually, the final pot in today’s terms would be just £210k – not bad but significantly below what our investor Dave had initially wanted.

Dave has a few options. He can accept that that is the likely outcome, come to terms with the fact that he may need to take on additional risk, extend the investing timeframe from 30 to say 40 years, find a way to increase his monthly contributions or a combination of these.

What To Invest In

We believe that your portfolio should be kept as simple as possible. Although this is not personal advice, we feel that the more risky or aggressive element of the portfolio should be invested in a broad stock market index or a few indices that cover the whole world stock markets.

Investing in individual stocks is not for the faint hearted and if done properly is not passive at all. In fact, we would urge most investors to avoid it entirely, and those that do insist on investing in individual stocks should limit the amount they invest to a small percentage of their portfolio.

We ourselves allocate just 15% to this type of investing. This means that 85% of our portfolios are planned, diversified and passive. But as we say, most people would be better off sticking with index tracking funds.

Automate

Once you’ve decided on your portfolio or have outsourced the work to a robo advisor, the key is to automate your investing every month.

You should look to set up a direct debit or standing order to your investing account, so that the money is invested as soon as you get paid your wage. This has three main benefits:

#1 – Pay Yourself First

It’s far too commonplace to save whatever you have left at the end of month, but this will too often be nothing. It’s far better to pay yourself (aka your investments) first.

This forces you to live within your means and allows you to spend guilt-free knowing that you’ve already taken care of your future according to the plan you’ve already laid out.

#2 – Pound Cost Averaging

Investing in the stock market is a roller coaster. There is a real danger that you invest at the top, only to see share prices crash leaving you with paper losses for years.

As a reminder, if you had invested in the S&P 500 in the year 2000 you would have had to wait until 2007 until the stock market recovered back to previous highs, for it to only crash once again, making you wait a further 6 years before share prices recovered.

This obviously isn’t great but it’s not a major problem because if you automate your investing you will have smoothed out your purchase price. By investing monthly, you end up buying when stocks are high and crucially also when they’re low.

#3 – You Will Fail To Time The Market

Knowing that stock markets go up and down can tempt people to try and time the market. Don’t be tempted to wait because the chances are you will never start. You are more likely to buy high and sell low. Historical charts show incredible buying opportunities but when you’re in the thick of it will you be able to find the courage to invest?

All those lows coincided with apocalyptic news stories projecting doom and gloom. Humans are hard-wired psychologically to get this wrong. This is why auto-investing in good times and bad will see you build wealth over time.

Ignore The News

If you follow the ‘plan, automate, ignore, get rich’ strategy as per this video we think it’s sensible to completely ignore the news when it comes to investing. The media are in the business of selling newspapers, and to persuade you to watch their TV programs or read online articles.

Bad news sells, which is why every news piece is sensationalist. If you follow the news you will always find a reason not to invest. There’s always something bad going on.

Over time most of these reasons are completely forgotten about and the stock market powered ahead regardless of these negativities. Apologies if this chart looks a little blurred but we thought it makes the point far better than we can.

Let’s just take some time to look at some of these. We’re sure the Flash Crash felt like a big deal at the time. When the US government shut down people were like, “oh my god, the world is ending!”. The Brexit vote was in 2016, and Trump was elected at around the same time – again, everyone in the media thought the economy was done for. The markets continued upwards.

If we were to look further back in time there are always many reasons not to buy – events like the Cuban Missile Crisis must have felt like the only thing worth talking about at the time, but can anyone remember the impact this had on the stock market? Of course not.

S&P500 History

And there’s one good reason you should buy. Charts like this make it look like share prices didn’t move for decades but the volatility was no different than what was experienced in the 90s to the current day.

S&P500 History - Logarithmic

A logarithmic chart will show this better. As you can see the trend has always been up and we see no reason why this trend will ever end!

Get Rich

Follow this investment strategy and you are very likely to build wealth and be able to live the life you want. Moreover, this strategy excels further because it is passive. It doesn’t involve you putting in any effort other than the initial setup and the occasional rebalancing. The process is fully automated, and you don’t ever need to fret about events that could upset your goals.

While everyone else is busy worrying you can get busy living! Crucially, this passivity frees up your time to go generate more income, allowing you to boost your monthly investments. The more you can invest the sooner you will hit your financial goals.

This is why we always encourage our viewers to break free from the chains of employment. Some career paths do pay handsomely, but your salary income will forever be tied to the hours input. With a business you can scale your income. Whether you work towards boosting your employment income or whether you choose to build a business empire, the fact that you don’t need to constantly manage your investments means you can focus on what matters to you.

Will you be following this passive investment strategy, or will you be chopping and changing your portfolio? Let us know in the comments below.

Also check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

What Is A Good Salary And Net Worth – UK – Income and Wealth Percentiles

Where do you sit on the scale from poor to rich? How does your income and net worth compare to your neighbours?

 

These comparisons matter, because it is not the pound or dollar value of your wealth that matters, but what that wealth can buy you relative to everyone else.

 

You don’t need “X millions” to be rich – you just need more resources than most other people in the same economy.

