175k salary and all gone

[175allgone]

This will ruffle some feathers, but after tax, mortgage , childcare, living expenses….there doesn’t seem much left. SE London, commuting, wrap around care. Whilst I appreciate I’m not having to watch my bills I’m hardly living an extravagant lifestyle.

@CarterBeatsTheDevil my mum doesn’t understand why I bought a terraced house, that is a bit too small Contrary to the “you climb the ladder & cut your cloth” brigade her starter home was a house much bigger than mine & she had the larger semi by mid 30s 🙄

Childcare costs are a significant factor in your current financial situation. Without children, you would have a completely different lifestyle. Your current circumstances are the sacrifices you have to make for choosing to have children. This period of financial strain is temporary and will improve once your children start school. Eventually, you will own an asset that will likely make you a millionaire, on paper.

Reflecting on my childhood, my parents didn't have much money. I remember threadbare carpets and how our summer holiday was just a day trip to the beach. When I got my mortgage, I had to give up my car because I couldn't afford to run it. I lived on the bare essentials and I didn't even have children. Fast forward to today, with the mortgage paid off and better-paying jobs, my lifestyle has significantly improved.

It seems that nowadays, many people don't expect to go through frugal years; they want a luxurious lifestyle from the start and feel aggrieved when they can't have it.

I agree with this.

Until recently we were a household of 2x law firm partners. We have a nice house (but a long commute) but don't feel anywhere near as comfortable as we would have been a generation earlier. Back then the town's solicitor would have had once of the nicer houses in the town and a very comfortable life on one salary. We are slogging like crazy with both of us working full time + in very stressful roles and have hardly any spare money once bills are paid.

Higher rate tax payers are MUCH better off in other European countries or in North America. We get the privilege of paying huge amounts of tax and no benefits like subsidised childcare which we would get in scandi countries etc. If you've got another passport you really should consider it. State schools are shocking and private will be out of your reach.

It seems that nowadays, many people don't expect to go through frugal years; they want a luxurious lifestyle from the start and feel aggrieved when they can't have it.

Bingo! Younger generations have less disposable income than previous generations at their age. The may want it but they won’t be getting it & that mortgage will take a lot longer to pay off.

Op, it seems to me that once the childcare cost stage is over you’ll be fine. In the meantime either shop around for cheaper childcare options or talk to your mortgage provider about temporarily reducing your mortgage payments (ie increasing your mortgage term).
Also think long term about how you can make savings - the obvious one being state schools, or moving further out of London.

But "go back in time and buy a house in the 1970s when it was still expensive but more affordable on a normal salary" isn't very useful advice!

On the assumption the OP meant they lived in the South East, i.e. London, and within London they lived in the specific area of Islington...

I wouldn't expect anyone to live in Islington with kids unless they had a council tenancy or were old money and had an inherited property. Attempting to buy a property in central London and shelling out for childcare x 2 in central London at the same time is stupidly expensive.

I know plenty of people who earn more than the OP and none of them live in central London with kids. It's normal if you don't have a secure tenancy or own somewhere (and I mean own, not co-own with the bank) to move out of central for more space and cheaper childcare costs. That's how people do it.

Depending on where exactly in Islington the OP means, they could even be in zone one rather than on the edge of zone one. Living in London is expensive, but the OP seems to have made the most expensive choices possible and is complaining.

It doesn't matter what salary you are on, everyone has to make choices for that salary. Someone on £175k has many more choices open to them than someone on £26k, but everyone always has to choose what they can afford and what is important to them.

I’m not saying it is, my point was income isn’t the whole picture when looking at wealth.

Exactly.

it doesn’t matter how frugal I am, I’m never going to be able to buy a house for three times my salary like my parents generation did. Those houses do not exist.

Yes it costs stamp but if you downsize you can take some equity out and reduce the loan size…
2.5k /mth for a mortgage is High relative to your income and expenses . Is 175k the household income? ( or are you a one income family) presume you are or else your net income after tax would be higher. Why can’t the second partner work if you are paying for full time childcare for both kids

Clearly the £4k payment is the ridculous one. And the temporary one. Childcare costs in London are insane. We moved out because we couldn't afford full time London nursery which would have been more than £3k a month.

We are on a joint income of £120k and yet I've got 0 savings and actually a bit of credit card debt. No holidays, no new clothes. But £1200 mortgage, £500 commute, £2k childcare, £500 food, £750 bills - all gone. Then throw in the emergency household cost or Christmas - and we are screwed.

Just know that once the kids are in primary school and only paying for afterschool (a couple of hundred rather than couple of thousand) - we should be fine. But right now it feels ridiculous.

