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To Q why many high earners still live paycheque to paycheque?

305 replies

FrugalFannie · 26/09/2024 21:40

I wanted to spark a discussion after seeing a post about living paycheque to paycheque. An interesting article I read in the ES (Nov, 2023) claimed that “Some 26% of people surveyed across the UK with an annual income of £100,000 + said they had no money left at the end of the month” https://www.standard.co.uk/business/money/26-of-people-earning-ps100-000plus-living-monthtomonth-amid-costs-squeeze-b1121031.html

Recent years have indeed been tough financially, but if you earn a relatively good or high wage, it seems surprising to still be living paycheque to paycheque. I personally don’t live this way; I’m a single woman with no children and consider myself smart with money.

I’d love to hear from those who aren’t living paycheque to paycheque about how they manage their finances. What strategies do you use? Is it a matter of being extremely frugal in this economy? Clearly, this issue affects people across various income levels, and I recognise that everyone’s situation is unique. I’m genuinely curious to learn about different financial approaches that work for you!

26% of people earning £100,000-plus ‘living month-to-month amid costs squeeze’

Nine in 10 of those who said they were living pay cheque to pay cheque attributed it to cost-of-living increases, RBC Brewin Dolphin said.

https://www.standard.co.uk/business/money/26-of-people-earning-ps100-000plus-living-monthtomonth-amid-costs-squeeze-b1121031.html

OP posts:
VaubanRules · 29/09/2024 07:18

High earners do not receive a 'pay cheque'. They are salaried, paid by BACS.
And why so inconceivable that they spend their income each month, as do the rest of we mere mortals. Everyone spends to their means apart from the spendthrifts or the parsimonious, that is human nature
Does anyone apply logic anymore?

SunriseMonsters · 29/09/2024 05:04

JaninaDuszejko · 28/09/2024 12:14

i’m horrified when I look at my take home salary: the amount I take home is twice as much as I pay in tax/ni

That's pretty standard though, tax is just split up differently at different levels. Low income families pay lower direct taxes but higher (as a percentage of income) indirect taxes, high earners pay higher direct taxes (split into high income, low NI) but low indirect taxes. But most people pay about 1/3 of their gross income in taxes. There are only two certainties in life, death and taxes.

Do explain how someone paying no/ such a minimal amount of income tax and NI that it is an insignificant as a percentage of income that it is irrelevant is managing to pay over 50% of their income in tax when the VAT rate is a maximum of 20% and many essential costs aren't subject to VAT anyway? Even with fuel duty, insurance premium tax etc as well it is completely disingenuous to claim that the percentage paid by low and middle earners if comparable.

This is why UK public services are in the dire state they are in currently. The tax base has been narrowed too far. Higher earners in the UK pay some of the highest tax rates in the entire world. Especially when you compare properly using net incomes after all tax abd other compulsory deductions and adding back benefits, i.e. this is impacted by student loan payments being effectively another 9% tax (or more for those with MAs/ MSCs/ PHDs), the withdrawal of child benefit and the personal allowance and childcare funding. Those withdrawals need to be scrapped because they are creating peverse incentives and preventing economic growth. Then you add on all the Universal Credit etc other people get and as a PP pointed out, someone earning £100k - often after many years of study and gruelling hours and stress - is not really any better off than those on average salaries! Especially as many of the professions in question also require living in areas with high housing and childcare costs (and these people have to pay for their own childcare, not get 85% of it funded by UC). That can be thousands of pounds per month, just for that.

The difference between the UK and continental European countries that have the services people in the UK seem to covet is that low and middle earners pay far higher taxes. It's simple mathematics: there's no other way to fund the services people desire adequately due to the numbers of people in each "group".

People in the UK bury their heads in the sand yelling "tax the rich" and defining "rich" as anybody who earns a bit more than they do. "Rich" properly refers to wealth, not income. Wealth is very hard to tax. The "incomes" of such people aren't generally earner through PAYE. Therefore it is the people in between - very hard-working and highly-qualified professionals mostly - who have been hammered for the last 15+ years and carried everyone else because they are an easy target. Many in skills shortage areas that we desperately need for growth.

It is simply not worth working full time now for many in this category because they are penalised so heavily; even the Guardian reported the economic studies on this. They are either cutting hours/ retiring early or moving abroad where they won't be disproportionately taxed compared to everyone else and will be paid salaries more accurately reflecting their skills and qualifications.

People in the UK need to decide between having a European model for tax and services, or a more US-type model. It is not sustainable to have European levels of services and welfare and US levels of tax. The "someone else should pay for it" mantra is running out of road now and the consequences of not addressing it and raising taxes substantially on middle income earners commensurate with other western European countries will be far worse in the long run if the situation is allowed to continue as it is. Much as you might like to, I'm afraid it's mathematically impossible to raise the money required now from the same people who've been carrying every else for nearly two decades. Some already have real marginal tax rates approaching or even exceeding 100%! Nobody is going to go to work to earn less money.