 

Is a squirrel rich if it has 20 nuts? Well, he’s richer than his mate who has 5 nuts – the big squirrel next door is richer with 25 nuts, but you’d still say that our squirrel had a lot of nuts.

 

In this article we’re looking at income and net worth percentiles, and where you sit on the scale. Is your wage good, or not? Does your pension pot set you apart?

 

In theory, you only need to be doing better than most other people to live a comfortable life and retirement.

 

If you’re between the 50th and the 99th percentile it means you’re above average, and have a larger slice of the pie than most.

 

Between the 1st and 49th means you’re below average, and have some work to do to set things right!

 

So what is a good salary and a good net worth for someone in the UK?

 

What’s A Good Salary?

The Institute for Fiscal Studies has a handy calculator on their website for calculating your Income Percentile.

 

To qualify as above average, a single person would need to make £20,000 a year after tax – the equivalent of a £24,000 salary.

 

This would put you in the 51st percentile, just above average. But is that really enough to live comfortably?

 

According to RecruitmentBuzz, to be able to start saving just £100 per month you’d need a salary of £28,000 – or £22,700 after tax.

 

But to stand a chance of saving up for a house deposit, or a good-sized investment portfolio while you’re still young, we think you need to be saving at least £500 a month.

 

Extrapolating from the RecruitmentBuzz figures, we calculate the salary that allows this level of saving in the UK is £35,000, or £27,400 after tax, and this assumes the individual is not prey to lifestyle creep or lifestyle inflation.

 

This puts you in the 74th Income Percentile – the top 26% – meaning that to get ahead in life you need to be doing better than nearly three quarters of the population.

 

Not All Income Is Created Equal

You might be tempted to pat yourself on the back right now if your income puts you in a high percentile.

 

But is income from a job the same as income from dividends, or from rental property that you own?

 

Of course not. You might be in the bottom 40%, but if all your income was coming from passive sources, like stocks and property, you’d still be better off than someone in the 70th percentile or top 30% who gets all their income from a job.

 

Why? Because your passive income means you can probably retire whenever you want, or have unlimited free time to pursue more income if you chose to.

 

The guy making a decent salary in the 70th percentile – the top 30% – might still be chained to his desk for another 40 years. We’d say, it’s more important to own financial assets. Which leads us to: what is a good net worth.

Wealth Percentiles from 0 (worst off) to 100 (richest)

What’s A Good Net Worth?

Above is a “UK Wealth By Household” chart which uses data from the ONS, which we’ve adjusted for inflation to 2020 as ONS data is typically out of date by 3 or 4 years.

 

This orange line is Total wealth, which is made up of the 4 underlying wealth types: Financial Wealth (investments and savings); Property Wealth (the value of your home); Physical Wealth (shiny things you own like cars, jewellery and fridge freezers – what Rich Dad Poor Dad refers to as “Doodads”); and Pension Wealth (the value of your private work pensions and SIPPs, not including the state pension).

 

The graph gets a bit mental after around the 65th percentile – the top third of people having so much wealth that it’s difficult to even see what’s going on below that, so let’s now zoom in on wealth up to £500,000.

Zoomed in to £500k: Wealth Percentiles from 0 (worst off) to 100 (richest)

A household – whether that’s just you, or as a couple – with Total Wealth of £300,000 would find themselves on the 51st percentile – better than average.

 

That may sound crazy to a 30-year-old audience, but bear in mind this chart includes older people who have paid off their mortgages and built up significant pension pots.

 

We’re not fans of this focus on Total Wealth. Again, not all wealth is equal, and someone whose £300,000 is made up of highly depreciating Physical Wealth like new cars is obviously not as well-off financially as someone who owns £300,000 of Financial Wealth, like an investment portfolio that generates an extra £30,000 a year.

 

Let’s now break down the types of wealth that make up a Net Worth, and see which ones really matter.

 

#1 – Financial Wealth

This is your stocks and ETFs, your investment property, your cash and savings accounts, peer to peer lending accounts, gold, bonds, businesses that you own – all your money and things which substitute for money like investments.

 

Put the kettle on and tot up all your financial assets, then find your household on the chart – and we’ll zoom in again as most households will have less than £100,000 of Financials.

Zoomed in to £100k: Wealth Percentiles from 0 (worst off) to 100 (richest)

Your Financial Wealth is net of any debt, meaning the worst-off 25% of people have zero or negative Financial Wealth.

 

If you have a stocks and shares ISA or even a bank account with £8,000 in it, and no debt, you are above average.

 

The ONS data does not subtract your Rainy Day Emergency Fund from these numbers though, which should probably be around £8,000 for most people – around 6 months wages.

 

So what the chart is really saying is that half the country don’t have any spare cash for investing.

 

If you have built up any kind of investment portfolio alongside your emergency fund, you should consider yourself winning!

 

Financial wealth has the potential to generate more wealth, and can allow you to retire before age 55 if it’s large enough, or allow you the freedom to start your own business without having to worry about paying the bills in the initial years.

 

Passive income generated from it may even improve your standing in the Income Percentiles.

 

It can be difficult to value at the more affluent end of the population as rich people tend to own businesses which have no obvious market value, but generate them an awful lot of money.

