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!

It's based on individual income rather than household income so we still qualify.

@IVFmumoftwo as long as you aren't earning over 100k each then it's fine. It's not combined income, it's per earner.

I went through a period of unemployment during covid and wasn't entitled to any help beyond JSA (£70 a week). After paying into the system for 20+ years I thought that was pretty rum to be honest. I have minimal savings now and just over pay massively on my mortgage. I can pay pretty much any unexpected repairs or bills from a months salary, but can't see the point in cash savings

Do you mean less tax for high earners or less tax for parents?

I see your point but somebody has to pay for it. I am a single woman and part of my struggle is my tax load and nothing to claim as I am penalised for never having had children.

A fair system would be to do what almost every other developed country does: allocate all tax allowances and thresholds on a household unit basis.

You are quite right that single people without children are also hugely overpaying, currently, and yet get far less support if they do become unemployed etc.

A fair system would be to allocate a tax free amount per household unit. By default this would be split 50/50 between a couple (so people can keep finances separate if they choose to do so) but they can reallocate it between them if they choose to opt in to that. The same with tax thresholds (how much a household unit can earn before a higher tax rate is applied).

Obviously in HMOs or flatshares, each adult is a separate household unit, likewise adult children living at home. Just like for welfare, and just like every other developed country pretty much operates its tax system. Not remotely difficult and much fairer because then each household can be taxed the same amount on the same household income.

Some countries then allocate additional tax allowances if you have children, in recognition of the additional costs that inevitably incurs, particularly given the fact that we have ageing societies and falling birthrates everywhere outside sub-Saharan Africa.

Yes but the government has to her money some how and it's via tax on earnings. So many people in this country hardly pay tax or don't at all and still need public services

Indeed it does. However, higher earners in the UK pay some of the very highest tax rates in the entire world already, hence many going part time/ emigrating/ retiring early as it's simply not worth working if 80-100%+ of your additional earnings - if you are a higher earner with children in childcare - are confiscated: nobody will work more for a lower net income.

The UK tax system is very top heavy and imbalanced. This also makes it precarious because it is extremely reliant on an ever-decreasingly small number of people paying extortionate tax rates.

The difference in most European countries that have decently funded services is that lower and middle earners pay far more tax. It's simply not mathematically possible to fund European-standard public services unless they do so, and the UK is in a mess largely because the public will not accept this basic fact. Many people claim to support higher taxes but they always mean paid by someone else. I'm afraid the higher earners have already been milked dry and you won't be able to get much out of the genuinely wealthy because they just leave an go somewhere else, so the only way to have a European service model is for lower and middle earners to also start paying their fair share.

Eventually the UK population will have to face up to this very simple choice: 1) far fewer state services/ fund your own pensions properly and reduce state pensions to subsistence level/ only very basic state healthcare with no contributions; or 2) lower and middle earners start to pay a lot more tax. And no, not another £50 per month or whatever! Significantly more.

It is not possible for people to continue to have both low taxes (or "tax someone else!") and have the services they demand currently.

It's also worth noting that the longer the refusal to accept this basic mathematical fact persists the worse the situation will become because money is being borrowed to fund these demands that people refuse to contribute towards adequately, therefore ever-more money is being spent on national debt interest and not invested in infrastructure, skills, education, technology and industry which would increase productivity and therefore raise GDP per capita and living standards. The longer we stay in the doom loop the less likely it will be for an exit route to be available.