I earn a bit more than you, also in London and yes, the money does go quickly. No childcare but very expensive teenagers and home improvement. We are not extravagant either but we’re also not super careful and it does all rack up and yes, there is a greater pinch than before, even at a high salary

The Bank of England inflation calculator is a useful way of putting it all into perspective - to afford the same on £175k as you would have in 2019, you’d have to earn £216k in 2024. So, effectively £40k erosion in 5 years. Yes, the numbers are large and many people would love these sorts of salaries, but the reality is still that there has been a huge drop in what they can buy. So it is entirely possible to feel far less well off on a high salary than it was a few years ago. I think it is also natural to not be happy about this - I know I’m not. I was used to having plenty to spare each month and now no longer do

So, to your question of how do others manage - it is harder, even on a larger salary and you’re not the only one feeling this way

What do you suggest she does about childcare given that she’s paying the going rate for London?

I was on a night shift, when I replied.

Yes this is what that level of salary buys - choice - and you’ve made a choice to have two kids close together, to live in one of the most expensive postcodes in the UK. Which is perfectly valid - you can afford it OP. If you had chosen to space out your children, or had fewer, or move to one of the 1000s of more affordable places, you’d have more disposable income. My friend and former colleague did exactly this. They moved from Islington to Hendon when she was pregnant with their first, then later moved to Crouch End once the pre school era was over.

I think the problem is our expectations. If we are from a relatively ordinary background, we imagine that when we reach this level of earnings, we will be able to cover all the basics and afford to do whatever fun stuff we want, without even thinking about the money. It just doesn’t work that way.

OP I live near you and have done for years. I guess the managing part comes from the childcare bit. You haven't given the ages of the DC but it does seem a lot on childcare, are you getting any free hours? Are there any options for finding a cheaper option? I actually found having a nanny cheaper than 2 in nursery. Could you get an au pair and then reduce down the nursery hours? You'll need to think about school at some point and that gives you a whole new headache so that may be good to think about au pair or childminder to do after school pickups.
Could you or DH do compressed hours over 4 days a week and then reduce down your nursery costs without reducing salary?

Have you really checked the bills side so have you optimised the gas, electric etc ? I have saved a fortune like around £1000 a year on utilities by switching to better rates. Commuting in London is expensive especially if daily - can you or DH cycle to work ? That's £5 odd a day and does add up.

The system is completely broken

Someone who lives in one of the most expensive areas of one of the most expensive cities in the world not having as much money left over for luxuries as they would like after paying two lots of nursery fees is not, in my view, indicative of a "broken system".

The alarming rise in child poverty and homelessness over the last decade is indicative of a broken system. The existence of Warm Hubs and schools having to set up their own food banks because community food banks can't meet demand, those things are indicative of a broken system.

I get what op is saying, she has a high salary but their lifestyle is not flying business class to exclusive hotels. Unfortunately there's a huge difference between the well paid top 5% level salaries that she and we are on and the mega rich who post on instagram, people get jealous they can't afford the trappings of high incomes. We too fly economy, do our own cleaning, shop in Lidl and drive older cars we own outright, we should be rich on paper but we aren't, what we are is comfortable though and I'm not complaining.

Islington is expensive but a £2.5k mortgage isn't silly high for London, it's the childcare bill that's high, but luckily it goes down significantly at age 5 then disappears until you need to pay out university maintenance costs!

Well that's the price of having kids and London salaries are weighted to balance the high costs. I'm a teacher so earn nothing like your salary and also live in the South West but when our kids were little we had no money left at the end of the month after childcare, no holidays, no treats. So I feel like you are doing quite a lot better than most people to not be worrying about money and have cash left over.

I was in the London trap, paying so much for childcare and earning a lot.
I changed my lifestyle and it worked.
Semi in Zone 5- 1k mortgage
childcare-none

I work evenings part time, take home about 1k, husband pt similar

I essentially life a similar lifestyle working far far less without commuting or childcare as a factor.

It began to feel mad working ft in London and what it cost. Appreciate I couldn’t do this in zone 1/2… but I can still travel there in 15/20min and the local parks are nice

The more you earn, the more you spend. It just all becomes your new normal.

@175allgone You get almost four times what my daughter gets and she is single with two adopted children, working hard in a very full-time job. She manages childcare costs, living costs, a simple holiday, running a car and owns her own home. You just spend too much and clearly are living an extravagent lifestyle. Your choice, get real.

"I can't understand how people manage?"

I find that such an ignorant question.
Which bit of managing on 175K don't you understand OP?

I think it's all relative - you earn well but live to your means. People just get their back up because of the size of salary, but lots of people don't have anything left or a small percentage of their take home salary left at the end of the month. They just get on with it until the childcare costs reduce.

Is this a joint salary?
Are you opting for private school after nursery ?