 

Furthermore, income producing investments held within an ISA will be part of the Financial Wealth category, but a noteworthy point is that the income produced doesn’t actually classify as income in the eyes of HMRC.

 

It is unclear from this data whether this is counted as income or not, so it might be ok to be on the low end of the income percentiles, as long as you are on the high end of the Financial Wealth percentiles.

 

For most people, working out their Financial Wealth is as simple as looking at the balance on a savings account.

 

For a lot of people, their Financial Wealth will be held entirely in cash, and while this could be used to buy passive income assets with, most people won’t, and will instead convert any temporary Financial Wealth into Physical Wealth.

 

#2 – Physical Wealth

Physical Wealth is wealth that has been trapped in “stuff” – cars, coats, cots and other crap. To further quote Rich Dad Poor Dad, these are Expenses, not Assets, and typically decrease in value – by around half on the very first day of ownership in many cases.

 

Tot up your physical wealth and see where you land relative to your fellow countrymen – it’s the blue line.

 

What’s sad is how much more value people place in Physical Wealth than Financial.

 

A majority of people happily place tens of thousands of pounds into doodads, while utterly neglecting their finances.

 

#3 – Private Pension Wealth

Let’s now look at Private Pension Wealth.

 

It’s obvious in from the charts just how much more of a priority is given to pensions investing (the green Pension Wealth line) over accessible investing (the grey Financial Wealth line).

 

If you don’t know where you fall on the line, you are not alone. Barely anyone of working age has a clue how much money is invested in their work pension pots or what it’s invested in.

 

Maybe you don’t even remember how many pensions you have?

 

We did a deep dive video on exactly what was in one of (MU co-founder) Ben’s workplace pensions, and were horrified by the inefficient and undiversified way his money was being put to work by incompetent pension fund managers.

 

Ben has since opened a SIPP to hold all his old work pensions in, so he can control them more directly.

 

Check out that video for ideas about the SIPP providers you could open with, and why it’s so important to take control of your own money.

 

And if you open a SIPP with Nutmeg using our link you will get the first 6 months without management fees when you either deposit or transfer at least £500 – the link is on the Offers page.

 

The charts tell us that the average person (50th percentile) has a pension pot of £68,000. If you have more than this, you’re probably either over 40, or you have a very generous employer, or you have focussed relentlessly on your Pension Wealth to the detriment of your Financial Wealth, necessary for retiring before age 55.

 

#4 – Property Wealth

Unfortunately, the orthodox view in the subject of financial security is still that your home is your greatest asset. This is absolute tosh! Poppycock of the highest order.

 

Far too much focus is placed by wealth seekers on non-income generating assets like your home.

 

You could be a millionaire on paper because of your house’s value, but have no cash in the bank, and no stocks or other assets paying you an income.

 

You still have to go to work every day to pay the bills. The value trapped in that house makes your net worth look good on paper, but is pointless for any real-world application.

 

Your home, once paid off, is kind of an asset, so far as it stops you from having to pay rent, or mortgage interest.

 

But while Financial Wealth and Pension Wealth are more clear-cut Assets that generate additional wealth, Property Wealth can be more easily likened to a Liability. Of course, we’re only talking about the house you live in. Property held as an investment sits in your Financial Wealth box.

 

Your home doesn’t do anything to generate more wealth, and it costs you a lot to maintain. If you own a big house, you’re going to need a big income to pay for big maintenance bills and running costs.

 

And it can’t be easily sold to get hold of the money. You have to live somewhere, so selling your house to live on the cash is pretty unrealistic as far as plans go.

 

Only by downsizing or moving to a poorer area can you get access to that trapped value.

 

Take a look where you sit on the yellow line – and this is only the part of the house that you own, not the bit the bank owns with your mortgage.

 

For a new homeowner with a 10% deposit on a £200,000 house, you would own £20,000 of that house, and be in the 34th percentile – or bottom 34% of people.

 

Below the 33rd percentile – the bottom third of the country – households do not own any property, and rent instead.

 

Age Matters

The big dividing line between the haves and the have-nots is drawn through the generations.

Household Wealth Percentiles By Age (Remember that Under 16s live with parents!)

This chart shows this divide vividly. The average over-65-year-old has access to at least half a million pounds of total wealth – we can see the 50th percentile hits the green bar, which represents £500k to £1m.

 

Meanwhile, down at our end of the age-spectrum, the average 25-34 year old can command somewhere between £85,000 and £200,000 of total wealth.

 

Compare and contrast to the first chart we saw on Total Wealth. While there, the average person in the UK may have £300,000 of wealth, for the 25-34 age range, the average is just over £100,000.

 

So don’t feel too bummed out if you’re not on the property ladder yet, or if you haven’t built up much in the way of investments.

 

There’s time to turn it around and grow out of average. Get there faster by focusing on the right types of wealth – and the right types of income!

 

Tell us what you think your income and wealth percentiles are below!

Also check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Tax-Free World Portfolio With Synthetic ETFs

We recently did a video showing how the new iShares S&P 500 Swap ETF (I500) could eliminate Dividend Withholding tax and supercharge your returns.

