If you grew up poor and are now ‘rich’

[Taxtart]

How did you manage to change your money mindset? I need to change mine as it’s making me miserable. Are there any books people have read that have worked for them? I’ve watched My Rich Life on Netflix and it didn’t resonate.

TW: I have nothing to moan about compared to 99% of people on these boards. I am borderline technically rich yet there is not much left in my account and I have little to show for it.

What’s worse is that DH and I feel like we are destined to be poor as we both grew up in poverty. My parents lost our family home and never recovered. I am sure my father was probably depressed as we had to emigrate for safety reasons and he lost his status and livelihood. After many years, doing jobs he was grossly over qualified for, he managed to buy a decent house in the new country but then lost his job and the bank foreclosed. I was doing my exams at the time and it really stayed with me. It’s made me think I need a huge financial cushion to feel secure in case the rainy day or hurricane comes. We ate well but I never had new clothes - maybe 2 outfits a year and I still see clothes as a waste of money.

Combined, DH (especially) and I pull in good wages - not banker level but decent. We live in an area that’s terrible for secondary schools. School fees x 2 account for a good third of our income.
We have virtually paid off our mortgage on the house we live in.
I try to invest near the ISA limit. No massive pension sadly and that’s a massive oversight. It feels as though all our money is locked away. Some of it in speculative investments eg an EIS scheme, just shy of 1 Bitcoin, 2 rentals with mortgages which are income wise virtually loss making as we charge 30% below market rent as we don’t want to be pricks. We go on one big summer holiday SC, Europe and maybe 2 city breaks a year. No skiing, no fancy car, no expensive haircuts/highlights/tweakments.

At what point will this savings/investment regime reap rewards - if ever? And in the meantime, how do I stop feeling like we are destined to be poor like our parents? I will never reach the fabled 600k pension that you need for a modestly comfortable retirement. I am lying awake wondering how we are going to fund university, especially if we are not working. Neither of us is entrepreneurial enough to launch a business and we don’t have the hustler personalities or social polish.

Sorry for the long and insensitive post to those who are on the breadline. I know I’m lucky but feel my luck is going to run out before I’ve enjoyed it.

I have heard of it and used to subscribe to Louise Hay publishing updates,
thank you @Cantalever. You have put a refreshing perspective on this. I was sure I was being shallow but you think it may have a spiritual element. Could you elaborate?

Woah @SOBplus can you explain your equation a bit? What does the 0.3 figure represent? What does the net after tax drawings mean? And over how many years do you need to get 6% to build up that portfolio… Clearly maths is not my strong point! We definitely don’t have this much in investments sadly and still fall substantially short if you include property too.

I grew up in what you would call a modern day poverty in a dysfunctional family living from a paycheque to paycheque. I earn six figires now and I would say I am comfortable in UK terms but considered “rich” relative to where I started in life. What I do differently now is I don’t feel like I can blow half of my salary on payday (like my parents used to do), the “feel rich” feeling on payday. I also pay all bills first and don’t feel resentful doing it, read that in a book called The game of life”, which I recommend, by Florence Shinn. The more generous you feel, the more you will have. Scarcity mindset is a very poor mindset to have when it comes to money.

HI, many will argue but its a nice simple and conservative way to calculate how much you need in passive income (investment return money). You can find many publicly traded company who have legal mandates for conservative investments who list their investments (Insurance companies being the most common) and they generally operate on making an average return over many years of over 6% (almost never less and often more) so you should be able to achieve the same by following their portfolio. In my case I need £150,000/year to meet my needs - bills, travel, food, clothing, gifts, supporting kids, etc. and I need to account for taxes (1/2 of the 6%)(inflation tends to come out of the investment returns). Therefore I take my need (£150,000) and divide by my "cash flow available for use (3% which is 0.03 not 0.3) which then shows me what I need to have in passive income to never worry (£150,000/.03= £5 million). My assets can't be counted as they don't generate passive income so house, car, etc doesn't matter except for how it affects my savings/investment rate to get to £5,000,000

@SOBplus

I really don't understand this.

I'm on another thread about early retirement.

