'Middle class earners' - struggling to cope financially and can no longer afford comfortable living standards despite having household incomes of between £60,000 and £120,000- Guardian

[fluffykittens208]

https://www.theguardian.com/business/2024/mar/04/middle-class-workers-mortgages-bills-tax

Excerpts:

'Scott was just one of scores of middle-class earners who shared with the Guardian how they are struggling to cope financially and can no longer afford comfortable living standards despite having household incomes of between £60,000 and £120,000.
A report last month from the abrdn Financial Fairness Trust highlighted how Britain’s insecure jobs market and high housing costs are leading to the growth of a precarious middle class. These households are struggling to maintain a decent living standard on joint incomes as high as £60,000 a year. That compares with the median gross annual earnings for full-time employees of £34,963 last April.'

“It does seem that the only way to be on a middle income and doing OK at the moment is to be a Dink and living in the north.”

'Although respondents with children reported more precarious finances than those without, millennial childless couples say they barely have any disposable income either.'

Personally we am coping ok with a household income of £120k and still eat out/have a lot of city breaks, but I wonder if that is only because of our specific circumstances

1. small 2 bed flat in zone 3 London so we don't have a car and where it is possible for DH to cycle to work. Would probably always stay in a flat even if income doubles so it makes more sense to stay in zone 3 if living in a flat.
2. were able to live at DH's mum for 3 years while working in London and bought in 2019. We were able to overpay a mortgage on 2% interest during the pandemic and plough our pandemic savings into it which means the new mortgage rate isn't as painful.
3. fertility problems so we are still DINKY and unlikely to have more than 1 child (am already 32 this year).

As a disclaimer i don't think the chancellor should cut taxes despite us all feeling the cost of living crisis as 40% of tax revenue comes from NI and income taxes so if they cut taxes, they would have to cut services and I have no desire to pay for healthcare privately in my old age.

But it feels very strange to read about people struggling in the news on our household income, probably means that the income threshold to be 'comfortable' (without very specific circumstances that lower your cost of livin) is much higher! Would hazard around £150k to £250k now. Basically we are going to be a hugely unequal society where only the top 5% can expect all the middle class fixtures and the rest of us have to pick and choose or live a life of penury and no luxuries i.e. car or property in expensive location; 2 children and no savings or 1 child and savings. Far luckier than those in the bottom 50% obviously but i am not sure how you can say you are middle class when the only reason you can afford to eat out and have nice holidays is cos you purposefully cut back on things people used to expect if you were doing semi well i.e. 2 kids in a suburban semi and a car on the driveway.

I always wonder on these threads what the amount is that it goes from "Poor personal choices" being at fault to "It's all about the system" when people say they're struggling.

Though that said I think it's less about the amounts involved and more about the attitudes involved. Someone asked a question, maybe a year or so ago on here, about who the 'squeezed middle' actually are.

Off the back of several threads of people on the lower end of the spectrum struggling and being told that they should, move somewhere cheaper, get better jobs, try harder, take responsibility for themselves, not have had children and certainly not anymore, and lots of 'inspiring' stories about working your way out of a cardboard box to being a multi millionaire, just through sheer hard work and sacrifice, I replied it was the people who've spent a few years telling other people on less money than them that it's entirely their own fault, but now it was starting to affect them, suddenly it's all not fair.

I think that's the issue with the 'squeezed middle' now feeling the pinch and complaining about it, they're seeing the other side now, and like anyone, they don't like it.
But there's no suggestion that they could change anything to improve their circumstances, that's only for the lower paid, they shouldn't have to move, they shouldn't have to get a better job, they shouldn't have to limit the amount of children or compromise their standards of living.

The cost of living has increased and continues to do so, and maybe the 'squeezed middle' are starting to realise that no amount of their special brand of hard work can insulate them against that because it was always about more than that., they just didn't want to see that.

isn't it better to talk about it on a public forum so we all know that its not just the poor who feel squeezed but also people they may consider 'rich'.
if the middle class is in decline, then this means worse things for those on lower incomes.
It depends how it's done.

A post saying
Things are getting so bad that even people who would historically have been very comfortable are finding things difficult in some places. It's time all workers and voters started putting pressure on the government, energy companies and other big winners to stop crashing the economy and giving handouts to their mates

is going to go down very differently to a post saying
Everyone thinks we're rich but actually £100k doesn't go very far by the time you factor in our (by choice) mortgage on a 4 bedroom house in a fancy area that we've stretched to afford and the private school/nursery fees that we chose to take on knowing we'd already got huge mortgage payments. We have to have cars to get to work so £Xxx a month goes on our car payments (which we chose rather than a more economical option). People act like we're loaded but we're only having one family holiday this year instead of two and our childfree friends are still able to afford city breaks throughout the year because they're not paying for childcare. It's awful because despite earning £100k we can't claim child benefit and people seem to think £100k is a lot of money, but it isn't. It doesn't go as far as people think it would (because out lifestyle has expanded as our salaries have grown).