 

This newly launched ETF led us to us to thoroughly research a specific type of investment that we were previously overlooking, and we discovered that we could save hundreds of thousands of pounds over a lifetime by using synthetic ETFs rather than physical ETFs.

 

If you’ve not seen that video, then it’s worth checking out after this one but we’ll try to cover the key areas here too.

 

Dividend Withholding tax is a sickening hidden tax imposed by many countries around the world. Investors will feel the sting mostly from their US investments as Uncle Sam will take a hefty 15% of your dividends.

 

We hate dividend taxes of all kinds because they’re taxes on cash flow – not profit. You may receive a dividend of say 3% and get taxed, but if the value of your investments had fallen by say 20% you would be sitting on large losses and yet still be paying taxes – not right at all.

 

Anyway… US Withholding tax is the most important and the one that you should focus on eliminating first where possible, because it is highly likely that US investments make up the bulk of your portfolio.

 

A world fund based on market capitalisation will hold about 55% of the portfolio in the US, so it’s clear you want to tackle US withholding tax first.

 

However, investors should be aware that other countries are often as bad or in many cases even worse. Japan will also withhold 15% of your dividends and Germany will withhold 26.375%.

 

Synthetic ETFs are a fantastic tool to eliminate withholding tax but as they are more complex to understand than physical ETFs, there is far less choice.

 

Since the financial crisis of 2009, many synthetic ETFs converted to the physical type but recently there has been a growing demand for tax-efficient synthetic ETFs, and availability has been improving.

 

In this video, we’re going to look at building a world portfolio of synthetic ETFs and make some comparisons to our world portfolio built from the physical variety. The idea is that we squeeze as much return out of our investments as possible! Let’s check it out!

 

About once a month we send out the Money Unshackled email newsletter, so if you have not yet subscribed to this consider subscribing. It’s the best way to ensure you don’t miss anything.

YouTube Video > > >

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

Take Control Of Your Financial Life – You Can’t Rely On Anyone Else!

We see a lot of people whinging on social media and in some news publications about how the government is a disgrace and that they’re not doing enough. We agree that the government are making a pig’s ear out of everything recently, but is it their job to mollycoddle us?

 

The same people complain that their boss isn’t fair or that rich corporations are somehow dodging taxes. They complain about their wages, their commute, the tax they pay, the cost of a beer. They pretty much moan about everything. Everything but themselves of course.

 

People can generally be split into two camps – the Doers and the Do Nots.

 

The Do Nots are the complainers who want everything for free and done for them; and the Doers are those who take control of their futures.  The Doers know that nothing worth having in life comes for free and that you can’t rely on others to improve your life. You must take control to improve your own future.

 

Today we’re going to look at some of the things that too many people are foolishly relying on getting, and will be whinging about and blaming someone else when they don’t get them. These are all key areas where you can snatch back control and improve your life.

 

If you are one of these people that expects something for nothing and has a tendency to be easily triggered, we advise you not to read any further! With that said let’s check it out…

 

Reliance On The State Pension

Too many people put their wellbeing, security, and life in the hands of the state. This is especially true when it comes to retirement. Growing old is not a surprise. If we’re lucky it will happen to all of us.

 

And yet, millions of people in the UK fail to prepare – instead choosing to be saved by a future government. A government that will not be able to carry this burden.

 

A lot of people pay taxes throughout their lives and assume that the government must put some of that aside to save for their future state pension. This is not the case at all. Any taxes that you pay goes towards paying for the state pension of current pensioners. There is no state savings pot for you.

 

State pensions are really just a pyramid scheme on an epic scale. Pyramid schemes only survive for as long as new members can join at the bottom. Sooner or later the whole thing comes crashing down. This will happen in some form to state pensions.  There is no doubt about it.

 

When pensions were first created in 1909 it was only paid out to some people aged over 70. At the time, only one in four people reached the age of 70 and life expectancy at that age was about a further 9 years.

 

Nowadays, the age you can take a State Pension is set to rise to 68 from the current 65. But 68 is not high enough –from a “how we gonna pay for this” point of view – as too many people are qualifying for it and drawing from it for too long.

 

Children born today are expected to live until they’re 90 years old. That’s over 20 years of taking from the system, rather than contributing. The state pension relies on a large worker-to-pensioner ratio, but the problem is that the ratio is forever shrinking.

 

In 2004, there were approximately 4 working age individuals for every 1 person aged 65 and over. By 2056 this ratio is predicted to fall to about 2:1. Therefore our kids will be asked to pay the living costs of twice as many old people as we do today.

 

Despite all these problems, people continually moan that the amount paid out is not enough, and the age that you can claim at is too high. FYI, the state pension is currently over £9,000 a year. This won’t get you a lavish lifestyle by any means, but the state should never have been expected to do this in the first place.

 

State benefits should be an absolute minimum. People have 40-50 years to plan for retirement and need to take action now.

 

Reliance On Government Handouts

Worryingly, there seems to be a growing dependency on and expectation of government handouts. Ask 10 people what they think the role of the government should be and you will likely get 10 different answers.

 

We consider the role of the government is to run and manage the parts of the country that the private sector cannot or should not. This includes things such as a military defence, fire and police services, basic healthcare, the transport network, basic education, social services, environmental protection and ensuring everyone has access to utilities – water, gas, electric and broadband.

