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!

Agree with the lifestyle creep comment. Although I am not a higher earner, I am not longer a min wage earner. Things I do now that I couldn’t do before are things like occasionally get a coffee from a coffee shop (maybe once or twice a week) and a weekly hobby that costs £10 each time. I couldn’t have afforded this before a pay rise, but now that I do these two things that eats up the pay rise.

it’s small things that are little luxuries for me that I am pleased I can now do.

You don’t get rich by spending money!

A mixture of lifestyle bloat and high expenses. At 100k specifically they likely have young children and don’t get as much help with childcare costs.

Private school is a choice.

Saying that though I'm on 36k a year, £1k rent and don't consider myself living PC to PC. I was when my son was in nursery. I just have to live a very frugal life

Some other ways I save money -

• no cleaner (tiny 3 bed house, one bathroom, don’t feel I need one)
• haircut once a year
• don’t get nails done or any beauty treatments at all, not interested in that stuff
• hobby is exercise class once a week, costs about £40 a month
• taking a packed lunch for us all on days out with the kids

No help with childcare costs at all here.

I have to earn about £20,000 before tax to recoup the equivalent income to the childcare support im not eligible for.

And that’s just for one child.

You would be lucky if it is Americans coming or staying here.

paycheck /pā′chĕk″/

noun
A check issued to an employee in payment of salary or wages.
Salary or wages.
"The new appropriations bill could mean a larger paycheck for state employees."
Money received on payday as payment for work performed.

Obviously helpful for you but this is very simple to do yourself I’d suggest. Or is that the point, people can’t do what to me seems very simple.

We earn over that combined and live in a very modest 3 bed terrace in an expensive area (where our jobs are). Add on a 2 year old in nursery (£1400 per month) and there is not much left after bills. Shop in Sainsburys mostly and don’t spend much on clothes.

People very often take on more financial responsibilities and upgrade. It starts with the tesla instead of a hatchback. Then one in the couple is probably a lower earner, so becomes a stay at home parent. Holidays are at nicer places. The house is larger and in a nicer area. The kids move from nursery to private school. I can see how it all creeps up on them just by way they upgrade each individual thing. Then you have to keep working the high stress, long hours job to keep funding it all.

Private schools, cleaners, holidays and eating out, shopping?

We are comfortable because we scrimped in our younger years and had a house before our first child. Having a second child meant we had to move - it was difficult access up lots of steps - and we took on a larger mortgage to afford it. We prioritised paying off the mortgage asap. Our furniture, toys and clothes were secondhand. Our Christmas presents were not the huge extravaganzas of today and eventually my husband's family instituted a policy of presents only for young children. (Our wedding for the time was considered expensive but would be considered cut-rate by today's standards with no over the top hen's parties etc.) We drove ancient but reliable and economical cars. We paid off our credit cards in full every month. We also sacrificed on holidays.

It's really important not to say to yourself, "I work hard and I deserve this". We always had good quality food and private medical insurance though. We did splurge on some activities for the children and had pets which luckily were on the whole blessedly healthy (and we wouldn't have done any really aggressive treatment for an older animal like chemotherapy though we never had to make this decision). We were also able to support one child who got into medicine as a postgraduate in another city for what seemed like an eternity and both our children had nannies for the first year.

My retirement savings are very well funded and we are doing up our house which I have to admit was looking very dated indeed. I think I have avoided the expense of following various trends over the year and am now sticking to a fairly classic look for the house. (It is quite illuminating to look at old magazines on interior decorating and consider which styles are still timeless rather than dated.)

Childcare costs. Housing. Commuting lots of jobs still require it.

I have 2 kids and they don’t go to private school!

We have a little debt from house renovations but other than that, I’d say our next biggest outgoings is food. I buy most food at Aldi/Lidl and then I go to Sainsbury’s to buy anything else I can’t get from there. I’ve had some unpleasant experiences with meat from the cheaper supermarkets so I buy the better quality chicken etc from Sainsbury’s but that really bumps the bill up.

We have a 3 year old car - not a flash one- and the insurance on that just climbs every year despite no claims. Tax on it is ridiculous too.

High council tax area.

High energy bills.

All the money just gets swallowed up.

We put nothing in savings. I’m amazed by the PPs saying they put £1500 away a month!

The original poster’s household income is £120k pre tax. Not a hope of spending £60k post tax on school fees on that income in London!

It's the "oh I'll treat myself" mentality. And 100k isn't as big as it sounds after taxes.

The trick is to automatically shove half (for example) into a savings account, isa, whatever the day you're paid. That way, it's out of sight.

I have a business account. I take 1000 and stick it in my normal bank account, and use that. I don't even look at my business account (I should, I should stick it in something that gains interest, but still...), so it's 'easy' for that money to build up and not be squandered on crap.

Most people live within their means regardless of income. Higher earner may spend it on bigger houses, bigger cars private schools holidays etc...lower earner don't have that stuff but both end up with little at end of month. I speak as a daughter of a higher earner. Parents were always skint despite a large income. They squandered it. Simple.

This is a niche part of the world - south west London but when a modestly lavish lifestyle was suggested to be £400k plus then I’m not surprised by lower earners struggling.

nappyvalleynet.com/community/viewtopic.php?t=132547

Why do you think that?

I’m a lawyer on more than that and on PAYE

I do not have much in my current account by the end of the month but that's because any extra has been either put in savings or used to pay something off. It's also relative. Some jobs I do I earn a lot then the next job is paid more modestly. When I earn more money I spend more on fripperies, can't help myself. When I earn less I spend less if that makes sense.

We earn less that that but security has always been important to me. So we tried not live paycheck to paycheck and save some each month and live within our means.

But there was so much luck in being able to live like this to so I can't give advice. Luck from buying at a good time, luck from both being made redundant which sounds crap but we both found better work and had these lump sums to save.

I mean it only takes for both of us to be out if work for a while and it's all gone anyway so that's luck too.

I think childcare is the killer for most people. Those years were very tough.

We're not true high earners but we earn about £120k between us (I work part time) and we can run out of money by the end of the month. I suspect it was the same if I earned £100k (I earn about £60k) because when we get paid we put money in the joint bills account first then money in the family account and then pay off any credit card bills, money in savings, and whatever else is left is to spend. It is rare that I get to the end of the month and have no money but it happens because I've already moved my savings out.

For big purchases I try to pay out of my income and not use savings.

Also the more you earn the more you tend to spend on mortgage, save, spend...

It depends on what you classify be choice though. I know several couples paying £3k on their mortgage for a 2 bed house in London. Their kids either share or 1.5 year old is still with their parents. Another bedroom is about £80k for a loft conversion with London labour these days.
Its hardly a luxury lifestyle having a family of 4 in a 2 bed house.

Their expectations are higher so they spend more. They move in different circles where they 'need' to wear designer clothes, rent or buy a fancy house, go on luxurious holidays.