SunriseMonsters · 29/09/2024 04:42

JaninaDuszejko · 28/09/2024 11:13

This is the only developed country that levies taxation on an individual not household basis and it is enormously discriminatory against women.

It's far more discriminatory for a woman's income as having to be taxed at a far higher rate than a man's which is what happens if you tax a couple together. A lot of women would step out of paid work altogether in that case because a higher taxation rate plus the cost of childcare in the UK would make it not worth working.

The issue for single mothers is that absent fathers do not pay their fair share of the cost of bringing up children. But yes, getting rid of the stupid cliff edges on various tax bands would make a massive difference. But that affects people on at the £60-80K band as well as they lose child benefit and those on very low incomes when they lose the entitlement to vatious benefits, not just high earners.

No, it isn't. It is very easy to design a system where tax allowances/ thresholds are allocated on a household basis with an opt in system allowing couples living together to transfer tax allowances between them in order to reduce their overall tax bill if they wish to and both agree to do so.

It is a completely false argument to claim that single people, and particularly single parents, must be penalised in order to avoid women in couples paying high tax rates where finances are not shared with a cohabiting partner. I find it pretty appalling actually that you're happy for other women to be deliberately penalised by the tax system due to a false belief that rectifying this would disadvantage other women because quite obviously it would not need to do so at all.

It is very unpleasant to argue for the continuation of systematic prejudice against and disadvantage to women and children living in less fortunate circumstances than you because you (falsely) believe the current discriminatory system benefits you personally (I presume, otherwise your comment is even more unfathomable).

Sibilantseamstress · 28/09/2024 18:47

Overall rate, PAYE.

JaninaDuszejko · 28/09/2024 15:43

Is that his marginal rate or overall rate @Sibilantseamstress ? Is his income all PAYE or does he have other sources of income?

Sibilantseamstress · 28/09/2024 15:04

My husband pays over 58% of his gross pay in tax and NI. That’s not even counting what he pays in VAT.

I think this explains some of the mystery that is astonishing some posters. Doubling your gross pay doesn’t double your spending power. A big chunk of the extra get’s taken off you and put into the pot to pay for shared infrastructure and services, and redistributed to people who don’t have enough to get by.

The UK is a relatively poorer nation than it was 20 years ago. Every income bracket is feeling the squeeze.

JaninaDuszejko · 28/09/2024 12:14

i’m horrified when I look at my take home salary: the amount I take home is twice as much as I pay in tax/ni

That's pretty standard though, tax is just split up differently at different levels. Low income families pay lower direct taxes but higher (as a percentage of income) indirect taxes, high earners pay higher direct taxes (split into high income, low NI) but low indirect taxes. But most people pay about 1/3 of their gross income in taxes. There are only two certainties in life, death and taxes.

WickerMam · 28/09/2024 11:51

"No money left at the end of the month" means different things to different people also.

I might moan about being skint the week before pay day (not out loud - before i get accused of being tone deaf). But, that's with a large pension payment, money going into various long and short term savings pots at the start of the month, mortgage overpayment, etc.

What is left, I normally spend - but the important things are prioritised first.

So some people might say they have nothing let after "essential bills" but view e.g. kids uni savings, or school fees as essential rather than optional.

OrdsallChord · 28/09/2024 11:16

Yep, people often miss that there are cliff edges and bottlenecks spread out at various points over our tax system. It could be reduction in free childcare entitlement at 100k, it could be loss of free school meals, or lots of things inbetween. The principle is the same and it all needs fixing.

JaninaDuszejko · 28/09/2024 11:13

This is the only developed country that levies taxation on an individual not household basis and it is enormously discriminatory against women.

It's far more discriminatory for a woman's income as having to be taxed at a far higher rate than a man's which is what happens if you tax a couple together. A lot of women would step out of paid work altogether in that case because a higher taxation rate plus the cost of childcare in the UK would make it not worth working.

The issue for single mothers is that absent fathers do not pay their fair share of the cost of bringing up children. But yes, getting rid of the stupid cliff edges on various tax bands would make a massive difference. But that affects people on at the £60-80K band as well as they lose child benefit and those on very low incomes when they lose the entitlement to vatious benefits, not just high earners.

MattBerningerstrophywife · 28/09/2024 10:48

I had started a post stating “Another thing is that many lower earners are propped up with other benefits and don’t pay a lot of tax so they assume that someone on 3 their salary actually comes out with 3 net income”..: but then some of you have worded it much better than me.

i’m horrified when I look at my take home salary: the amount I take home is twice as much as I pay in tax/ni

SunriseMonsters · 28/09/2024 10:24

Completelyjo · 28/09/2024 06:47

Monthly take home for £100k with student loans and 5% pension £5,041.04

  • 15 funded hours at 3years

Monthly take home for a couple earning 50k between them with one 30k and one 20k salary, same pension plan and student loans £3,424.64
+£170.2 in child benefit every 4 weeks

  • tax free childcare
  • 30 funded hours childcare from 9 months
  • some element of universal credit or housing allowance towards rent and possibly the childcare bill being lowered.

