This is a story about getting airborne...

In startups, we talk a lot about runway. That is, how much money you have left to pay all your bills before you go bankrupt. The thing about doing a startup is, you don't make money from day one. You raise some money, build a product then try to get the revenue up higher than the bills... and you need to do all that before you run out of runway.

Most ordinary working-class folks know a lot about runway. They know that they have to pay their rent, bills and then make the remaining money last for things like food and transport, until payday. Every single month there is uncertainty about whether they're going to be able to get to work, if their money runs out before payday. That's called running out of runway.

A lot of low-paid jobs pay weekly. That's useful for something called cashflow smoothing. It means that your cashflow looks like lots of little peaks that aren't very high. If you got paid the same money on a monthly basis, you'd see a massive spike on payday, and then cash would slope down, down, down for a whole month, before spiking again.

If you run a limited company or a public company, you could pay yourself wages, weekly, monthly, whatever, but wages attract income tax. Income tax is 45% for people in the highest tax band. So if I wanted to do some cashflow smoothing, it's going to cost me 45% of the money I worked hard to earn. That's quite a waste of money if there's another way to pay myself that doesn't attract such high taxes.

Generally, I have to work for a month, then I can invoice my client for the days worked. My invoice is payable within 30 days, but it basically takes a whole extra month to get the money into my limited company.

Ok, great. Now I can pay myself wages... but I'll have to pay 45% tax and loads of national insurance. On the one hand, I really need some cash, because I've already lived for over two months without a single penny of income, but the main person who's going to get rich out of that arrangement is the taxman.

So I work another two months, plus the month for the invoices to be paid. That means that I have three months worth of invoices paid into my limited company. Now it's time to pay myself a dividend. Limited companies can pay dividends from their profits once every quarter. So, to maximise your dividends, you need to have 3 months of invoices paid into your limited company.

But that means that you've been working for 4 months, and not been paid a penny. Harsh man. However, the tax savings are considerable. This is not about me being a tightass with taxes. I always paid full taxes, and then when I got sick, there were no state benefits available to me, despite being under the limit for savings etc. etc. The state safety net just didn't exist when I was homeless and penniless, so fuck the government. I now save the tax and try and set it aside for when I'm sick.

Now, OK, you have your dividend... 3 months pay. You're feeling pretty rich, right? Well, if you've been living in a hostel, you might like to now get a flat. That'll be 6 weeks rent as a deposit, a month's rent in advance, and probably about £500 in estate agent fees. There goes £6,000 of your hard-earned cash.

What about how you lived for those 4 months with no income? How did you do that? I guess you probably had to borrow money. So, you use your remaining dividend to pay off all those debts you ran up, staying alive.

So, what now? Well, you'll have to work for another 4 months, and then pay yourself another dividend, and live off what's left after you got yourself a flat and paid off your debts. Oh, there isn't anything left? Oh dear.

The thing is, the system is fairly well tuned to fuck you. I can borrow money more cheaply than the tax, but the interest is compound, so it works out about the same. I could take a wage and pay the tax, but then I'll have less money left to pay off the debts. Between the banks and the taxman, you're f**ked.

It's true, each quarter things get a little better. I was planning on working for about 9 months, and then I would have been quite nicely sorted, but if you think that it's stressful waiting for payday, try waiting for 4 months for payday.

That's the life of an IT contractor. I'm an IT contractor. That's what I do, for a living. Yes, I could bake bread, stack shelves or work in a warehouse... are you fucking stupid? There's nothing wrong with those jobs, but if I wanted to burn money surely it would make more sense for me to do some IT contracting and then literally set fire to £50 notes. Jeeps, you must have a degree in Economics from Oxford if you think that it's a smart idea to not work the highly paid job I'm qualified and experienced to do, and instead work a job that doesn't cover my cost of living and is stopping me from getting the highly paid job that I'm qualified for. I'm sure that you'll be getting a tenured professorship any day now, with original thinking like that.

My cashflow is lumpy, and I don't have much runway, but at least this time I have the flat already, and a friend who can count higher than the 3 deformed stumps on their retarded hand has helped me to make sure I don't end up driven to suicide by the stress of being let down by liars again.

My plan was to start the contract hunt in the second week of January, when people were coming back from their holidays. I'm over 2 weeks late and sick as hell, but it'll be OK. I somehow got the HSBC job looking like this:

Yes, that's a hospital wristband. Arms are pincushions as usual from double canula and providing a gazillion blood samples (June 2015)

Tags: #career #london #computing #hospital #nhs