Let us try some easier maths

Let's say my needs are £15,000 a year.

My passive income is £20,000 a year.

My calculation is....that's fine. Of course the boiler might need replacing etc but broadly speaking, there'd be no need to touch the capital?

OP you sound like a friend who said she needs £2million in capital. She does live an expensive life though.

I think we all have a sense of panic that whatever we have isn't enough.

I think @SOBplus is saying £5m invested achieving on average 6% a year returns gives a gross annual income of c£300,000. If you deduct c50% tax the net annual income is c£150,000.

To get a c£20,000 passive annual income, you need just under c£500k invested achieving an average 6% a year return. This would give a gross annual income of c£30k, and if that is the only income the tax rate would be 20%, leaving a net annual income of c£24k.

I was going to reply to this thread and then realised on reading your OP that I am very much not what you’d class as rich compared to your family. But we are comfortable and feel like we have enough. We don’t have all the assets and savings that you do but we don’t have to worry that we won’t have enough at the end of the month or what happens if we have a big unexpected outlay arise. So to me that’s miles away from what things were like in my family when I was young, and what many folk in my area experience now, so I feel relatively ‘rich’ in that sense.

Objectively, you have a shitload of money by the sounds of things, so I would consider investing some of that in therapy to explore why you can’t feel like it’s enough.

I appreciate we are so very lucky @Emotionalsupporthamster which is why I added somewhere I think a trigger warning. On paper - right now until my job ends shortly - (I do short term contracts) - we are massively well off. But in reality half of it goes (rightly) on tax. We have interest only loans on the 2 rentals which have soared as we thought we failed to
fix the rates in time.

We live in an area of London which is - I think - good value but not well known and a bit underpriced but because the homes are big they aren’t cheap but would be double the price in, say, High gate. We sadly have pretty patchy secondary school provision so that is where our cash goes. To move to the same house a borough along in a ‘good’ secondary catchment we would be looking at 700k more plus six figures in stamp duty.

I can’t help thinking we are mugs for earning so much gross yet losing so much to boring outgoings without having a flashy life at all.

People earning similar amounts
probably would have moved to a more
expensive house years ago to ride the capital
growth or bought a sprawling house outside of London by now.

Holidays for us are never luxury resorts and more about travel and cultural experiences. We go abroad about twice a year. Once for a holiday in somewhere like France or Italy (often driving) and another city break somewhere and possibly a weekend break in the UK countryside. Again, I feel
so lucky to have holidays. I went abroad once between the ages of 7 and 19 and DH never went away. Kids wear H&M when we are feeling flush and Primark the rest of the time and secondhand uniform. Husband was wearing shoes that had cracks on the top and were in such bad condition that I felt embarrassed! I’m perpetually scruffy in my appearance (age and weight don’t help) so I don’t present as middle class or well off and don’t feel it though objectively we must be.

I sometimes feel like we are being embezzled without our knowledge (but not in an angry way). Armchair psychologists would have a field day!

Again I’m sorry for anyone reading this who is actually living in the real world and struggling to
put food on the table rather than grappling with the nonsense in my head.

It hasn’t helped that my DF had a very prestigious post in his home country but for safety reasons had to move countries and start from scratch. When he and DM finally built a home, they had it taken away due to job losses in a recession.

I do have a friend though whose parents went bankrupt and it has never phased her. She chose not to have shame and has thrived career wise and financially.

Why did I internalise their misfortunes/bad decisions so much and she did not?

Ah, that makes sense, thank you.

"Get Rich Lucky Bitch" by Denise Duffield thomas is all about money mindset. It sounds really suitable for you who knows objectively that you are not poor but can't convince yourself of it. She also has practical tips for getting over the scarcity mindset without spending a fortune. I'd really recommend it for you.

Yes, exactly. Thank you for making it clearer!

I don’t really understand this.