 

It’s now taken for granted that the government should be the wage payer of last resort. This was always the case with the benefits system, but has been significantly ramped up during the coronavirus response.

 

The need for a furlough scheme – whether an arbitrary 80% or 73% – is only there because barely anyone has taken the steps over their working lives to put money aside. It surely must be recognised that the country is so deep in debt that it cannot afford such expensive schemes.

 

There is a lot of noise that the current job support scheme is not enough, but we ask the question why do so few people not have an emergency fund? Instead, since the last recession many of these people have been splashing the cash on frivolous stuff.

 

While the exact timing of the Corona pandemic is unexpected, recessions are fairly routine, with history littered with them. The one before 2020 was only in 2009.

 

For the record we don’t think the government should be force closing any business in the manner they have, but why were the masses not financially prepared? This time it was Covid that sunk their finances, but next time it could be something else entirely such as a personal injury, or a war sending the country into a financial depression.

 

We all need to be prepared, so that we can fight off temporary setbacks, and it starts with having an emergency fund of at least 6 months of living expenses. Help from the state should only ever be sought as a last resort, not in the first instance. Why do so many grown adults depend on the state like a child depends on a parent?

 

Reliance On Chance

We’ve come across countless people who hate their lives and hate their jobs but do nothing tangible to change this. Instead too many people are relying on chance, such as a lottery win or an unexpected windfall from an unknown relative, to improve their lot.

 

Other than by a miracle this isn’t going to happen to you. The chance of winning the lottery is 1 in 45 million.

 

There is also ample evidence showing that many lottery winners blow their fortune because they didn’t learn financial literacy. Believe it or not, statistics show 70% of lottery winners end up broke and a third go on to declare bankruptcy, according to the National Endowment for Financial Education.

 

The problems they had with money before they had wealth carry over but on a much larger scale.

 

Reliance On A Boss

Why do so many people put their future in the hands of one person? One person who frankly doesn’t give two hoots about them.

 

Bosses are people too with their own lives to think about, and most people have enough problems on their plate to worry about yours as well. Sure, some bosses will genuinely care, but not a single one will care about your future and your wellbeing as much as you do. This means you must take control of your future and don’t rely on someone creating it for you.

 

Time and again people are hoping their boss gives them a pay rise out of the kindness of their hearts.

 

No! You must take what is yours.

 

Your boss’s performance and therefore his or her own bonus is probably measured against a department budget. Paying you more or sending you on an expensive training course will result in the department going over budget. Your boss is being incentivised to pay you as little as possible. They don’t have your best interests at heart.

 

This conflict of interest also affects the work you’re doing. Sooner or later most people get bored to death doing the same task over and over again. Trust us, we’ve been there before.

 

At this point your boss might dangle a carrot. It might include additional responsibilities or more interesting tasks. Rarely does it involve relinquishing the existing tedious work. Your boss doesn’t want the hassle and expense of having to find someone else to do your work. They will do whatever they can to keep things ticking over. This again is not in your best interest.

 

You need to stimulate your brain, which means you likely need to progress elsewhere, but only you can make this happen.

 

Businesses generally break down massive processes into small, tedious, repetitive tasks and assign one person to each. Think of a car production line but it happens in offices as well. If you’re screwing that same screw for the 1 millionth time, you are not developing yourself.

 

Reliance On The Crowd

By this we mean deferring our major life-decisions to society’s standard playbook.

 

This is most illustrative in the life path dictated by society. You know the one. You go to school, get good grades, go to University, get a good job, buy a nice car, get married, buy a nice house, fill it with expensive stuff, have children, have an annual holiday, work until old age, and then retire.

 

Too many people are not engaging their brains and instead just follow the crowd. They believe if other people do it, that means it’s right. Nobody ever stops to question why or whether they even want it.

 

When you think about it, maybe you don’t want this. Maybe you don’t want to work a crappy job for 50 years; maybe you don’t want to waste £30k on a wedding; maybe you don’t want to be a slave to debt repayments for your entire life.

 

Following the crowd doesn’t just apply to how society dictates your path, but also impacts every decision you make. For example, from our backgrounds we know that too many people don’t make their own investment decisions. They are looking for that hot stock tip, so they can get rich quick. Analysing the investment themselves is too much like hard work – far easier to follow the crowd.

 

Reliance On Family

A long time ago, Andy (MU Co-Founder) was talking to a friend of his about retirement planning and was shocked that she wasn’t contributing to her workplace pension, despite the company matching any contributions.

 

Andy could not understand why she would throw free money away and that she wasn’t preparing for old age.

 

The reason she didn’t contribute to her pension was nothing to do with her young age. She said that she expected her future family to look after her in her old age.

 

This is both stupid and selfish because it was passing over responsibility of her life into someone else’s hands. Even if her family did want to help her, they may not have the strong finances to do so. Life will throw a lot of curve balls and it’s very presumptuous of her to think that her family will bail her out. They themselves could die young, develop financial or health problems, move away, may have their own problems, or simply not want to be put in that position.

