Monday, November 05, 2018

Find The Gap

Living Hand-to-Mouth is not sustainable. There is no buffer. You may have deep wells of endurance. The skills and knowledge to survive. But if you have no buffer, you can be destroyed anyway. Resilience is as important as Endurance. The ability to take the knocks and bumps, and get up. To be wrong, and learn from it rather than end from it.

Being Financially Secure depends less on the size of the hand and mouth, than the gap between the hand and the mouth. 

The Living Wage in South Africa is about R3,800 a month. 80% of South Africans live on less than that. R3,800 a month is R45,600 a year. A "Sustainable Drawdown" is the percentage of Capital you can relatively safely draw on average without risking the well running dry. 3% is a fairly safe call. That means you would need R1.52 million in Capital to safely draw an annual salary that is the same as the Living Wage in South Africa (That is roughly $100,000/£80,000).

£80,000 is a very good annual salary in the United Kingdom. It is not unheard of. Before Tax and Benefits, about 20% of Brits earn more than that. The Household Income (2 adults) of half of Brits is £23,556.  Many people earning that will be investing nothing. The UK Household Savings Rate is about 5% (down from a 50 year high of 14% in 1992). That means that most people end up putting most of what they spend in their mouths. There isn't much of a gap. There isn't much left over.

So when we look at inequality, numbers are way better questions than they are answers. The ins and the outs both matter. You don't need numbers to know that inequality is a challenge either in the UK or South Africa. Or between the UK and South Africa. The challenge is very complicated. Particularly as borders start melting and the interdependence of the world increases.

Someone with £80,000 in Capital could draw a Basic Income equal to the living wage in South Africa. They could be Financial Secure. They could choose to do work that doesn't earn them money - caring for family members, community work etc.

Someone earning £80,000 a year in the UK could be under extreme financial pressure. They could be spending £100,000 a year a gradually building up the opposite of Capital... Debt. Their big hands matched by even bigger mouths.

The key to Universal Financial Security is spreading the idea virus of building Capital. Capital provides a Buffer when your hand isn't able to provide. If a gap between hand and mouth is sustained. Resilience feeds Endurance. Eventually, Capital can be built that can provide a Basic Income. A secure foundation from which to work. From which to thrive.

Hand-to-Mouth is not sustainable

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