We are certainly well off. We have no mortgage, a house worth an good amount outside of London, 1 dc at uni and 1 in sixth form so coming to the end of the school fees years and university is cheaper than school fees.

what we don’t have is other sources of income. You have two houses! Sell one or put up the rent.

university fees are paid for by student loans. No cost to you as a parent. Cost is paid by the child. Your children will only get the minimum maintenance loan so that means you need to top that up (will cost you between £6k and £10k per year of study) or else they take a gap year and work plus work during the holidays.

I get the whole not feeling rich thing. But you’re hardly in a position where you need to be not sleeping worrying about university costs.

I completely understand how you feel. I grew up in a very poor household and the fear of ending up back there is very real. However, from my perspective you both have worked yourself into a great position and are streets ahead of where I would like to be. By all means take the good advice of others on here with the book recommendations etc… but honestly you are doing brilliantly and I would love to be in your position 😊

@Taxtart sorry if my post came off as combative, genuinely not my intention. It does seem that there’s something that would benefit from unpicking with a therapist. You should be able to feel a sense of security with what you have. But it sounds like more than grappling with the feeling that it could all disappear, but also about an aspirational lifestyle that you don’t feel you have. What is it that you’d really want - do you want ‘a flashy life’ or is it more that you feel you should have it because other people who earn what you do might?

I have an elderly uncle who is very similar - has a house with no mortgage, a very generous civil service pension and probably hundreds of thousands in the bank. In my view, that's rich. He has all this money basically because he will not spend it. He needed a new washing machine, but refused to buy one, he needs proper hearing aids, but only eventually bought the cheap shitty ones that don't work properly. He never goes on holiday or spends much money on himself, it's so strange.

A few years ago he proudly showed me a new pair of shoes he had bought for himself - they were €12, he bought them in the market, they looked like they would fall apart after a few wears. I mean, come on, spend a bit of money of yourself FFS. It must be a mindset from being brought up poor. I get saving for a rainy day, but he's in his 80's - it's raining now!

But he also seems to always want more, just to have more. He gave out stink that he didn't qualify for a medical card - that's because he has far to much in cash assets and income, and is well over the means tested limits. He doesn't need one, it's for low income people!

I remember when he turned 80, he mentioned he wanted to live to 100, and explained it was because he wanted the cheque from the government - here in Ireland the President sends you a congratulations letter and a cheque for €1000 or something. That's why he wanted to live to 100. I'm pretty sure he was only half joking!

I remember thinking - why do you want it, it will only sit in the bank with the rest of your unspent money. Not to mention when he dies most of it will go back to the taxman.

Does your DH have a good pension, would it help if your prioritised paying into a pension now?

I think a lot of this depends who you mix with.

I think I only know less than a handful of properly rich people (6 million house or daughter of billionaire etc) and it’s crazy to think they’re technically in the same 1% bracket when our income is in very low six figures (still very lucky I know) but theirs has an extra zero or 3 at the end!

I don't mix with anyone who is - by your definition - "properly rich" and you are talking about knowing several people like that.
You drop in the fact you are paying for Private school for 2 dc. Children who go to private school make up a very small % of the population. I can only think of 2 families I've ever met whose dc go to Private school (people dh worked with, not people we particularly spend time with socially).
So the people you are mixing with, will make your perception of what is 'normal' what is 'comfortable', what is 'well off', and what is 'rich' very different from my perception, and different again from someone else's who does not own even their own home, let alone 2 properties you let out / doesn't know anyone who went to Private school / works two jobs on minimum wage / etc etc.

Having less than the people you surround yourself with will always make you feel the poor relation in the same way that having more than people you surround yourself with will make you feel quite rich.

I want to thank everyone on here for being very restrained in not calling me out for the entitled twat that I can see I am! I promise I’m not trying to humble brag with any of this. If you see my house you and how we dress you would never assume our income. @Emotionalsupporthamster I don’t think you were combative at all! No need to apologise and you’re right about perspective. Maybe this is some kind of financial dysmorphia thing?! My DH does not help at all and is even tighter than me! I gave DS 12 some money the other week for an outing with friends and he didn’t end up having to spend it so on his way out of the station, he handed the lot to a homeless man. DH thinks if he can ‘just’ get an extra 100-200k in cash he would pay a load of school fees up front. This would buy him peace of mind as a lot rides on his children.