 

Our suggestion to you guys watching is to make sure that you take action today to control your own future, by first building that emergency fund and then investing. This is well within your power.

 

Are you independent or do you rely on the government and other people to get by? What are you doing about this? Let us know in the comments section.

 

It’s worth checking out the Money Unshackled Offers page as we have tonnes of awesome cash bonuses and ways to make money listed that are continually being updated, including how to make £500+ tax-free each month consistently from Matched Betting.

Also check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

How Companies Avoid Tax – If You Can’t Beat Them, Join Them

If we told you a legal way of slashing your tax bill would you do it? Of course you would.

 

There are very few people who are supportive of the punitive taxes enforced upon them by financially illiterate and inefficient governments. Those that do support tax increases almost always expect others to bear the burden and never wish to do so themselves. “Tax the rich” is frequently roared from low earners.

 

The more you earn, the more your aspiration is punished, and so it is understandable when individuals and corporations take steps to legally minimise their tax payments.

 

Unfortunately for individuals there isn’t that much you can do, but corporations can do way more to reduce that horrid tax expense. We’ve done a few videos previously on how individuals can legally dodge tax, but here we’re going to look at some of the more common ways a company can legally avoid tax.

 

Hopefully, this inspires you and gives you yet another reason to setup your own business empire!

 

Some sections of the media condemn and lament the corporations that avoid tax, but it’s a company’s management’s duty to maximise shareholder wealth. Almost everyone in the country will be shareholders in these companies through their pensions, insurance companies, and if they’re smart, investments, and so these companies are only acting in your best interest.

 

Just to be clear we’re not supporting tax evasion, which is illegal. There are plenty enough legal ways to avoid tax by using a company!

 

Whether you’re new to this website or not, it’s worth checking out the Offers page as we have tonnes of awesome cash bonuses and ways to make money listed that are continually being updated, including how to make £500+ tax-free each month consistently from Matched Betting. The link to the Offers page is here.

 

There Is No Need For More Tax

The UK is in deep sh*t as debt and spending are spiralling out of control and tax receipts are consistently below the amount being spent exacerbating the problem.

 

What individual or corporation wants to pay ridiculous sums of tax when the money is just squandered? Did you know the UK government’s Coronavirus Test and Trace system has cost £12 billion so far and still isn’t fully working?

 

Then there’s the issue that government departments are encouraged to spend their entire budgets. If they fail to spend it all, then the following year they get a reduced budget as it obviously wasn’t needed. The result is – they spend everything.

 

Moreover, a bigger department will probably mean higher wages for the management, so they are incentivised to be inefficient. A few years back the TaxPayers’ Alliance found that £120 billion of taxpayer’s money was being flushed down the drain every year.

 

This is your hard-earned money. Just think how much extra time you have to work each week to pay the government a cut of your wages – for most it’s around 2 days a week.

 

They found one council had spent over £5,000 on hot drinks from a vending machine, when the equivalent number of tea bags would have cost just £200, and another council spent £19,000 on a ‘motivational magician’.

 

The message of this is that the government needs to stop waste, rather than punish wealth creators. And also, that it’s very easy to spend other people’s money.

 

How Can Any Company Avoid Tax?

1. Earn, Spend, Pay Tax

While many of the major avoidance techniques are reserved for global multinationals, the most basic way to minimise tax is available to all companies, irrespective of their size.

 

This means you can establish a relatively small business and yet still benefit from the order in which tax is paid. Let us explain.

 

An employee earns money, gets taxed immediately, and then can spend whatever’s left. The problem with this is the employee is spending after-tax pounds.

 

For some expenditure that’s quite fair but you might be surprised just how much you spend on stuff related to work. Expenses that you otherwise wouldn’t have incurred. So, in these cases its highly unfair to be spending after tax income on work related expenses.

 

For example, the work clothes which were solely bought to wear while chained to that desk were unfairly paid for with after tax pounds. The overpriced work lunch you had was also paid for with after tax pounds, and so was the petrol or the train ticket used to commute back and forth. We could even stretch it to holidays that were taken as result of the stress piled on you by being overworked and therefore exhausted.

 

A company on the other hand only pays tax after expenses and quite rightly to. Companies first earn, then spend, then pay taxes on the small amount remaining.

 

There are rules in place to stop this system being abused but they have to be fairly loose because otherwise a company may end up paying tax on revenues, which would only disincentivise entrepreneurs from creating businesses – businesses which ultimately benefit society by creating jobs.

 

A company, also called a corporation, can be as small as just one person, so anyone is allowed to benefit by incorporating their small business. Through a corporation, your relevant expenses are now done with pre-tax pounds.

 

Suddenly a meal out with a business partner becomes a business meeting and is tax deductible. If your laptop or car is used for business, you’re able to claim costs as a business expense.

 

We both enjoy reading about money and entrepreneurship, and as business owners we can now put our money magazines, subscriptions and books through the business as an allowable expense, meaning we can effectively buy them cheaper than you. All associated equipment used such as expensive technology or office furniture can also be claimed.

 

2. Keep It In The Family

Your spouse and children aren’t just there to keep you on your toes. They also come with very juicy tax allowances. A business can deduct the cost of employees before paying tax, so it makes sense to utilise this if possible.

