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 might be an unpopular opinion but I do think there is an element of choice involved. We earn approx £50k per year between us, we live in a home county and DP's job is based in zone 1, we have two kids. We manage fine. Yes I do get child benefit and yes we did get funding for nursery but even so, but I don't think that would equate to another £50k per year. The main thing is we have chosen to move further out and as a result our mortgage isn't crippling.

It is very hard to generalise as people differ. I had our first child at age 22. Plenty of people wait until nearly 40 so have had 20 years of buying a house and paying off a mortgage before the child even arrives. We spent 50% of each of our net full time salaries (teacher, trainee solicitor) when we had our first child and I went back to work full time when she was 2 weeks (weeks not months) old.

Childcare costs are more expensive here in London (we live in zone 5 London - so outer London - as even when I was 22 a good while back we could not afford to live more centrally) than the NE of England which was my original home.

I certainly agree people tend to spend a bit more as their earnings go up even if just to feel they are getting some kind of reward for working all night without over time (as some lawyers do) or for working whole weekends without extra pay and that kind of thing. We never bought hair conditioner and anything other than squash rather than proper orange juice etc back in the day and even disposable nappies were beyond reach. As we got to higher incomes and older we did eventually have a cleaner. I don't now as happy just to do it myself and I have a fair old non ulez compliant car (ie I have to pay £12.50 if I do by a ulez camera) so I do not think have particularly got too extravagant as I got older with a higher income but I do know exactly what is more than others might do. I put the heating on for 2 hours last night. I would not have done that had I been poor. I pop out to Waitrose quite often and can buy whatever I fancy - a big luxury for most people. I paid for 6 weeks of external house works this summer which was a big job just to paint outside paint work) which I would not have done had I not had much money. Even things like buying chemical to clean my patio myself I know full well is a luxury.

I think I could cut back and live on a lot less if I wanted as most material things other than my house are not particularly important to me.

Yup, this is the case for us. We were going to finally be doing well last year as we were finally going to be getting 15 free nursery hours but then our mortgage increased by £700 a month and nursery fees increased by 20% at the same time. So that was fun! We also have to pay a lot of money for security at our other child's school which also increased. So now it's £1600 per child per year, which didn't help.

We're not quite paycheck to paycheck though, we just don't really see any change in our savings from month to month, unless it's a month with a bonus. So we're very lucky that we have those!

Age and when you could buy is a huge thing too.

You aren’t buying anywhere commutable to zone 1 on a 50k household income. It’s literally not possible in the current climate.

I don't want to give away where we live but it's an hour by train to zone 1 and a 2 bed flat cost around £250k. Dp does also have the option of working from home a fair bit which saves a lot on train fair. I changed jobs when we moved here so that I could work more locally to be around for the kids. The point is we have cut our cloth as needed and it's worked out OK.

So he must barely ever actually commute to London because a 50k household income like you are suggesting is not financing the mortgage on a 250k property and even a twice a week train ticket one hour into London.

Don’t bang on about choice and how you live further away on a small income all the while your DH still works in Z1 when it’s not reality.

£50k a year wouldn’t fund two places at nursery locally to me.

Don't cry about how expensive it is to live in London when moving is a possibility. If you can't afford it, you can't afford it. If its uses all your money then that's on you. We moved out because we had to. It's not that complicated.

Edit - no, we couldn't afford two at nursery at the same time. We spaced our children out. This stuff really isn't rocket science.

Because a fool and his money are easily parted

@Bibbledibble how much were you paying for nursery?

My local nurseries cost £2-2.4k for an under 3.

That’s anywhere up to 80% of a £50k salary.

Where's this nursery in London that charges £2k a month for 2 kids?
It's at least double that.

@Crushed23 not only double that - but they seem to increase by £100+ a year.

You are looking a £2-2.4k a month per child locally to me now.

Not eligible for the free hours anyway, but increasingly they aren’t offering them anyway - doesn’t cover their costs, and there’s plenty of demand as few nurseries.

A £100k earner with two kids is looking at £4k a month minimum here now with two in nursery (inc the 15 hours at 3).

Don't see the point in hiring someone to come and paint the living room when we've got a pair of hands each.

That can be a false economy - my hourly rate is higher than my decorator’s (though not by as much as you’d imagine!) and he is a heck of a lot faster than me.

I can paint a living room. We just did up a flat to sell, and we painted that ourselves because it would have cost a fortune to have the whole flat repainted, at a time when we needed the money for the onward purchase.

