To be surprised about savings

[Finanzas]

It's a financial one. Name changed but long time user. Those who are easily offended by discussion of money and earnings should move on. I won't engage with pointless comments.

I have some friends who are high earners, some £100k plus another £75k. We don't talk much about money generally but the guy on £75k likes to talk about his finances openly. I don't ask questions but always assumed he must have thousands saved up as that kind of salary allows you to do a lot.

Friend recently told us of his plans to buy a house in a year or so. He volunteered the information that he currently had £8k saved and was waiting to save at least £20k to buy a £300k house.

He's been earning £75k for at least five years and currently lives with partners family so only pays token rent and groceries etc and will have loads left over after essential spends. Used to live abroad for work and rent was more expensive but still a good salary for country he was in. I found my self wondering why he didn't have a big deposit already. 75k over 5 years is £375k!! I know there's tax, NI etc but it still leaves a decent amount left to save as well as enjoy a nice lifestyle (no pets or kids to pay for)

FYI I know other people's finances aren't my business and I'm not judging but this example has challenged my assumptions about how much money people save. I assumed higher earners would stash lots away and have tens of thousands in the bank.

People are very open about talking about how much they earn but not how much they owe
He could have had huge credit card debt or owe a lot of money from when before he had a good salary
Otherwise he was just poor at managing his finances and didn't save anything
Or simply just thought why not just enjoy my salary and spend what I want on holidays etc before I need to settle down into a mortgage etc

Lots of possibilities

I like that he talks about finances, as many people don't. He may learn from others by chatting openly about it.

£8k in savings, or is that just the deposit fund? Needs more for a good deposit and needs to have money for moving costs, legal fees etc... plus an emergency fund for all those unexpected things that could occur.

YANBU to wonder what he has been doing with his income over the last few years. I too would assume that a high earner with low expenses would have more in savings/investments. Maybe there is lots in investments/pension?

Lots of people spend what they earn.
Personally, we "pay ourselves first" - so money goes into savings straight after pay day.
Our neighbors complain they don't have any money, but then fly business class on holiday to Mauritius. They just spend their money differently to us.
Both households are fortunate to have enough money to easily cover the basics.

Why didn’t you ask him? If he’s open with his salary and savings I’m sure he would tell you about his outgoings.

Find out from him OP and report back immediately.

I went out with someone who was earning 100k in 1998. He had a car on a payment plan with a balloon payment at the end. The month before the payment was due, he asked me if I could lend him any money because he didn't have enough.

He spent his income on things like very expensive wine, skiing holidays, ride-on lawn mowers, the latest TVs, a wine fridge, and expensive bike, Basically grown up toys.

Some people are just daft with money.

A lot of people are poor with money, I had a colleague a few years ago who was on almost £100k as was her husband, she left our employer because they would never be able to afford to buy a home in London! At the time I was a lone parent, not on £100K(!) and I had just purchased a flat in zone 1.

So they couldn’t afford to buy, but they could afford holidays abroad, designer clothes and jewellery, a very fancy serviced apartment and a daily in home pet sitter. So what she actually meant was that she couldn’t afford to live an old money lifestyle and save a deposit.

I work with someone who has a high mortgage and rarely has any spare money

Instead of saving or overpaying the mortgage when she DOES have spare cash she is buying a brand new car on PCP (is that what its called ? the car finance thing).

She admits she doesn't need a car, just fancies one and second hand cars are just as expensive as new

Top tip - not buying a car is free 🤣🤣

Just because you earn more doesn't mean you save more. It just means you spend more.

Although saying that, how do you know that he isn't sacrificing his salary into his pension so that he isn't paying as much tax. That's what I do so therefore I actually have a lower salary on paper.

he might be paying off debt.
Or - he might enjoy spending money. I know lots of people who earn huge amounts of money but just enjoy it. These are people who have decided not to have children so don't have responsibilities in that sense. They still have mortgages but enjoy Michelin star restaurants, theatre, holidays (you know - the fun types of holidays without children!), and just generally going out. They live in London but can afford all it has to offer.
Btw £75k can easily be blown after high rent, the odd weekend away, a nice holiday, restaurants and nights out. Let alone the odd shopping trip. I'd have a great time doing that!

