To ask what you think a reasonable lifestyle is for this income?

[Momeymoney]

They have a DS (11) and a DD (8). Mum and Dad both work full time and when combined their income is £155,000 before taxes. What is a reasonable lifestyle for them to live? How much can they afford to spend on cars, can they afford private school, holidays, etc?

Depends on the wage split. Could be £8, £9, £10 or £5.5k take home. Massive differences in lifestyle!

We earn this. Mortgage £950. If we sent both kids to private school there would be very limited hols / savings and not expensive cars.

Entirely depends on lifestyle and what you get used to spending.
For a small family with children in state schools it's a good amount of money.

If you start factoring in private education and new cars every three years along with family holidays abroad this would soon dwindle.

So yes it's enough, but you'd still have to be aware of your spending.

We had a similar equivalent income in the late 1990's. It was enough to gradually pay off the mortgage and be mortgage free, enough for a modest boat, an outdoor pool, a gardener, a cleaner and new cars every few years. Luckily my children went to outstanding state schools so I didn't need to buy education. And, we didn't live in the SE which is expensive.

Your residential home isn't wealth. It's a cost, an essential cost but a cost all the same. It is a liability. It's good to overpay and reduce debt but owning my home makes me poorer (but secure in terms of tenure). It may be better experience wise as opposed to renting as I can stay for however long I like and on my terms and harder to repossess but I am under no illusions it makes me richer. In fact it makes me poorer.

You'd be considerably poorer if you had to rent the same place.

That's about our joint income but DH is full time and I'm PT. Kids similar ages too. Our mortgage is massive (only bought 7 years ago for the first time and done lots of renovations since and in SE. It's around £2300 a month) we don't worry much about our other spending in the month within reason. We don't budget for food etc. Could possibly send one child to private school if we cut down massively, but not two. You can certainly have a good standard of living on 155,000. Even more so not in the SE or with more equity behind you.

It's cos the UK has a lot of poor people so that makes you feel lucky. But equally the UK has quite a few rich people that would make us seem like paupers.

I am an immigrant (from a rich country)and my DH grew up on free school meals but we don't have as many structural barriers to our progression (ability to live in London rent free in our 20s and university educated) so we can't compare ourselves to a victim of domestic abuse struggling to raise 3 kids! Or someone who faces intense racism (though I suppose DH experiences anti semitism)

You need to see a financial adviser to put you straight on this.

even at 2% mortgage rates, renting my flat was cheaper. Around £200 cheaper in fact. I think the gap between the two at 5.5% mortgage rates is £300. I think it is worth it for the security of tenure but lets face it, owning is still a cost.

This is why so many BTL landlords are screwed, they are basically providing a home at a loss.

Your residential home isn't wealth. It's a cost, an essential cost but a cost all the same. It is a liability. It's good to overpay and reduce debt but owning my home makes me poorer (but secure in terms of tenure). It may be better experience wise as opposed to renting as I can stay for however long I like and on my terms and harder to repossess but I am under no illusions it makes me richer. In fact it makes me poorer

A house is an asset not a liability. That's a financial fact. You need to educate yourself on this. A mortgage is a reducing liability, a cost, that at the end of its term leaves you with an asset. Once you have repaid the liability you're left with an asset.

https://www.blueleaf.com/articles/house-asset-or-expense/

Most financial advisors would agree that your primary home is not an asset. An asset is something that generates income. It may be preferable to renting for all sorts of reasons; security of tenure and ability to plan (as you can fix your mortgage rate for 5 years or extend your term- which may allow you to artificially deflate your expenses during crucial life moments like maternity leave or the childcare years or early career years). But it doesn't build wealth.

of course deferring and spreading out your housing costs can help you build wealth as it may enable you to build your career if you are able to 'stay in the game' but that is also dependent on a lot of factors. It is also not totally secure as bank can repossess your home, but i suppose it is secure if you have emergency fund and you fix it for an affordable rate for a long time (and pay down the debt during that time)

We earned similar and have a modest house and mortgage ( 3/4 bed semi , nice garden, unfashionable part of SE.),second hand cars , one or two 1 week european holidays ( usually one skiing and one last minute bargain self catering or family run logis) de France type places.No expensive clothes or hobbies , 3 DC of whom at any time maximum two in private school and when younger a day nanny.It felt like a good quality of life , only one left on the books now so mortgage paid off.

@MasterBeth not what I meant. if one person earns 110k they take home 70k. If two people earn 55k they take home 80k between them. So the setup/distribution of income makes a difference to the available income, which is part of the equation.

Most financial advisors would agree that your primary home is not an asset. An asset is something that generates income. It may be preferable to renting for all sorts of reasons; security of tenure and ability to plan (as you can fix your mortgage rate for 5 years or extend your term- which may allow you to artificially deflate your expenses during crucial life moments like maternity leave or the childcare years or early career years). But it doesn't build wealth

An asset is something you own which can be sold. A car, a house, anything really which holds value. A house literally builds wealth if the value of it goes up. The liability is the debt that sits against it. Honestly this stuff is basic accountancy and your lack of understanding on it is worrying if you're using this as a premise on which to rent and not buy. And yes I work in finance and understand this stuff.

