To Q why many high earners still live paycheque to paycheque?

[FrugalFannie]

I wanted to spark a discussion after seeing a post about living paycheque to paycheque. An interesting article I read in the ES (Nov, 2023) claimed that “Some 26% of people surveyed across the UK with an annual income of £100,000 + said they had no money left at the end of the month” https://www.standard.co.uk/business/money/26-of-people-earning-ps100-000plus-living-monthtomonth-amid-costs-squeeze-b1121031.html

Recent years have indeed been tough financially, but if you earn a relatively good or high wage, it seems surprising to still be living paycheque to paycheque. I personally don’t live this way; I’m a single woman with no children and consider myself smart with money.

I’d love to hear from those who aren’t living paycheque to paycheque about how they manage their finances. What strategies do you use? Is it a matter of being extremely frugal in this economy? Clearly, this issue affects people across various income levels, and I recognise that everyone’s situation is unique. I’m genuinely curious to learn about different financial approaches that work for you!

What about the rest of the bills?

Yep it was a two bedroom flat, so two bedrooms, a living room, kitchen and bathroom to be washed down, filled and painted, and it took four weeks because we were only doing weekends and odd half days when I could move my work around (too little light to do much in the evenings). Plus also trying to keep a semblance of normality for DS, which meant I did most of it by myself while DH took DS to the park.

i don’t know how much it would have cost to get it done professionally, probably £5-6k, but if I’d had that money spare at the time I’d have paid it.

@harrumphh you are a Millionaire Next Door par excellence!

What about them? Other bills are council tax, water, gas & electric, various insurance for cars, home, contents, pet, MOT'S etc. They all get paid. Drop in the ocean compared to mortgage

£700 per month in inner London? Is that a mistake

Because, get this, you can be really clever/a great lawyer/a sought after dentist and also be crap with money? Two separate skill sets....?

Why can't this brain surgeon cook like a Michelin starred chef?
Why would a CFO be shit on the tills in Lidl?
Why would an amazing, inspirational reception teacher be no good as an office manager?

Some more threads for you, there 🫠

Rude

£700 for London? I’m in council housing in Hertfordshire (2 bedroom flat, no balcony or garden and living room/kitchen space is one room) and my rent is over £1k. So that’s crazy to me that your rent is so cheap for London!

There is the option of moving out of London.

For the same reason a high percentage of lottery winners end up broke after a few years, a high income doesn't mean people are financially savvy.

Some people here are living on another planet

Chavs. Uneducated people.

This is a journo thread - If anybody is bothered about being quoted

Omg thanks I suspected baiting as much. Clearly they want people to hate on the middle class, support taxing people on £100k seriously when they obviously shouldn’t be taxing higher for those on £115k than those on £1m. Truly shameless journo - stop making people on £20k hating those on £100k they should be hating those on £1m!!!!

Monthly take home for £100k with student loans and 5% pension £5,041.04

• 15 funded hours at 3years

Monthly take home for a couple earning 50k between them with one 30k and one 20k salary, same pension plan and student loans £3,424.64
+£170.2 in child benefit every 4 weeks

• tax free childcare
• 30 funded hours childcare from 9 months
• some element of universal credit or housing allowance towards rent and possibly the childcare bill being lowered.

With a young family the difference in these sorts of incomes really aren’t that vast.

Those on lower incomes assume people on £100k must have twice as much money as them but they don’t.

DH senior in public sector in IT. Me many years service in financial services. The bonus has been built up over many years.

Exactly.

There are loads of threads on here where people pipe up well we only have a household income of 40k or whatever and we live comfortably in London, but neglect to mention that they bought their first property in 2006/are in SH/had parental help for a deposit either in cash or years of free rent.

There are indeed millions of people in London living on low and medium incomes. The number who are doing it whilst fully exposed to the full 2024 cost of housing is much lower, not least because many people have been forced out for that reason.

Exactly. People earning low incomes pay so little if any tax that they often have no comprehension of how much of a higher salary is paid in tax.

Due to the cliff edges in the tax system I calculated that a lone parent with two children in childcare has to earn over £150k to have the same net income after tax and childcare + benefits as a couple both earning average UK salary. The penalisation of single parents is beyond ridiculous. This is the only developed country that levies taxation on an individual not household basis and it is enormously discriminatory against women.

I had started a post stating “Another thing is that many lower earners are propped up with other benefits and don’t pay a lot of tax so they assume that someone on 3 their salary actually comes out with 3 net income”..: but then some of you have worded it much better than me.

i’m horrified when I look at my take home salary: the amount I take home is twice as much as I pay in tax/ni

This is the only developed country that levies taxation on an individual not household basis and it is enormously discriminatory against women.

It's far more discriminatory for a woman's income as having to be taxed at a far higher rate than a man's which is what happens if you tax a couple together. A lot of women would step out of paid work altogether in that case because a higher taxation rate plus the cost of childcare in the UK would make it not worth working.

The issue for single mothers is that absent fathers do not pay their fair share of the cost of bringing up children. But yes, getting rid of the stupid cliff edges on various tax bands would make a massive difference. But that affects people on at the £60-80K band as well as they lose child benefit and those on very low incomes when they lose the entitlement to vatious benefits, not just high earners.

Yep, people often miss that there are cliff edges and bottlenecks spread out at various points over our tax system. It could be reduction in free childcare entitlement at 100k, it could be loss of free school meals, or lots of things inbetween. The principle is the same and it all needs fixing.

"No money left at the end of the month" means different things to different people also.

I might moan about being skint the week before pay day (not out loud - before i get accused of being tone deaf). But, that's with a large pension payment, money going into various long and short term savings pots at the start of the month, mortgage overpayment, etc.

What is left, I normally spend - but the important things are prioritised first.

So some people might say they have nothing let after "essential bills" but view e.g. kids uni savings, or school fees as essential rather than optional.

i’m horrified when I look at my take home salary: the amount I take home is twice as much as I pay in tax/ni

That's pretty standard though, tax is just split up differently at different levels. Low income families pay lower direct taxes but higher (as a percentage of income) indirect taxes, high earners pay higher direct taxes (split into high income, low NI) but low indirect taxes. But most people pay about 1/3 of their gross income in taxes. There are only two certainties in life, death and taxes.

My husband pays over 58% of his gross pay in tax and NI. That’s not even counting what he pays in VAT.

I think this explains some of the mystery that is astonishing some posters. Doubling your gross pay doesn’t double your spending power. A big chunk of the extra get’s taken off you and put into the pot to pay for shared infrastructure and services, and redistributed to people who don’t have enough to get by.

The UK is a relatively poorer nation than it was 20 years ago. Every income bracket is feeling the squeeze.