Higher middle earners- how do you afford your fancy life?

[Led921900]

This is very much a tongue in cheek post … and yes I might be crying in my Tesco finest Prosecco but….

I live in London and there are smallish but relatively expensive houses around me that sell for about £1.1 million… inhabited by 2 parent 2 children families with nice cars, bugaboos and doodle dogs who go on all inclusive foreign holidays. How???

It’s not that unusual…. whereas we have a household income of about £140k which I thought was pretty good and I don’t feel like we’re doing particularly well at all. No prospect of upsizing our house, no fancy cars, no foreign holidays at an algarve all inclusive. I have had 3 kids but my childcare is cheap (£55 nursery a day full time) and to be honest when the kids are school age the childcare difference between 2 or 3 kids is hardly anything.

So how are you all doing it? It’s no fancy extensions for us, no upsizing to a nice house, no fancy cars (running a cheap Citroen) and our fancy foreign holiday is driving 10 hours to a nice Eurocamp caravan with air conditioning.

Is it…

1. Bank of mum and dad or inheritance has allowed you to afford a nice house with small mortgage?

2. Not having kids?

3. A very well paid job (if so, what and what earnings?).

My background is working class northerner but I can’t see the lifestyle we have now on a very good income is any different than what my parents could afford with us! And I’ve looked at my job elsewhere and the cut in earnings is more than the lower mortgage (although actually houses in nice areas near good schools i. Wirral/manchester are about the same as mine anyway!)

I don’t get it?

Interesting thread and a good perspective on why no-one (even those earning well) want higher taxes! Whatever you already have, is not enough when you see others with more... and especially when you think of your children and want the best for them. I don't mean that as criticism of OP or others!! I can totally see where it comes from (and I acknowledge I have benefitted so much from generational wealth, so who am I to judge at all). But it's sobering to think the average salary in London is £45,000, so £90,000 for a 2 adult household... 50% of Londoners have less than that to live on!!! Yet £145k doesn't feel like enough to do the best for your kids and live the life you want.

So, basic tax payers obviously don't think that should go up as they're already earning below average and struggling to make rent. Higher rate tax payers don't want theirs' to go up as they feel they're fighting as well to get what they deserve out of life (the house, car, dog, foreign holiday sweet spot... bugaboo? Maybe even a yoyo!) and surprise surprise, additional rate payers also don't want to pay more because they're saving to get their kids through uni without a loan or but then a first house whatever. And from their £1.1million house they can see the £3m one with a proper garden; just like the £425k house can see the £1.1m one (and those on £90k can see bugger all because they're living in the basement).

Society is a mess all round! Rant over.

(And as for the original question 1 makes such a difference. Tighten up inheritance tax rules!!)

I suggest it takes a fair amount of self confidence and commitment to work in a foreign country for a number of years in a professional capacity. And luck had nothing to do with it. It was hard work and long hours in a total different culture.

Quick google tells me that petrol is 10p per litre cheaper in London than where I live and 15p per litre cheaper than where I work. Cinema prices are the same and public transport is cheaper in London. Average wage here is substantially lower. Seems to be mainly average house prices that are the biggest burden on finances.

Higher rate tax payers have never wanted higher taxes. But this thread shows that their desire to perpetuate the nepotism by buying their kids a flat is part of the problem and not something that the rest of us should subsidise.

So, we live in a 1.25 million house in Zone 3 London. It’s a terrace but with a nice extended kitchen and we recently had the front smartened up with repointing. I earn just over 100k for 4 days a week, DH about 125 full time but about 20k bonus each year too. Neither of us came from money, his parents in fact need us to help them out a bit from time to time. I grew up in Scotland, he in the South West. Neither of us had parents who went to university, but we both went to Oxbridge. I am in law, but in non client-facing capacity and he works in IT back office in a bank. Both of us decided not to pursue more lucrative career paths in our industries in favour of work/life balance but we both enjoy our jobs.

We own a flat worth about 300k that we rent out.

We ski and do 2 all inclusive sunny-place holidays a year. DS 7 is in private school. Main reasons we can afford it all are that we both worked abroad for 5 years so had low tax earnings, we only have 1 child (we met late in life), we hate pets so no labradoodle for us, and we are happy to work in fairly bland corporate environments. I bought a flat about 2005 with no parental support and did well on it, my father died young and my Mum got a big life insurance payout, then she died about 15 years later so I inherited about 100k that went into our current property. So that’s a sort of fucked up BOMAD scenario I guess.

Partly a highly paid job, partly early investment gambles in tech which paid off (so similar to #1, but money from investments rather than inheritance or parents). The capital to put into the investment originally came from earnings 15 years ago, we both come from modest backgrounds and haven't had any help from parents. Our first property purchase was 12 years ago, so we haven't benefited a huge amount from being on the property ladder.

We bought a 4 bed house in z2 London a couple of years ago with a big deposit and have overpaid, so mortgage is modest. We have 2 dc in private school but our holidays aren't too fancy - it just doesn't appeal to us and the dc have loved Eurocamp holidays!

We tend to let others assume the money has come from DH's high earnings rather than a windfall as people seem to judge differently if they think money came from a windfall than earnings. My own salary is fairly modest but I have been the risk taker with investing and have built the majority of our assets.

For my friends with lifestyles like that:

1. they earn a lot more than you, especially London
2. They were in a relationship young and got on the housing ladder early
3. they took risks with the houses they bought - I would never have stretched myself as much as them, but it’s either risk appetite or knowing the bank of mum and dad could always bail you out
4. their risks paid off as they’ve had more than 10 years of low interest rates.
5. they don’t necessarily save or save into a pension. I know someone in their 50s, very expensive house, no pension. (Of course they could sell the house, but they won’t want to. I suspect inheritance will solve the problem)

Have any tax payers ever wanted higher taxes?!?