@NewName24 I think you’re right about inadvertently mixing with wealthier people. It does indeed make you feel poorer and also triggers the ‘well if they can do/earn that, why can’t I?’ question. Alan de Botton’s Status Anxiety is good on this! I think in London a disproportionate number of children end up at private secondary schools.

@FestivalFun good point. DH is 50 something and at an age where he may get chucked out and of his job. 700k pension. I have about 200k! So my pension should be absolute priority but after we have paid tax, mortgages, bills including sports and music extras for DC and any incidentals eg fence falling down/house maintenance, school
shoes, 1200 into an ISA for me as I don’t have a consistent workplace pension, it sort of disappears.

Someone asked if I would like a flashy lifestyle. No. I would like the house to be decluttered and decorated. We need to replace some furniture. I’d like to be able to visit some relatives who live a very expensively long way away every 2 years and to earn enough from passive income so that if I lose my job or if DH loses his, we can still keep the kids in their schools.

Ironically it has been pointed out to me that if I were to live in a more expensive house, it would ‘make’ more financial sense as the value of it would grow by a bigger amount (because for argument’s sake 10% of 2million is more than 10% of 1 million).

I have been very distracted by the idea of moving house but I also know the house is a subconscious representation of the self!

I will look out for the book, thank you @Itsallthelittlethings . Great user name by the way.

Thank you for explaining it @SOBplus . And to @BlueScrunchies I hope you win the lottery x

We are not as well off as yourself, we were in top 10% for a while of earners combined though.

Putting your children in to independent schooling. This has obviously made you happy but it’s a choice. What happens ultimately with that financial commitment will not become apparent until schooling, University is years down the line. I can see why you want to do the best for your children but it’s no guarantee. You made it without that leg up of private education so you know it can be done. It’s a massive commitment.

I also do not understand why you charge so much below market rent. I mean landlords are generally disliked on MN so maybe you are getting lots of admiration but 30% is far too much of an allowance.

@NewName24 about 7% of children are privately educated.

I gave DS 12 some money the other week for an outing with friends and he didn’t end up having to spend it so on his way out of the station, he handed the lot to a homeless man.

What a lovely lad you’ve got there @Taxtart 😊

I can understand the desire for independent schooling, giving your children better “opportunities”. But are they better opportunities? The children they will mix with have a similar privileged mindset. No financial difficulties. Your children might develop an “expectation” that they might not reach in future life, and as a consequence become unhappy even though they might be relatively well off. Spending doesn’t equate to happiness. Academically they might do a bit better than in the state system. But how much will this matter in later life.

Your children are missing out on the range of children they mix with, and how to relate with a wide variety of “the rest of the population”. If they are to become managers then understanding a whole range of social groups is a superb advantage. Academic education, or real life education? We are moving into a world of AI. A whole swath of upper middle class occupations such as solicitors, accountants will be competing with AI. I will let you finish the list.

we are living in a society that encourages expenditure on “trivialities”. We have the luxury of wearing clothes that we can discard before they are “worn out”, or worn a few times. Consumerism. Can the planet support this?

happiness is being content with your lot, but having the ambition to progress, but the having the resilience to cope with unforseen issues.

Sorry but I just don't believe private school mixing stuff. It always comes from state school parents for some reason!

I am in my 50's, when I went to state school many moons ago the school was 100% white. Rather amazingly I have no problem mixing with anyone from a different country/race/ethnicity.

Interestingly I also, even back then, seem to mix with people of a similar socioeconomic group to me. It never occurred to me to think about where people lived. That said children, like adults, are drawn to people like them, it's human nature. This goes across different groups in society.

My DC are at private school so mix with people who can afford private school although out of school mix with everyone who shares their love of their sports. They don't know where they live, nor would they even think to ask. They are polite and engage with everyone.

Contrast that with some of my friends with DC at state school. They are keen to ensure they are friends with the 'right people', actively discouraging some friendships. Contrast that also with many state school kids who can't hold a conversation with an adult and who will have no aspiration or work ethic not because they've too much money but because all they know is the benefits trap.