Meet the Henry- High Earner not rich yet

[Ontobetterthings]

This was a very interesting read about a man who earns 100k but struggling financially working in London. After doubling his wage to 100k with inflation costs he is only 6k better off a year.

https://www.cityam.com/100k-isnt-a-big-salary-and-we-need-to-talk-about-it/

I can believe 100k salary in London is a struggle. Aibu?

Very glitchy website for that article - could not be arsed reading it all.

But I did do an inner eye roll at the thread title, as people keep bringing this up

If 100k is only just enough to live on how is everyone else supposed to fare- teachers? - nurses? - firefighters? -police?

That was an interesting read but the expenses are very London-centric, especially the rent for a one bedroom flat. If Henry really wanted to be better off in London, he would have to follow the immediate pain for future gain lifestyle. Move into shared accommodation, stop eating out/going to the pub, no new clothes etc.

Or he could move to a cheaper city where a lower salary will leave him with more disposable income.

I think that's the problem. With London real estate prices, you can't survive on normal pay unless you have inherited money or something.

I still think 100K is a very good salary with many people surviving on much less even after accounting for other benefits they may get. And this fictional person has options and a good financial outlook for the future if he is wise with his money (and he should really have some decent savings given his background, age and stage to fall back on if needed), plus I don’t know how he is spending £600 plus on monthly in Aldi for a single person even though I agree food prices have gone up significantly! I also don’t believe his £2000K plus a month private rental has mold, if so he will easily find an alternative private rental with a decent landlord (and with that sort of salary and access to the bank of mum and dad, why has he not got a mortgage by now?) This person is still in a relatively financially privileged position compared to the majority of people in the UK.

Having said that there are odd quirks of the system that kick in around the 100K threshold with tax and childcare entitlement, child benefit etc. I do agree that there is an issue with middle and even higher earning individuals also feeling the pinch from the cost of living crisis in general. Particularly if living in an area with high costs especially for housing, such as London. And I agree this is being overlooked by government and attracts limited public sympathy when so many are struggling so significantly. I generally feel this is a reflection of the financial crisis the country and economy as a whole seems to be in.

I do not earn 100K personally or anything like it (admittedly I work part time for various reasons), but I am a doctor and I would agree with the article that many doctors have had their real terms income cut by a third since 2008. And for people like myself who only started working right before the 2008 crash happened, it has been difficult to build up wealth and feel secure now and for the future in the way that was true pre-2008, particularly if not part of a couple and/or if you have dependents. As a single parent I am certainly feeling the pinch financially since the pandemic in a way I suspect most of my patients would never imagine. People still think of doctors as being rich generally. However I still recognise that my situation is better than so many of my patients who are struggling with real poverty. I have never had to choose between heating and eating, or faced eviction because I can’t afford a rent increase etc.

Wah wah wah. My diamond shoes are too tight.

Increasingly they can neither afford to live in London nor afford to commute in. It’s a real problem.

Not just London, many places have house prices that are unreachable on 'normal wages'.

We bought a 2 bed flat in zone 3 in 2019 when I was 26 after saving for 3 years living with MIL. I was on 25k, dh on 46k. I had eloped at 22 with 400 quid in my pocket (parents are wealthy, paid for my uni but kept my savings), dh child of single mum and on free school meals for most of his life. We saved around 70k in 3 years. Our flat is in the same post code as the most expensive road in the uk (Winnington road) and 1930s, residents manage the building. In catchment of excellent state schools.

Childcare is more of an issue with lack of parental support but our mortgage is v low, around 1282 at 4% interest rates as we managed to overpay 30k in 2 years after our salaries increased to 120k combined. Not earning 100k each/no inheritance/no help from grandparents just means we can't have more than 1 child and also can't upgrade and we wouldn't risk moving to the home counties due to escalating rail fares.
At the same time, being lean on housing means if our salaries are stable/increase and keep up with inflation we can consider things like private school..

Didn’t it come out this article was written by AI?

I struggle with the idea that someone can secure a £100k job but not have the skills to work out how to live well on that salary. I didn’t read the article but agree with PP that £600 on food for one at Aldi is ridiculous. Even if it’s not just food but household essentials as well.

That’s great @Primrose86 but what would you have done on £25K in London if you had been single and renting privately? Because those people need somewhere to live too.

London being that unaffordable is the point of the article though.

A lot of them are immigrants or live with parents or live in flat shares or have richer spouses. Hence why more ethnic minorities in london

I married at 22 and lived with MIL for 3 years and managed to buy in London at 26 on 71k household income in 2019. Was lucky to marry a 4th generation Londoner though. But our way of doing things would be quite unusual for most middle class white brits. I am east asian/ from a country where it isnt unheard of for people to get engaged at uni to qualify for the government home buying scheme with max subsidy (if they break up, they lose the flat and their deposit) . DH is from a background where half his sister's class was married at 21 (they did go to uni though) and he thought 22 was a middling age to get married (plus we were an international couple who met during theresa may's tenure as home secretary). But at the same time we had fertility issues which meant I didn't conceive until I was 32 (due to be induced on monday) and are pragmatic enough to stop at 1 (dh got a vasectomy)

Henry would still be eligible for free childcare hours and tax-free childcare, though article says he wouldn’t.