But in what way could we be considered to be subsidising it? By not charging them more tax? or am I missing your point.

Perhaps the incoming Labour government will do something to fix this e.g. by increasing the tax paid by higher earners, raising inheritance tax and building enough new homes to reduce the premium on the existing short supply of housing. It would certainly level the playing field!

But even had you not worked abroad your key asset would have still cost far far less than it would today and you still would have been much better off than today’s equivalent of ‘you’.

Are you saying today’s young people don’t work hard? no one wants to admit that they have got where they are through luck or privilege but by and large the impact of other factors - pluckiness or whatever you’re implying got you what you have - is marginal in comparison to those determinants. .

Yes, by not charging them more tax one way or another.

@Led921900 "what the F do I actually have to earn to keep up with these Jones’s."

It wouldn't even occur to me to try. Maybe I'm tragically lacking in ambition.

But it sounds like you have lots of lovely things in your life? But you're still not happy and looking for a magic solution? So the only thing is to find a different career trajectory I guess.

I'm neither a high earner nor living a fancy lifestyle, but I know of people who are both and I've been surprised by how much debt they are in. They don't see it that way though, it's considered a normal part of life.

At what rate do you suggest “ higher earners” should pay tax above what they are already paying and what constitutes a “ higher earner “ anyway plus inheritance tax is a punitive measure in the first place. Also Social housing won’t go to middle earners either.

So, where do we draw the line where you are doing 'too much' for your kids and that money should instead be being taxed away to others?

A house? A contribution to a deposit? Having a spare room so they can live rent free for a bit?

Private education? Uni with less of a loan? an after-school tutor 'just for a bit of help'?

Is OP with their kids with piano and swimming lessons also promoting nepotism and it should be taxed out of them? (Sorry OP)

I'm not actually disagreeing with you (I think you've posted a lot of sense on here! And I would support higher taxes for lots of people, and certainly higher inheritance tax). But I think different people have very different ideas of what constitutes a 'higher earner' when they say things like this (normally somewhere above them lol).

No BOMAD here.

I think we were very lucky with the housing market - between us in we owned 3 properties in the 90’s/00’s that, with a little bit of work, more than doubled in value when we sold 5 years later. Our current house, bought nearly 20 years ago, was a fixer upper that had a minimal mortgage at the time as we had a lot of equity from previous properties. It’s worth 3 to 4x what we bought it for (albeit after extensions/loft conversions). Our daily life style, though, is due to DH’s salary, but that is underlined by the fact that we have a lot of equity (six figures) and a build up of savings… so I think the housing market/property is where financial security is.

It means our kids will benefit from BoMaD when we pop our clogs, though.

We are similar to families you’re describing minus the nice car - not car people so feels like lighting money on fire to spend there! We 1. Earn a lot more than you (£80k), which is essentially all extra cash because our expenses are not that different than yours. 2. DH had money invested for him so we bought first flat with a 60% deposit, then bought our £1mil house with a 60% deposit because we got lucky and sold the flat for almost 2x what we paid. 3. Have no commuting costs because we both WFH full time. We are chucking about 25%/month pre tax in pensions and DC is at private school so our childcare costs are about 2x yours.

I don't think the Middleton's ever went all inclusive. I remember reading a article with Pippa saying holidayed in France self catering every year when they were young children

TBH OP, 43k is pretty low salary for a man in his forties living in London doing the sort of job which pays more in London than in the regions. That’s the pretty glaring reason for you feeling like you don’t have enough money. How has this happened, why did he drop to 4 days? though even the FTE not great. Why such discrepancy between you, does he work in a “vocation” type profession?

Also OP inflation has been hideous this last few years so your £140k is less now than it might feel like it should be.

We went from feeling extremely comfortable to feeling very stretched over the past 4 years (we are well off but have school fees and costly travel to see relatives that we don't really want to cut back on).

Income a bit higher than yours and house worth about £300k more than you quote, have most of the other stuff you mention (except all inclusive holidays, hate them, prefer self catering).

We can only afford the house because we first bought in the mid 90s and made steady profits since then. Bought current house over 20 years ago for about a quarter of what it is worth now. We simply couldn't afford the mortgage to buy this house as first time buyers now. That is what faces younger people trying to get onto the property ladder now and it is really hard.

Yep - my mortgage is £650k too, but the house is worth £950k because I’m not a FTB… that’s how people afford a million pound house on a “normal” salary (normal as in couldn’t get a million pound mortgage)

I didn’t get anything through luck or privilege.

I am the age I am and I bought the house at the price it was at the time and I worked for every penny of that.

I got to that point through paying attention at school/college and years of medical training. I then used my initiative, did a mountain of research and formed a plan. I moved overseas secured a key position and worked all the hours. I also got married and had my first child. Nobody helped me. Nobody told me what to do or how to do it. And I certainly didn’t sit there grizzling about what others had and how unfair it all was.

I then came back to the UK and started work on a major trauma unit. There was f all privilege with that coz I worked nights, weekends and Christmas.

You make your own luck in this life. Nobody said it is easy.

Upper middle class do, do all inclusive, I’m literally employed to book them. They don’t do cheapy package deals, but they (some/plenty) are in the market for all inclusive.

£140k earnings sound like a lot to me, but when you do my job and realise how much people spend on holidays, 2-3x a year, every year. You realise £140k income is a drop in the ocean.

For some people OP it’ll be credit. For others, they earn into crazy figures.

we were basically given our house so no mortgage, just a small loan for some reno work - and in laws pay children’s school fees

^

Christ Almighty it's a different world