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 happens really easily. I've worked hard to opt out, but many don't have that option.

Two higher earners in a household often don't have much choice over work location. This means high mortgage, perhaps less grandparent help, and may influence private school choice.

When all your co workers are sending their kids to private schools and have expensive clothes and cars, there is pressure to keep up to fit in. You then feel you have to remodel the kitchen so that your kids /family doesn't feel judged at the private school.

I'm glad to be away from that.

My DH is on around £100k and I work p/t so I earn between £10-£20k. I know that’s a much higher combined income than many people but I can honestly say we feel skint at the moment! Certainly less well off than we were say, 5 years ago when our income was less.
Mortgage has gone up and is almost £2k, we’ve had no holidays in 2 years and are O/D mid-month. We don’t have a penny to save. Shop in Lidl/Aldi, I’ve bought no new clothes all year, kids have only had essential items.

Im normally the first to say 100k doesn’t go that far but it’s ridiculous to earn 10-20k & be skint & unable to afford a holiday particularly when 2k is quite a low mortgage vs your income. Even with 2 in private school there should be plenty left over. Presumably there’s either a lot of debt, &/or a huge amount going into savings/investments or maybe you actually have 5 dc in private school.

For us, we have a profoundly disabled DC who needs 2:1 care 24/7. We have no family who can help and we are only funded to about an hour a week so we pay a fortune on carers and on the equipment DS needs. We aren’t eligible for a lot of the support other families receive due to our income so instead it gets swallowed up. In school holidays, this costs us about £100 a day. DS gets through special needs buggies like a knife through butter - we have to replace them about every 4-6 months. They’re over £200 a pop. He needs a specialist car seat - £1000. Specialist bed - £5000. SALT is £70 for 30 minutes once a week.

2 in private school is £60k post tax round here - not a hope of sending with an income of £120k.

Such a stupid response.

I earn over £100k. After I've paid mortgage and essential bills (utilities, council tax etc) I have £1200 a month left. From that I support a child at uni to the tune of £500 a month, which is the gap between what she gets from full maintenance loan she's entitled to, what her dad gives her (he's unemployed) and what she needs to pay rent and have a modest budget each week. She can't have a termtime job because her course is intense (medical) but did work all summer.

From the remaining £700 I spend £400 commuting to my job. Leaving £300 from which to budget for food, other household expenditure, petrol, kids' birthday and Christmas presents, and clothes for me and the younger child. At the moment both the washing machine and dishwasher are broken and the only way I'll be able to replace those is on credit card, which I then won't be able to repay.

This situation won't go on together but my spouse left 18 months ago (affair), we're trying to sell our house (which I'm still in) and until I can reduce the cost of housing, this is how it is.

It is ridiculous to assume that everyone who earns over £100k is rolling in money, without any knowledge of what their cost base is, or why.

I shop in Aldi and buy clothes for myself and children on Vinted

I am on 100k and have nothing left at the end of each month because I put everything not spent into my pension and early mortgage repayment. I don't feel a need to build up savings because I can deal with life emergencies from my salary.

I mean I earn paycheque to paycheque. This is because I have salary sacrificed 18% into my pension and over pay my mortgage by £400 extra per month. I then have £1200 go out per month in nursery and child care costs. I wouldn't say I'm a spendthrift but I have nothing left at the end if the month either.

Loving the we are so poor but mention in the same breath sticking £1500-2000 into savings every month. 😂

Our combined earnings are £130k roughly, he earns triple what I do.

We live in one of the cheapest parts of the country, our 4 bed detached house is valued at around £350k now.

Our children are adults now but we had zero childcare costs because grandparents helped.

We put money away each month in pensions, premium bonds, ISAs etc.

We have one expensive car and one run around that's over 10 years old now.

No student loans because we didn't go to university, Dp is a high earner because he has a trade that is not very popular in this country so he's been lucky to be in high demand in his career.

We are currently looking to downsize, no mortgage on the house but council tax is extortionate and we don't need 4 bedrooms because the children have their own homes.

We holiday abroad 3-4 times a year and get a few UK city breaks.