With a young family the difference in these sorts of incomes really aren’t that vast.

Those on lower incomes assume people on £100k must have twice as much money as them but they don’t.

Exactly. People earning low incomes pay so little if any tax that they often have no comprehension of how much of a higher salary is paid in tax.

Due to the cliff edges in the tax system I calculated that a lone parent with two children in childcare has to earn over £150k to have the same net income after tax and childcare + benefits as a couple both earning average UK salary. The penalisation of single parents is beyond ridiculous. This is the only developed country that levies taxation on an individual not household basis and it is enormously discriminatory against women.

OrdsallChord · 28/09/2024 07:50

Inslopia · 27/09/2024 10:58

Oh my god, it's like people living on £50k per year in/ near London don't exist 😂 You do realise the average salary in London is significantly less than £100k? You don't have to believe me, its fine

I know loads that do but loads aren’t paying todays mortgage & childcare costs.

Exactly.

There are loads of threads on here where people pipe up well we only have a household income of 40k or whatever and we live comfortably in London, but neglect to mention that they bought their first property in 2006/are in SH/had parental help for a deposit either in cash or years of free rent.

There are indeed millions of people in London living on low and medium incomes. The number who are doing it whilst fully exposed to the full 2024 cost of housing is much lower, not least because many people have been forced out for that reason.

LiftyLift · 28/09/2024 07:33

Inslopia · 27/09/2024 16:13

DH and I are reasonably high earners, him £70k and me £60k, plus £20k bonus that goes straight to savings and holidays.

That’s a pretty big bonus vs salary ratio. Intrigued as to what industry or are you just both young starting out?

DH senior in public sector in IT. Me many years service in financial services. The bonus has been built up over many years.

Completelyjo · 28/09/2024 06:47

Monthly take home for £100k with student loans and 5% pension £5,041.04

  • 15 funded hours at 3years

Monthly take home for a couple earning 50k between them with one 30k and one 20k salary, same pension plan and student loans £3,424.64
+£170.2 in child benefit every 4 weeks

  • tax free childcare
  • 30 funded hours childcare from 9 months
  • some element of universal credit or housing allowance towards rent and possibly the childcare bill being lowered.

With a young family the difference in these sorts of incomes really aren’t that vast.

Those on lower incomes assume people on £100k must have twice as much money as them but they don’t.

Artfuldodger24 · 27/09/2024 22:57

Bearpawk · 27/09/2024 22:04

This is a journo thread - If anybody is bothered about being quoted

Omg thanks I suspected baiting as much. Clearly they want people to hate on the middle class, support taxing people on £100k seriously when they obviously shouldn’t be taxing higher for those on £115k than those on £1m. Truly shameless journo - stop making people on £20k hating those on £100k they should be hating those on £1m!!!!

Bearpawk · 27/09/2024 22:04

This is a journo thread - If anybody is bothered about being quoted

SLeanne · 27/09/2024 20:24

Lifeofthepartay · 27/09/2024 20:17

For the same reason a high percentage of lottery winners end up broke after a few years, a high income doesn't mean people are financially savvy.

Chavs. Uneducated people.

SLeanne · 27/09/2024 20:18

Some people here are living on another planet

Lifeofthepartay · 27/09/2024 20:17

For the same reason a high percentage of lottery winners end up broke after a few years, a high income doesn't mean people are financially savvy.

SLeanne · 27/09/2024 20:16

There is the option of moving out of London.

orangeleopard · 27/09/2024 19:50

This reply has been deleted

This message has been withdrawn at the poster's request

£700 for London? I’m in council housing in Hertfordshire (2 bedroom flat, no balcony or garden and living room/kitchen space is one room) and my rent is over £1k. So that’s crazy to me that your rent is so cheap for London!

141mum · 27/09/2024 19:47

Itsgettingbettetman · 26/09/2024 21:48

Because they're thick as pig shit

I was fortunate to get a job that pays nearly double what I used to earn two years ago. I still live as though I'm earning the lesser amount. Rest goes in pensions and investments.

Can't understand how folk I'm this country are so poor at budgeting.

Rude

Newusernameforthiss · 27/09/2024 19:44

Because, get this, you can be really clever/a great lawyer/a sought after dentist and also be crap with money? Two separate skill sets....?

Why can't this brain surgeon cook like a Michelin starred chef?
Why would a CFO be shit on the tills in Lidl?
Why would an amazing, inspirational reception teacher be no good as an office manager?

Some more threads for you, there 🫠

SLeanne · 27/09/2024 19:42

This reply has been deleted

This message has been withdrawn at the poster's request

£700 per month in inner London? Is that a mistake

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