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 a silly thing to say about benefits! On benefits you wouldn’t be building big pension pots like you are now, and paying off a large mortgage - the end result being a very valuable asset to your names.

I haven’t cried about how expensive London is nor have I said I have money left. It’s just annoying when people make stupid arguments that aren’t true.

I do not believe for a second your household income is 50k and your husband commutes to zone 2, while paying 250k for a mortgage and happily squeezing in kids 4 years apart into the same bedroom.

Ok so happy to be critical of others in light of your spending, but not willing to explain exactly how you afford to raise a family inc two kids, mortgage, and a long commute in zone 1 on what is basically 2 x London living wage.

Regarding ‘mortgaging themselves to the eyeballs’, a £350k mortgage ie 3.5x income would be £2k a month in repayments currently. That doesn’t buy a lot of house in the South East.

You say your husband commutes an hour to zone one. That might cost another £400 a month.

Childcare for one child, anywhere in Britain, might be £1,500.

That’s already £900 a month MORE than the entire take home pay on a £50k salary.

My youngest was signed up for nursery months before birth because I needed both kids to be in the same place … during that time the 30 hours was implemented and funnily enough his weekly fee is the exact same that was quoted 18 months ago without 30 “free” hours.

@Completelyjo no surprise there!

I think between signing up (before they were born) and and getting a place at one nursery (age two), the fees had gone up by £400 a month.

I need to earn an extra £10k a year just to pay that £400/m increase.

Oh my god, it's like people living on £50k per year in/ near London don't exist 😂 You do realise the average salary in London is significantly less than £100k? You don't have to believe me, its fine

No one is saying they don’t exist, but people on a household income of 50k in London will be bare bones if they have kids or are in the private rental sector or are paying a mortgage.
Lower incomes can skew the reality of living costs due to top up benefits and particularly housing and childcare benefits.

@Bibbledibble no, that’s not what anyone has said.

I think unless you can outline how you funded a mortgage, full time childcare and a long commute comfortably - it’s difficult to take your criticisms of others spending too seriously.

Exactly! Private rent is never ending circle. It's impossible to save a deposit while paying high rent. 100K is nothing when you do not own your home, when you don't have any relatives, who can help you with a deposit and when you won't benefit from any will.

Personally I wouldn’t go that far, 100k isn’t nothing but people on household incomes of say 40/50k underestimate the difference in take him at the end of the day between their “low” salary but plus child benefit, funded nursery hours, a small amount of universal credit and a housing allowance vs the take home of a household on say 110k.
Take home after all benefits are accounted for is nowhere near as vast as people first expect who just think 100k = millionaire.

This is a really relevant point. There’s a big difference between running out of money at the end of the month but having money in savings etc, and running out of money and having no savings to tide you over or find any unexpected costs. Both are technically living ‘paycheque to paycheque’, but one has a lot more security than the other.

Hmm. Last time we painted our living room, it took us a weekend. That was with breaks and not constant work. The quality may well have been better had a professional decorator done it, but it looks good enough for us. My dad worked as a painter/decorator (and all sorts of other things) and taught me how to do it, so I've got some knowledge and it was pretty easy!

DC got involved and loved it. We had "camping out" meals and turned it into an adventure.

We'd never laid carpet before either or done tiling, but we just Google and ask advice from people we know. It always comes out looking fine and it's never taken huge swathes of time. We'd probably not decorate a whole house in one go, though, unless we moved somewhere else and it needed it. Then that would be done for X amount of years, possibly repainting another room another colour if we wanted a change.

My DP earns just over this, and we have 5 children, student loans, overdue debts and teenagers that eat more than we do (Tesco bill comes to £200+ every week, we all eat different things). We are just breaking even, and have to cut back as oldest is hoping to go to university in 2 years.

I keep thinking we should be feeling more secure, but we don’t.

Our household income is around £120k (most of that is DH). After expenses (mortgage, bills, commute, food, car, loan repayments etc) we have about £1500 a month left to save or spend frivolously - we usually save or invest £700ish. We have 3 DC, live in SE, DH commutes into London daily. We live a nice, but not extravagant lifestyle. I can see how things might be very tight if we had childcare or student loans to pay for, but I do think lifestyle creep is the main culprit. £100k+ is not a vast sum, but it is plenty unless you acquire expensive tastes.