@fluffykittens208 ,

‘top 30% pay 90% of the income taxes/NI. Income taxes/NI are 46% of overall tax revenue in the UK. top 30% is an income of around 45k or so.

Without this income group, there is no British state. no money to even turn the lights on.’

The wealthy always believe this but it is far more complex.

If you do a thought experiment where AI ran everything and only Mr Smith, the PM, took a salary of a couple of trillion, and he paid £800bio in taxes, to allow everyone else to live pretty much as we do now, with everyone else on benefits, then you can see that income distribution matters (I hope).

On a more realistic scale, if certain jobs are underpaid (nurses , teachers, delivery drivers etc) in order to allow others to be paid more, then those that are paid more only partially compensate for those paid less. Does capitalism efficiently allocate resources? It has been open question for many years but the back bailout of 2008 and the PPE scandal seems to indicate that we have a lot of crony capitalism rather than pure capitalism anyway.

And finally, if the whole country was 20% poorer, would we all starve? No, most of the world manage on far less than this. Things become cheaper, it is why country rankings are hard, do you rank on GDP purely or do you adjust it by purchasing parity?

have you looked at the difference in what the 9% paid into the NHS pension scheme will give you later on compared to what your 5% will get you? I think you might be shocked by how incredibly stingy private sector pensions are compared to public sector.

Wowser I mean I don’t not believe you more a how?

Private x 2 (if you say three then blimey) is £25k per dc - unless you’re outside London?

You could have £4k going out a month just on fees

Maybe you’re mortgage free. Still, it sounds tough?

I'm a single mum to one teen and right at the low end of that bracket. Wfh 4 days a week, 1 day in the office.

I take home about 33,600 out of which I pay £9k a year in school fees (I know, I know, but he was desperate to go, and got a 50% scholarship).

Leaves me 24,600 to pay mortgage, 6yo car, CT, utilities, one day a week commute to London. No benefits.

I'm holding steady but we haven't been out for a meal in a year. DS has been on school ski trip and GCSE German exchange, but no family holidays. New clothes are very few. No subscriptions or gym. Phone is elderly payg. It does feel tight at the moment but I'm basically hanging on for him to leave school. Only two years to go.

OP, on the house query, I hate living in flats, I get depressed, so I bought a v. scruffy house and am doing it up slowly, myself. Very slowly.

U Facking wot M8?

🤣

Yes - even higher in London. You need to budget £30k a year for nursery costs.

My husband and I bought our cars for cash before having kids. We could have afforded a bigger mortgage but went for the most we were comfortable paying instead. We don’t have any consumer debt, and don’t spend much money on days out. We’ve also had our phones for years and have sim only contracts. We have basically cut back on everything except food, but one big expense, like having to replace our car (which we need for work) would wipe out all our savings and we’d still have to get a loan to pay the remainder. So would an accidental pregnancy, or having to replace our roof. We earn about £60k ish combined
So I do still see how people earning more than us could struggle. I believe work should pay people to enjoy a decent enough standard of living, otherwise what is the point? The system is broken. Money should be circulating the economy instead of just being in the hands of a few. The problem is the rich have so much money, they don’t need the system to work anymore.

Haven’t RTFT but I just wanted to say that you definitely don’t need to live with parents/in-laws to be able to buy a property in London.

I bought a 2-bed flat in Zone 3 by myself in 2020 at the age of 31. No gifted deposit, no living with family - just saved up for 8 years while flatsharing.

Many of my friends were the same.

I‘d be really surprised if 120K is the top 5% in the UK! Top 10% possibly. I think the problem is the total disparity of income. People tend to see it as a straight line so 120K feels a lot more than 60K. However the final 10% of the graph goes up exponentially like a hockey stick. You have people earning 500K and 5M in the same category and the difference between those numbers are insane compared to the difference between 20K and 120K.

COL has gone up everywhere without regard for what 90% of people earn. A buffer of 10K or even 50K may not last that long depending what kind of outgoings you have and what financial decisions you made.

Obviously it would be silly to argue that 120K is not a lot, HOWEVER the only people in real life who seemingly aren‘t bothered at all by COL are those earning well over 250K. Again, the numerical difference between 120K and 250K is much bigger than for instance 60K vs 120K.