But it took about 4 weeks, and I was exhausted trying to fit painting around a 50 hour a week job and childcare. If I’d had the money sitting around, I would absolutely have paid my decorator to come and do the whole flat in a week, with me then freed up to do my actual job, and spend time with my seven year old.

I’m a single woman with no children and consider myself smart with money.

This explains a lot!! Children as a general rule = bigger/more expensive home, childcare costs, clubs/hobbies and more everything basically!!

So a large salary can easily be swallowed up.

And before people come on saying…well don’t have DC if you can’t afford them blah blah….be grateful that folk are as people’s DC are the future police, fire, nurses, doctors, plumbers, mechanics etc. We need people to have DC!!

We are both high earners (£100k plus pp) and save a lot, even with PS.

We have friends in a similar position but they have just bought a large house with at least £800k mortgage and have both just bought TWO new Range Rovers that cost £100k EACH. They must be spending close to £6000pcm just on mortgage and cars.

The DH also has a slightly precarious job and has been made redundant 2 times in 5 years.

I wouldn't sleep at night in that financial situation, what happens if he loses his job again?

This is a journalist researching/ collecting quotes for an article btw. If anyone's bothered about being quoted.

I don’t know what there is to question.

Lifestyle inflation. As you earn more you standard of living tends to change to reflect that.

I earn many multiples now of what I did as a graduate but honestly don’t feel especially “rich” and only stopped living pay check to paycheck recently.

But then I lead a very different lifestyle at 43 to what I did at 23 or even as a student.

I genuinely don’t see why people are confused by this. However as you go up the income scale fewer people live pay cheque to pay cheque.

Some people on 100K do not own their house, they have to rent one. After paying the rent, they are left with very little and yet still considered to be "rich" with constant "tax more, tax more"...

For me how I manage currently are:

1. Having a budget and a budgeting tool and using bother religiously.
2. Paying myself first
3. Currently being a lodger.

I hate being a lodger at my age so looking to rent alone and expect my ability to save and age my money even further to shrink dramatically.

Living beyond their means!

We could afford a bigger house, flashier cars, holidays, clothes etc than we actually do spend on. But we prefer to save. As well as the fact that we are not impressed by material things, nor do we care whether people are impressed by what we have.

As our income has increased over the last decade we have increased our holiday budget and done home improvements, but we still don’t spend as much as we could. We live in a very nice 4 bed in a lovely area that we’re perfectly content with even though we could afford to move somewhere bigger/more impressive. I’d much rather enjoy financial security by having money left at the end of the month.

If I moved from London I would have to retrain in something else (likely lower paid) as the vast majority of my industry is in London.

I would love to relocate to my home city but every time I search for jobs in my field the results return blank.

Will give an example of DH very high earner mate in London. We were staying at his house and he got an urgent call from work and was going to be flying off . He would just buy a new shirt and toiletries when he got there as couldn’t be bothered to pack. He also gave his GF a credit card and she was allowed to use it for anything she liked. Her typical spend was 3k per month, this is at least 20 years ago. This was just for fun stuff, he paid for everything house wise, she was a FT teacher so had an ok wage.

The disconnect here is people are mainly writing about the cost of basics like housing what I’m writing about is someone who could easily afford all the basics with zero issue but just spent everything. This guy is rich, less contact now but I remember him being on 150k over 25 years ago and that was without his bonus. He was DH friend from University and the ultimate capitalist. Made it from nothing and had a chip on his shoulder.

I'm not going further into the details of our family budget. The point is so many people seem to get good jobs in London, but then mortgage them selves to the eye balls in the most expensive area of the country and have multiple children where nursery fees cost ££££ and then wonder why they have no money. I don't get it. Sorry.

@Bringautumnnights Well done for saving, but surely you can see it's disingenuous to say that you're living paycheck to paycheck when you're saving £1,500 per month ?!

This is the same for us. We each have 8 year old cars which have had zero problems so far, so do not feel the need to upgrade. We have a touring caravan which we use for 2 separate weeks in the summer holidays, costs approx £400 for a family of 4 for a site with swimming pool, entertainment etc. And the kids enjoy it more than when we go on a 5star all inclusive to the Canaries, which we also do but in October when it's cheaper. We have paid off our mortgage and save over 1k a month. If our household income was double I wouldn't change a thing. It's all about making good choices and not trying to impress others.