Oh my god, it's like people living on £50k per year in/ near London don't exist 😂 You do realise the average salary in London is significantly less than £100k? You don't have to believe me, its fine

I know loads that do but loads aren’t paying todays mortgage & childcare costs.

Its the childcare that’s the killer - it’s like having two mortgages.

You have 3 DC. Let’s say they are two years apart - that means you might have 4 years during which you are spending £4,000pcm on childcare. That’s going to be over half your income, even on £120k.

Without childcare expenses, you suddenly ‘free up’ almost £50k annually in spare money. Which is a massive amount - your lifestyle and ability to save would look very different!

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.

People in London aren’t having multiple dc hence why schools are closing. And a mortgage is often cheaper and definitely more secure than renting.

I'm a single mum of twins.

My mortgage, for a small 3-bed semi-d is 2,500 per month. My childcare bill is 2,800 per month.
Luckily I'm a very high earner, so not living paycheck to paycheck, but I can easily see how someone on 100k doesn't have any money spare if they have childcare and a big mortgage.

I think it's called "living within your means". So if you earn 25k, then you live within that, if you earn 125k then you live within that. Everything is relative depending on your income and outgoings

Yes, that’s it. I use the wine example. As a poor student you buy a bottle of $5 wine, because that’s what you can afford. When you leave uni and get a graduate job you buy a $7.50 one. You then get a promotion so it you now but a $10 bottle. You advance up the ranks and buy the $20 bottle, then $50 bottle. You don’t end up earning a high salary and buying a $5 bottle of wine and saving the $45, because you can ‘afford’ the $50 bottle.

Because they set a lifestyle based on an income and inflation has hit. My average costs went up by over £500 a month a year or so ago (childcare and mortgage both jumped 10%). How many people think they'll need over 10% spare in the budget?

Totally agree, and I did acknowledge that. 2 of ours are at school now, but even nursery and wraparound is more than our mortgage, and more than I earn. But then I suppose we wouldn't have chosen to have 3 DC were we paying for childcare. Ultimately, number of DC, size of house etc are all choices, £100k is still a very decent income.

Exactly, and most high earners living to the edge of their overdraft every month without these securities in place are very few and far between. So the posts of 'they are thick as pig shit' and 'just goes to show you don't need to be bright to get a high earning job' are rather ridiculous.

As I said above, we currently don't have any savings at the end of the month, but we have around £300-320k in a mixture of assets, savings and investments. I'm not trying to brag (though when you're directly being called 'as thick as pig shit, then no, I'm not pulling any punches) – I'm just being transparent and showing that we have been financially savvy enough to make sure that is in place before we have considered spending on things that take us to the edge. High earners also tend to have very robust insurance and mortgage protections in place because they can afford them.

Saying that, 'over £100k' isn't very descriptive for what a 'high earner' means. There is a very big difference between a family on £100k and one on £200k, and what they have likely been able to put in place for security.

I did for years because I grew up in a frugal low income household and for me one of the benefits of a high income was not having to think about money. If I wanted something (e.g. private schooling or another DC - I was never one for expensive 'stuff') I didn't ever consider the cost just went ahead and did it.

I work in London, in financial services. For those without inheritance or family help, main expenses stem from,

1. House prices (lets say £4k a month for mortgage and council tax and utilities)

1. Childcare and School fees (this is not a debate about private vs state, just a factual statement for those who already choose to pay plus VAT. Say £5k a month, 2 kids)

1. Cost of living: household help or leisure cost, nice all inclusive holidays £8k, as you can only do a particular week in August. Kid has a party £500. Cleaners charge £20/hour. Groceries maybe £500 a month. Chain restaurant meal at Nandos may cost £100 for family of 5. School Holiday camp £600 a week for 3 kids. Or £2k per month for 4 days nursery. Let's say £3k a month.

That's £12k a month from after tax pay.

For singles they have a fabulous time travelling, restaurants, all sorts of entertainment. All the parents at my work live vicariously through single people. If they save well (without having to sacrifice too much) it is very possible for childless high earners to retire in their 40s. But they usually

If the government was looking to give the economy a massive boost, free state childcare would do it. There would be a huge amount of spending power unlocked that's currently going on nursery fees.