 

Whilst the salary must be sensible and reflect the work carried out, there is clearly room to extract money from the business in a tax efficient manner.

 

There are 101 different ways to take advantage of a company setup and if you’re in business, then we suggest speaking to an accountant who knows their stuff. And if you don’t own a business, then the game is rigged against you and hopefully this video will raise your awareness to the awesome power of corporations.

 

How Do Big Companies Avoid Tax?

Tax avoidance techniques for multinational companies are all about location. It essentially boils down to where a company chooses to record profits and expenses. These intelligent companies simply shift profits to subsidiaries where there is a low or zero tax regime – what is commonly known as a tax haven – and simultaneously record expenses in high tax jurisdictions.

 

So, when we hear that Amazon or whoever it might be is paying next to no UK tax it’s because our tax regime is too greedy, and they’re just taking advantage of their global size and their industrious accountants to pay their taxes in more forgiving countries.

 

The financially uneducated who don’t understand tax – which includes many MPs – regularly campaign for taxes on revenue such as the 2% online sales tax. This tax might be a political vote winner, but this is a tax that is ultimately paid by the customer and is only collected by the online retailer at no cost to them. It’s turkeys voting for Christmas.

 

Anyway, lets now look at some techniques used to shift profits.

 

1. Transfer Pricing

Large companies tend to have multiple subsidiaries that trade with one another. This provides an opportunity to shift expenses to the highest tax regimes to minimise taxable profits.

 

For example, if a UK company owned two separate companies in Cyprus and France; when the Cyprus-based company (tax rate 10%) decides to sell to the French company (tax rate 33.3 %), it has a strong incentive to overstate the selling price.

 

In this scenario, profits have been increased in the Cypriot company and reduced in the French company.

 

2. Relocate Sales

Multinational companies can choose to sell their products from countries where they make the most profit at the minimum tax expense. They do this by moving products out of a higher tax regime to subsidiaries that add ‘value’ to the products in lower tax regimes, after which they can then be sold for more.

 

For example, a mining company can extract ore and then export it in an unprocessed state to a country with low taxes. There it can be processed and sold for a much higher price. The profit has been easily relocated.

 

3. Cost Loading

Multinationals can inflate the cost of operations in higher tax regime countries. For example, and this is hypothetical, McDonalds could produce most of its marketing in the US to load up on cost there and then use it in countries around the world. This would lower its US tax bill.

 

4. Internal Borrowing

Multinational companies can lend money from 1 subsidiary to another. By doing this the company in the high tax regime can rack up a load of interest expenses, artificially moving profits into the more favourable tax regime.

 

5. Intellectual Property

Multinational companies can choose to register patents and copyrights on things like their brand and logo in low tax regime countries.

 

The group’s companies based in higher tax regimes then pay a fee for the use of these items every time they make sales. Genius!

 

We’ve only just touched the surface and there is no way to stop companies from doing this, as there are too many loopholes and opportunities to reduce tax. If you can’t beat them, join them!

 

What do you think of companies that intelligently reduce tax? Geniuses or enemies of the state? Let us know in the comments below.

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday:

How To Get Paid More

Times are tough for UK workers. The government’s rules are not exactly easy to pin down, but workers are being hit hard in the pay-packet up and down the country – the need for a pay increase has never been stronger.

 

Even if you’ve managed to avoid being in this situation, if you are employed you will now be competing for pay rises in a much harsher world than before.

 

All companies are struggling in one way or another, and your much-needed pay rise is the very last thing on their priorities list.

 

It’s no good waiting around patiently for some boss to notice your plight – you need to go get that pay rise yourself. Let us show you how from our joint 20 years of experience in grabbing pay rises.

 

And if what you’re really after is more money, regardless of where that comes from, well… we have a few ideas for how you can give yourself a little income boost outside of your job too!

 

Why Are Wages So Low, Anyway?

Let’s quickly understand the big 5 reasons why you’re getting a raw deal from your wage:

 

#1 – You’re Trapped

You may not notice the pigeonhole you’ve been trapped in, but it’s there nonetheless.

 

You can only apply for jobs in your exact field of experience, unless you’re willing to first undergo years of retraining and then accept unrealistic pay cuts by entering at a lower level in a new career.

 

This problem is at least being somewhat recognised by the government in their doomed-to-fail campaign to help people retrain. Remember Fatima the ballerina?

 

For saying a ballerina could get help to retrain in cyber, they incurred the fury of the permanently furious on Twitter, but hey – at least the campaign got noticed.

 

#2 – Own Or Be Owned

A company exists to serve its owners, not its staff. Directors will prefer to prioritise the pay of the investors who own the company by raising dividends, over increasing their staff expense.

 

Unfortunately, choosing to make your money as an employee leaves you open to always coming second to the business owners when there is money to be passed around.

 

#3 – You’re One Of Many

There are too many people after the same jobs – a consequence of being a wealthy and successful country.

 

Supply and demand means your boss doesn’t feel pressured to give you a pay rise, because someone else will always do it for less.

 

#4 – Pay Rises Aren’t Really Rises

Inflation means that a pay rise of 1% is really a pay cut. These derisory 1% annual pay increases make you poorer and poorer the longer you stay in role.