It is a technical asset, but given that you have to sell it in order to realize the gain and are therefore subject to fluctuations of the housing market (may not be worth so much if you downsize at the wrong time) as well as may incur hefty transaction costs, it is not good as a store of wealth as hugely illqiuid. You also have to tie up quite a lot of capital in it.

You cannot trade it like a stock; a lot of people buy and sell homes for personal reasons and not because they want it to be this way- divorce, new child, new school. Hence you cannot always buy and sell at the right time and hence dangerous to think of it as an asset.

I bought my flat primarily as a place to live in. to me it is like buying a car, a depreciating asset i have to pay interest on my debt and which i have to pay to maintain. The main advantage is that it allowed me to stay in London for what was an affordable mortgage for me in 2019 (£1020) and this enabled us to increase our earnings as well as live more autonomously and comfortably.

We bought our property in our 20s and I don't regret buying but it is a liability. It is a perfectly decent (if small) flat, residents own the freehold, service charges very reasonable, well run, affordable mortgage. But it isn't wealth. Its a place to live, no more.

It is also why my DH doesn't care what we live in, only cares about the area. Cos if we are going to pay so much for a depreciating liability, then at least we need to enjoy the area and derive benefit from it i.e. it being in zone 3 london means DH can cycle to work which he feels enhances his life (as well as our bank account!)

Private day school in the South-East is £25k per child - so £50k for both, £80k pre tax and goes up at 5 - 10% per year - they will struggle to afford this unless significant savings, investments, grandparental help etc.

@HarrietJet I was responding to the poster who asked how someone/couple could be earning £150k but not know what lifestyle is achievable on that income with with 2 kids

we work in financial services too. A house is an asset if you don't live in it. I live in mine, that is the problem. I can't sell it, unless i buy another place to live in it. Unless i downsize.

I know it is an asset in accounting terms, but it isn't an asset that will make you richer. Your house going up in value doesn't make you richer unless you rent it out (and somehow it didn't go mostly toward servicing the mortgage or repair costs or taxes).

I bought when I was 27 and yes this isn't an argument to say you shouldn't buy. Home ownership is the prevalent tenure in this country and this is a policy decision. I would prefer to live in social housing or a cooperative but sadly this isn't an option so I have to buy and its not like I can challenge the system by myself. Its not something I am happy about btw, being forced towards home ownership (due to lack of rental protection or social housing provision) but thats life. https://blogs.lse.ac.uk/politicsandpolicy/homeownership-and-the-failures-of-asset-based-welfare/

'To sum it up briefly: a first-time homebuyer is supposed to be relatively young, making mortgage payments throughout the first half of his or her working life until the mortgage is paid off; then, when earning potential is at its highest later in working life, the mortgage is paid and income can be invested in a wider portfolio of assets. Then when an individual retires, the home is sold as a one-off cash windfall to fund retirement. In this respect, housing acts as a pension, in which contributions are made throughout working life in order to build a wealth holding substantial enough to draw on when an individual exits the paid labour force. The first problem is that the life-cycle assumes a balance between income, assets, savings and debt changes across an adult’s lifetime; more problematically, it assumes stable economic growth, low unemployment, stable working careers and a numerical balance between birth cohorts. However, finance-led growth has fundamentally changed the UK economy destroying these very economic conditions.
Moreover, households cannot know or control the housing market, whether one gains or losses from house price fluctuations is, ostensibly, luck. This means that some households were able to buy at the right time and realize significant wealth gains, while other households purchased highly leveraged assets in the middle of a bubble and consequently exposed to external factors such as liquidity in global credit market; other households were priced out of housing altogether. Therefore, residential housing can be a wealth-generating asset or a highly-leveraged vehicle capable of decimating the household’s entire financial security."

What this article also adds is that most ordinary people cannot buy and sell at the right time

Apologies.

@lavender2023 , you are talking complete bollocks.

No what they are saying is rational.

Your primary residence may be a capital asset but it is a cash flow drain. It generates costs not income. In some cases eg negative equity it fails to operate as an effective store of value. It is hard to realise the value given the relatively cumbersome selling process.

A rental property is both a capital asset and (hopefully) an income producing asset.

But it doesn't build wealth

Housing in the UK has built far more wealth then wages over the last few decades!!

Home ownership is a religion in the UK. I think we spend so much on it that we feel like it needs to be so many things namely:

1. Pension in old age
2. magic money generating asset
3. provide funds for social care

But maybe spending so much on shelter doesn't always translate it to needing to fulfil so many functions. A home is just a place to live. You buy it, you pay down the mortgage and then you die. The end. Maybe your kids will get it but you wouldn't be alive to see them enjoy it.

I prefer to aspire to fulfil those other needs not using my flat as some sort of magic money tree.

An asset doesn't have to generate income, it just needs to have a monetary value.
Rent is a cash flow drain.

I know it is an asset in accounting terms, but it isn't an asset that will make you richer. Your house going up in value doesn't make you richer unless you rent it out (and somehow it didn't go mostly toward servicing the mortgage or repair costs or taxes).

My in-laws 60k house sold for 2m which enabled them to buy a 800k house, a BTL & the rest went into S&S which has done well?