Neither me nor DH earn £100k but we do live in the south where house prices are ridiculous compared to local wages. There are tiny some tiny new build three bed semis being built in our village right next to a main road with rubbish parking and barely any garden and they want £410k for those 😬

DH could earn £100k if career progresses and we both find it a bit depressing that even if he did earn that kind of money we wouldn't feel 'well off'. After tax and student loans it's about £5k a month to live on. So while that is a lot of money and it's more than we currently live on with both of us working that still means buying a bigger house in our very average village where houses typically cost upwards of £500k will be out of reach.

We would have lost our child benefit, be on the cusp of losing any help with childcare, and losing DH personal allowance looming if he earned anymore.

I think the issue is earning £100k puts you in the very top % of earners in the uk but nowadays won't buy you a top % lifestyle. We wouldn't be sending kids to local private schools, going on nice holidays, buying new cars or able to amass a large amount of savings on that income even if we largely maintained our frugal lifestyle.

The cost of housing in many areas of the country where earning £100k salary is actually achievable means that there's not much disposable income left over.

And that rather makes those who do (or could) earn that think what's the point in working so hard.

I wouldn't have been able to stay in the country without dh, was an international student ..I would be back home living with my parents until I got married like 99% of people in my country (including investment bankers) and then I would buy a flat from the government which I would qualify for. I literally only know one person back home who lives alone as a single 20 something and he is extremely high flying- ivy league pedigree, government scholar etc etc my best friend on the equivalent of £120k back home still lives at home with her brothers and parents including a baby nephew (as her brother chose to rent out rooms in his flat rather than live in it).. she says she can't afford to buy as a single either.

Either way for me, moving out is only possible with marriage. I can't conceive of life any other way cos this was the reality from the moment I was born. I knew if I wanted to move out I needed to get married or forget it.

To me the white western middle class way of doing things and being able to live independently without a spouse is something I can't really relate to despite living in London since 2011. I have lived in London as a student though my parents paid for that (they lived with their parents too including after they married though they did buy a house with their parents).

That was me. I rented a room in a festering turd of a house because it was cheap with bills included and got a second job, and saved up enough for a 10% deposit on a flat over two years (£20,000). If Henry had done that and was to try Rightmove and to search for London - flats - up to £205,000 or so - he’d get himself on the housing ladder. Not an amazing flat or a prestige area but something.

The downsides:
mortgages more expensive than when I bought (but still cheaper than rent)
market for flats not as buoyant post-COVID
any property repairs and potentially service charge being your problem rather than LL’s

But doable and what I would do again today in Henry’s shoes.

The issue is definitely the £100k cliff edge and if you havent already got on the housing ladder.

We bought around 10yrs ago, a 3bed house in a rather undesirable part of south London for around £350k. Mortgage currently around £1500. Plus we have two DC in childcare - one with 30hrs funding and one with 15hrs funding. Total childcare bill £1900.

We have a joint income of £120k between DH (FT) and me (PT) - was probably more like £150k when i was FT. We have a comfortable life and appreciate how lucky we are.

But if I was a single earner of £100k, my take home pay would be around £5.5k and I would lose all my childcare benefits.

To buy our house today, you'd be looking at a mortgage of £2.2k+, plus once you lose TFC and funded hours, nursery bill would be around £3k min, maybe even higher. So thats already your entire salary before we even get into bills, food, necessary spends etc.

It does seem very unfair to me.

Back to the article and "Henry" should probably give up his flat and find a houseshare to be able to save a deposit for a flat rather than paying so much in private rentals. And probably reassess which part of London he lives in (like we had to.) But its understandable why someone in their mid 30s doesnt want to houseshare anymore. In the end, he cant have it all though so he would need to decide whats more important.

I think some people struggle to understand impacts of tax and inflation, and the article wasn't well written. Let me try a breakdown.

• Harry used to pay £12.5k tax and now pays £35k tax. The extra £50k is now only worth £27.5k.
• He's also had increases in rent of £16k per month for a mildly better flat only, but a huge housing increase on top. That brings his salary increase down to £11.k.
• His bills, food and other spends also went up with inflation so they cost £5k more than before (this one is debatable, I would say £3.5k is more realistic). The extra £50k is now an extra £6k (or at most £7.5k) that he can choose to save or spend.

The point though is that he never received an extra £50k at all, his true received income only went up by £27.5k, and he spends most of that on his increased housing cost plus inflation. You can argue he should go for a smaller shared accommodation, but he's on £100k, it's reasonable that he wants to be able to rent his own small place for that.

It says his salary is £103,500 so he would lose taxfree childcare and funded hours unless he upped his pension contributions to take him below £100,000k adjusted net income.

A lot of London fire fighters live miles away and some commute 2-3 hours for their shifts and sleep over in shared lodgings when time between shifts is too small to justify going home and back.

Then there’s tax. Henry now pays £2,868 per month

So he’s paying the above in tax and has this massive section as other which will be a similar amount.

I suggest Henry looks at where he’s spending 3k each month if it’s not food, eating out or housing.

For those that haven’t read the article, Henry is a fictional construct to illustrate a principle! He isn’t a real person that spends too much on his groceries or should move back into shared accommodation.

The cold hard truth of it - and this article illustrates how - is that standards of living are going down. Swathes of the UK are in the unusual and unpleasant situation of being worse off than we were five or ten years ago, and it looks as if the next generation will have it even worse. Wait till our spending on defence moves from 2.3% to 5%.

Am I sad that someone who aspires to be rich might have to go through a period of not being rich before he gets rich? No. And most of us will never be rich.