From real life observations, the only people truly unbothered are those earning a typical yearly salary every month, so they have at least five figures disposable after tax. Anything less than that (mid-high thousands) can only qualify as very good but not great. This was different 10yrs ago but the costs of everything has changed.

We cant afford a welfare state if we are a poorer country. Even the poorer people would have to adjust, forget UC or free at the point of service healthcare. Forget state subsidies for single parents. The majority of the world live on less than that but many also live in multi generational households, kids support parents and they have to pay for medicine/healthcare or even secondary schooling. Some even die prematurely from preventable illness. Women have to marry people who pay the bills rather than who they like.

I think essential workers have to be paid more but we overall all should earn more.

Sorry no sympathy. London is impossibly expensive for most people. Some folk have relatives providing childcare some don't. Some get large deposits from bank of mum and dad some don't. Benefits are too high. This has pushed up house prices. People in council houses who can afford their own house. Whole system, is crackers.

Well done!

How much was the flat, and how much were you earning?

I know exactly the difference. I was just pointing out that they're not employee contribution free. The employer contributions are higher in public sector. And one of the reasons I plan to return to NHS at 55!

But house prices as a proportion of wages were a lot lower.

My parents bought a 3 bed semi on one just-above average wage - let’s say the equivalent of £40k today - and a 10% deposit.

That house is now valued at £485k. So more than 11x the equivalent salary.

Yes but with your income you have recourse to benefits and help with some of the essentials - such as housing benefit, council tax, childcare, you get child benefit etc. I am on just under 70k, renting in London, my DH is sahp. We are massively struggling. Literally nothing left at the end of the month. So ‘just under 20k’ works out a lot more when you factor in what comes out in tax from both incomes and then what you are entitled to, plus col in different places (my rent, cheapest we could find for 2 bed in zone 4 is £1650 before bills and so on). Yes we could move but DH has a daughter who lives in London and my family including elderly parents we care for all here.

@EasternStandard - I bought a house in London, it doubled in price in a decade: during that decade I worked very hard and was a big earner. I then got divorced and adjusted what I did.

Now I do less at work and the fees were covered from the hard work done at that time. Financially okay!

Most people think they work upwards. I started earning very good money from leaving university and made the most of it. This is what I mean about lifestyle. I could still be doing the long hours and bigger money job. But why? Children and family are more important (imo).

Lifestyle is about choices. Hard work means I have more of them now. And my children will still have a very good education. I don't care about things like cars or other overt symbols of success. Assets and capital are real middle class guarantees of wealth. Drawing a salary is not wealth.

@Goldenbear You can't even put £50 a month away in savings? Savings don't even have to big amounts each month.

We earn a lot (me too 2% of the UK earners, husband top 5%) but still live fairly tightly. No cleaner, frugal with utilities, no sky etc, no one to help with the garden (disabled, can’t manage myself)

i do wonder who can afford package family holidays midsummer somewhere nice like Greece (£6-£7k when I last looked), and things like Alton Towers, going to the West end musicals etc, sights like St Paul’s and the Tower of London cost a fortune, eating out, getting a train anywhere? I long to visit my uncle in Cornwall but I looked at the train fare and even advance it was astronomical!

Where on earth does your money go??

I love a Mn thread that exhibits the shocking truth of a capitalist culture - some people get rich, some are piss poor, and there's a bunch in the middle who feel richer or poorer depending on the economy.

Very well explained.

We are very confortable, both work and good incomes and cannot understand why people in similar incomes seem to struggle so much.

You don't need a house extension. Your kids don't need stravagant birthday parties or branded clothes. You don't need constant redecorating and buy new clothes for adults unless they are needed, but not because they are "nice" or "trendy".
You don't need to buy stuff in amazon or similar just because it's easy and "cheap" to buy. That's just rubbish accumulating in your house.
You don't need weekends away with your girlfriends or expensive spa days.
I never did such a thing as a shopping spree because I think it's simply stupid. I do think it's good for kids to learn you can live in a different way. Retail therapy is a stupid concept. My teenage DD never had one with me. I buy what's needed and have a great bond with her. It's about sharing interests, spending time together

Instead we prioritised paying the mortgage as soon as possible, and after years and years of not spending we are finally at the end of it. Before the end of this year it will be paid. We are now planning a great trip around the world with the kids soon, which is important to us.
But not on credit but when your debt is gone.

Why live so frugally and deny yourself basic pleasures if you can afford not to? Top 2% of UK earners can afford a train fare, come on

Interesting, so more savings from earlier work if I’ve understood correctly

No argument from me on your path, it sounds great. Just wondered about numbers