I got the impression 8k was the extent of savings but don't like to probe.

I guess it is different spending habits. Some people prefer to enjoy money first before savings.

I ear a lot less but was always desperate to get on property ladder

He might be paying off debt.
He might be paying for expensive private medical care for himself or a loved one.
Or any other number of possibilities.
It's really not your business.

I wonder this op. I'm a single parent with a meagre contribution from the other 'parent'. My mind is blown at how skint couples I know claim to be.

Loads of people just aren't habitual savers to be honest. Instant gratification (spend now) will often win out against delayed gratification (save for later) unless you're someone who's actually sat down and given some thought to your overall aims for your money.

In my circle at least, the ones who have least in savings (from what I know at least!) are all the ones who have always earned well. I think because they've never really had to budget, they are used to just spending a bit thoughtlessly. They seem to struggle the hardest as they're breaking that established habit when they need to start saving instead!

I know someone on a similarly high salary - never bought a property. But he spends his money on first class travel, designer clothes, fancy restaurants, hotels etc. His choice. I think some people have different priorities and like living for the moment rather than long term.

I had a very well-paid friend when I was in my 20s/30s.

He was always skint, because when he bought stuff, any stuff, it was always very high end and often bespoke. When he got a big promotion and was able to buy a flat, I was amused when I visited, went for a pee and saw that all the (matching, of course) towels in the bathroom were St Laurent. I didn't even know St Laurent made towels! Most of his furniture was from Heals and Libertys.

Long after we lost touch, I bumped into a mutual friend who still saw him. He'd learned to fly and used to hire planes to "pop over to France" and was still spending every penny he earned.

He might be shoveling it into his pension, it doesnt mean hes burning £20 notes or rolling around in piles of cocaine and a million pounds in debt

I think it's called lifestyle creep, people who just live according to their salary spend money on clothes, eating out, cars, holidays etc and think that level of spending is normal, whereas most people could live on half that amount especially in his situation not paying a huge mortgage, rent or bills.

I have also seen this with younger people at work who say they don't have enough money at the end of the month but they take Ubers everywhere, buy coffees and take away breakfast and lunch everyday. People just have different ideas and priorities about money.

He might be putting money into long term, high interest investments which can't be easily accessed, with a view to retiring early. Or he might be downplaying his financial position for fear of people being envious, or asking for a loan.

It’s a lifestyle choice. Some people prioritise savings (even when they are living on the bare minimum) and some spaff their money up the wall.

There might be other reasons but my guess is he just likes his comforts; meals out, expensive coffee, holidays etc.

Everyone is different and you can't make assumptions based on what you think you know or that they tell you.

Does he have a noticeably spendy lifestyle? As in you can see where he spends his money? Car, holidays, hobbies, clothes, accessories, grooming, eating out etc can costs thousands a month if done enthusiatically.

But he'll take home substantially less than £75k pa (£46k assuming 5% pension contributions and a Plan 2 student loan) or just under £4k pm. Then obviously he has essential costs to pay, any debt he hasn't mentioned and whatever he spends on non essentials.

If he mentions it again, you could just make a breezy comment about upping his/their savings (you mention a partner but not their income/savings) and how a mortgage is going to be a shock to the system - at least £1500 pm based on the figures you've mentioned.

I’m on £75k and it doesn’t go as far as you think. Yes I love a comfortable lifestyle but it’s not rolling in it. And if you have just a few luxuries a month then it can all add up.

I would hazard that some people who earn a lot feel more confident about the money rolling in, so see less need to save - if that makes sense. When money is tight and you need to make choices about what you can and can't afford, you might be more likely to squirrel it away because you're more aware of the need for a rainy day fund. If you earn a lot and can spend what you like, maybe you think less about how you'll afford future things so don't feel the need to save quite so acutely?