 

#5 – Knowledge Isn’t Shared

Do you share information about your pay with your colleagues? Of course not – it’s taboo. But they’re almost certainly paid differently to what you are, even for a similar role.

 

When only the HR director knows who is paid what, employees allow themselves to be taken advantage of.

 

How To Engineer Yourself A Pay Rise

Hopefully you now know why you’re in such a bind.

 

As an employee you are totally at the mercy of other people to pass judgement on you favourably, whether an interviewer, a line manager, or the board of directors.

 

But there are 5 tried and tested methods that we have used and witnessed which swing the odds back in your favour.

 

Pay Rise Tip 1 – Switch Jobs Often

Most of the pay rises we took over the years were taken on interview day. It’s the only day you will have the power to negotiate as an equal.

 

If they want you, they’ll give you a good wage.

 

You are not yet dependant on them to provide your single income stream, so can walk away.

 

There are usually multiple possible employers that you can interview with until you find one who gives you what you need.

 

Pay Rise Tip 2 – If You Must Stay

If you can’t change jobs, or don’t want to, then you must get friendly with the decision makers.

 

The main disadvantage of a job is that all decisions around your future financial health are in the hands of a single randomly selected line manager.

 

Even if you get this person on-side, any requests to increase pay will often have to be cleared by the chain of command above them.

 

We’re not fans of this approach as it means you have to be seen to jump through hoops, and you have to spend as much time working on relationships and perception as you do on your job role.

 

Here we’re picturing those that wait until 9pm to send an email – which was saved as a draft several hours earlier!

 

Far better we think to move company every couple of years.

 

Pay Rise Tip 3 – Negotiate From A Position Of Strength

You’ll know if you’ve watched the channel before that we are both investors, with secondary income streams coming from the assets that we own.

 

Investing is usually thought of as a multi-decade project with no immediate effects, but it’s not true. An investment portfolio of only a few grand won’t allow you to retire, but it has other uses.

 

One of those uses is when it comes to negotiating a pay rise. If you have other income streams, or a growing pool of assets that you can sell parts of if required, it can give you a strong hand in any pay discussion with your boss.

 

If you can legitimately tell them that you’re not dependant on your salary to survive, you can lay down a pay rise demand as an ultimatum. Either they grant it, or you will leave.

 

In this scenario, your investments will keep paying the bills for several months until you can find another job.

 

Desperate people get taken advantage of! Those with sizable investment pots, however, can dictate their terms.

 

Don’t worry if you don’t know how to invest. Our YouTube channel (see below) is crammed full of useful videos and you can fairly cheaply outsource it to a professional.

 

Pay Rise Tip 4 – Free Up Time To Retrain Or Hustle

Don’t be one of those guys who sits at their desk until 7pm hoping their boss will notice and give them Brownie Points.

 

Instead, leave on time and do something productive with your evenings. This could be retraining for a new career, or studying to get a qualification that lets you climb higher on your current career ladder.

 

Alternatively, you could use that time to establish an extra £100 a month income stream from something non-work related – and then once that’s established, go create another one.

 

These are called side-hustles, and it’s estimated that 1 in 4 people have at least one. They help pay the bills, and can even take off into big money-spinning businesses that can replace your job.

 

Check out this article next for side hustle ideas. People sat at their desks until 7pm each night are not helping themselves.

 

Pay Rise Tip 5 – Jobs That Pay Commission

Do you find yourself working really hard but not seeing this reflected on your pay slip?

 

As in, you’re paid the same regardless of whether you put in a shift, or barely lift a finger? What might work for you is a job that pays a commission on top of a salary.

 

Jobs like recruitment and sales work to this structure. You get paid a basic wage – which often isn’t great – but get rewarded chunky bonuses for each target that you hit.

 

The risks with these roles are that if you don’t hit those targets, the base salary is usually worse than you could get in a normal job, and you might even be asked to leave for underperforming.

 

But your pay is much more within your control if you are able to put in the effort.

 

All That Takes Time

Applying for new roles, building relationships at work, or establishing side hustles takes time, and maybe you just want to start making a little bit of extra money now.

 

There are a few ways you can make some extra money from home, like surveys, or getting a lodger; but the one we’ve found to be the most financially lucrative is Matched Betting.

 

Despite the name, Matched Betting is NOT gambling – it is a risk-free technique used to scoop up the cash incentives offered by bookmakers.

 

We tried it out ourselves and we each made over £500 a month extra income from it for just half an hour a day – and you could make a lot more if you devote more time to it.

 

You can read more about it here on the Matched Betting area of MoneyUnshackled.com.

 

A Word Of Caution

We’re not saying you should throw caution to the wind when asking for more money from your employer.

 

During these times of uncertainty, it might be best to just be grateful that you have an income at all. Maybe.

 

But if you think you can do better, or want to set yourself up to have that difficult conversation from a position of strength in the future, then hopefully we’ve given you some ideas for where to start!

 

Do you have any tips that might help others to negotiate a pay rise? Let us know in the comments below.

Check out the MoneyUnshackled YouTube channel, with new videos released every Monday, Thursday and Saturday: