Reality check - are we earning enough?

[secretgoose]

Me and my husband run a small business together and it’s ran as a partnership.

Gross profit (before expenses) is around £80k.

Our net profit (after expenses) is £66k, so £33,000 each is what our recorded salary is. And that is legit. I don’t play stupid games with HMRC and record lower profits than the reality to avoid paying tax. Because I just think that’s dumb tbh.

I just saw someone say they’re on £35k per year and that’s “bad” for a 35 year old. Well I’m 32 and my husband is exactly 35. So it’s just made me worry.

On the flip side I have no debt (except the mortgage), have plenty of free time. Can take days off as and when I like. I’ve got 2 holidays this year. We’ve got no kids and don’t plan on having any.

Dont want to say what we do as it would likely give out identities away.

Whats everyone earning? Should I/we be earning more?

YABU = you’re fine
YANBU = you should worry

Enough for what?

Enough not to die of starvation? Yep.
Enough to bathe in Dom Perignon every day? Probably not.

But I'm guessing the answer is "enough for other people's approval," in which case... it will never be enough, so stop trying 😉

From a tax point of view it makes more sense to pay yourself below the tax free allowance threshold and to claim the rest as dividends. That's not a matter of 'playing stupid games' or recording lower profits, it's just makes good business sense.

Do you have an accountant who can advise you?

Look at the Institute of fiscal studies where do you fit in calculator if you really want to compare. A blunt tool but interesting.

It’s lifestyle expectation really that will decide if you have enough.

The highest either of us hit was DH on 70k when he was head of his dept but it ruined the job for him so he got out and took redundancy. I turned down promotion where I worked, management had an attack of the vapours as people never did this but I didn’t want to manage people ever. Like herding bloody cats.

What is with these threads recently asking strangers about their earnings?!

op if everyone said it’s bad what will you do?
The absolute irrelevance of comparing yourself to the next person who has a completely different set of circumstances as you, is just baffling.

You need to make sure you have contingency plans if something goes wrong with the business/health/relationship. And you need to take pensions seriously now. But with those caveats, who cares what someone else thinks is ‘enough’. If you’re paying the bills and happy with life, it’s enough.

DC is 25 and earns just over £30k.

A joint couple both on 30k makes 60k and that's decent enough for the two of you.

Well okay, we could do that. But if we did this around lockdown, we wouldn’t have got 80% of our pay. And it also doesn’t help when you apply for credit because you have to say you earn £12,500 odd per year. If one person is self employed, fine. Or if you’re earning enough that you don’t need to apply for credit ever, then that’s also fine. But we’re not in that boat unfortunately.

Full time minimum wage is £23,800, so you're earning a bit under 150% of minimum wage. If that's likely to go up as you invest in the business, great. If that's long-term, not so great.

Good for you. You seem happy and enjoying your life with your husband without being piled down with debt. And hankering after a load of status symbols.

As long as everything is ok with you OP I really wouldn’t worry. I have three children earning vast differences money wise and they are all ok.

That’s not correct. Dividends are classed as income.

I'm 34 earning £24k before tax etc. Husband earns similar. We don't care what someone on the internet thinks we 'should' be earning or what's 'good' to earn at our ages. Like you we don't have debts outside of our mortgage, we both work decent hours with good work life balance. Our child does 2 hobbies across 4 days a week and we have 3 pets. We're doing alright, for us.
Why do you care what others think?

Honestly if you can manage and don't need to claim benefits, that's enough in my books. Being reliant to meet your expenses with your income. That's what we should all do.

you’ve got no worries, you’re earning enough to cover living expenses snd have two holidays a year- you’re doing very well!
others will earn more but have higher outgoings , leaving them with less disposable income.
stop comparing, and thank your lucky stars

If it exceeds what you need to live on, then you're doing ok. I run a business with DP, we pay ourselves £1k a week (between us), but our outgoings are low as we've paid off the mortgage so I never spend all the money. My monthly budget for what has to be paid (bills and food, but also pension, kids pocket money etc) is around £1300 so we have plenty left over. I figure really it's down to what money you need to find each month.

I'm 55 & have never earned more than £25K. My husband has earned about the same as me, maybe slightly more. we're now mortgage free with a 5 bedroomed house, have a car each (mine is 13 yrs old his is 7 years old) we have about 4 holidays abroad each year & live quite comfortable. we do budget but don't have to be over cautious & treat ourselves when we want to. We live in the North east so not paying extortionate London costs. we have no debt & don't use credit cards at all.
So in answer to your question, it's really what kind of life you want to live & if you want a better life than what you have now then work hard to achieve it. Only you will know if you earn enough.

Well done for paying into the pension, that's a big self employed hurdle overcome. My only other comment would be to ask if you'd stress tested the business? With both your incomes being reliant on the one source what external factors may impact your profit and income? I ran mine for 9 years until CoL suddenly dipped our profits by more than 25% shortly after all the covid grants stopped and we were repaying our bounce back loan, within a year we'd gone from comfortably paying two £28k salaries to barely breaking even without any salary. If I had my time again I could have tried earlier to diversify the income stream rather than having 80%+ reliant on B2C short term work.

It's not as simple as that. My husband and I earn less than that between us and we're fine. But we have no kids, don't have a big mortgage (for our area) etc, don't need to save for retirement for reasons.
Many many people in the UK are on min wage or universal credit or nothing, and whether they're fine depends on their own situations and what they feel they want from life.
Whether you're 'fine' or not is something only you know, looking at your own personal finances, lifestyle, whether you're happy, what you want out of life. You can't just compare one number to someone else's number and get any meaning from that without context.