I definitely think it depends on where you live. We couldn't afford to live the lifestyle we do if we lived in London or probably any big city in the UK. It always amazes me when I see the property threads on MN, London prices are insane. Childcare is also expensive and I know we've been so lucky never to have paid that. I can understand how some high earners are living pay check to pay check though, just because people earn a lot it doesn't automatically make them millionaires. A lot of people wouldn't live in my area though because it is very forgotten and underfunded, poor hospitals and schools and terrible public services. We grew up here so don't know any different but it's definitely not for everyone.

Oh give over

Just to add, I earn much more than the majority of my friends (I am a single mother, and many single mothers are on very low incomes). I don't think my friends realise how much I earn, although they see I work hard and am an expert in my field. But, it means I don't hang around with other high earners. Plus, I don't like shopping or consuming (like to feel I am living relatively lightly on the planet).

Not true! Im a nanny in private homes and my cutting employers are very frugal despite having big salaries

We have a high household income and If you were to ask DH he would say he lives paycheck to paycheck. However we both save monthly into our pensions and ISAs and have 6 figure savings, we live well within our means. It really annoys me that he comes out with this but he genuinely feels skint because the money goes straight to savings at the beginning of the month and so feels like a bill like everything else. I may have set it up this way deliberately after seeing how he struggles with money.

As far as lifestyle creep goes that is inevitable, especially once you have children, you need a bigger house and car and holidays area lot more expensive. Even as a saver I think there's no point not enjoying your life, so we have short term savings for holidays and house improvements as well as long term savings for retirement.

Easy. The more you earn, the more the bank says it will give you for a mortgage. You then look at what you can ‘afford’. Bam, super high mortgage payments. Combine that with the expense of childcare that most people have and while high earners, there’s no money left over.

Yes, people don’t HAVE to buy more expensive houses just because that’s what the bank will give them but it’s human nature to cast your eye over what you ‘could’ have and then once you look at other stuff at lower prices it never measures up against what you ‘could’ have (obviously). Thats the trap.

2 in private school is £60k post tax round here - not a hope of sending with an income of £120k.

@Propertyladder123 Im not sure why you replied to my post? Earning 10-20k a month isn’t 120k…

Before my partner moved in recently I was supporting myself and two kids on a 40k income and still managing to save a few hundred each month.

I have a few things that make it easier for
me though - kids not at nursery now, just needing wraparound club at school so much cheaper; small house with small mortgage; wfh so no commuting costs; co-parenting so kids not here all the time.

I save money by decorating my house myself and buying clothes from charity shops. Holidays are a short break under a week long once a year.

Yes, the thing is that all those bills and groceries are much more expensive now than just three years ago. Most people have been decreasing their spending but still not catching up. The food prices is one but mortgages can be more than double than two years ago. If you have young kids or teenagers is so much more expensive and worse in the SE. I am more flexible with my budget for my kids. Life here is hard enough to deny them some fun or holiday after a hard earned great exam results year or any accomplishment in their lives. The reality it is that living here is not worth it anymore for many people. At least if you want a good lifestyle with a PAYE high earner salary. Only thick thing would be if you stay here living pay check to pay check.

I have zero savings, substantial debt, and pay 8% into my pension, which is not a lot considering my age

Also a lot of very high earners eg a lawyer earning 2m won’t be on PAYE.

Rich people often are tight.

£100k doesn’t go as far as you think it should but I suspect people who are totally out of money at that level are putting money into pensions (would be silly not to given tax penalties) and treating some savings as bills/overpaying the mortgage.

There is also a lot of discretionary spending that could be cut quickly. I was horrified when I added up the cost of one of my daughter’s extra curricular clubs. If we had a salary reduction a lot of that spending would need to go but could go relatively quickly.

A "high earner" is someone who get £100k. I know that is not a low salary, but if you live in London (or around London, even) and have kida to support, you might actually leave paycheck to paycheck! Factor in childcare for more than 1 kids and it's easy to see

Whats with the phrase 'paycheque'?

Or even worse 'paycheck'

This is american language

Its payday to payday

I live payday to payday because I enjoy spending, like another poster said, Im a spendthrift!

Yep, I was paying £1500 for 1 outside of London.