Apparently we need a household income of 'at least' £45K a year....

[notyummy]

David Kuo, of investment advice website Motley Fool:

'The average person in the UK spends around £32,000 a year. This is made up of £25,000 on basic expenses (transport, food, clothing etc) and £7,000 on mortgage repayments.

The upshot is that the average household needs a gross salary of about £45,000 just to break even.

That is why, I reckon that the average person won't be happy unless they earn around £50,000 a year. However, it is may still be a hand-to-mouth existence.

A salary of £100,000 a year can make a huge difference. After tax, this works out at £65,310. And after average expenses, there should be around £33,310 a year left over.

Someone earning a salary of this size could retire in reasonable comfort provided they invest their disposable income carefully. They could amass a pension pot of around £550,000 after 10 years and almost £1.8m after 20 years.

Of course, this assumes that a person on £100,000 is prepared to live modestly, spend carefully and save diligently.'

Thoughts ladies??

I am sure you can get costs down to far less than £32,000

I mean, people do!

£25K on transport, food and clothing? Really?

I'm sure the average salary is something like £25,000, so unless the 'average person' is getting into £7,000 debt every year, that figure has to be rubbish.

£2000 a month on transport food and clothing - they're having a giraffe

My travel costs into Central London (from outside the zones) is £250 a month. Food for 4 of us £500 a month, and clothes, shoes, haircuts maybe £250 a month.

So where does the other £1000 come from then.

Mind you our mortgage costs are a lot more than £7000 a year

I am assuming this is all part of the '£50K a year to be happy' reports that have been out there. It does seem like quite a lot to me. We are lucky to have a fair amount more between us, but I know of plenty of people on less.

I don't think he was really focusing on how much people need to earn to be happy, more just working through some figures to try to show how much you need to earn and save in order to have a good pension pot. Of course you can live on less than that, but even though he's phrased that bit badly, the rest of the example is true enough. (I am a financial adviser btw)

Unfortunately, most people don't consider pension savings as part of their necessary expenditure, so wouldn't see his point of view. Which is why this country (and many others) will be completely buggered in a few years, with an aging population and no savings to support them.

It's certainly true that if you're not careful, and if you're pretty cavalier about spending money on unnecessary things, then you "can't" survive on even double the average salary.
The thing is that everyone's idea of necessities has become really skewed over the past few years. There really isn't a need for massive TVs with SKy HD, 3 different kinds of games consoles plus millions of games, nails done at a salon, fake tan every year, so many clothes you haven't the room to keep them, an extra little table by that sofa just in case you might need to put a vase on it, huge numbers of books that you could get through the library, summer and winter cushions...
We are just so used to there being endless amounts of stuff to spend money on now.

Is what he's trying to say that it's very difficult for someone in a household on less than £45,000 a year to save for a pension because all their income goes on day to day expenses?

Good point luke warm. It has always been factored into my expenditure. Unfortunately when I started my pension pot at 23, it was Equitable Life..... Luckily I joined the military after a couple of years so am not relying just on that particular 'pot of gold'

Bramshott - not sure he's worked it through that far, but that's the natural conclusion and pretty much, I think he's right (that and the general attitude towards the necessity of pension saving).

'Average' is pretty meaningless. Old? Young? In a family? Living solo? 'UK' is pretty meaningless in this context as well. Which bit of the UK? Aberdeen? Billericay? Llandudno? Major difference in costs.

I would say that financial 'happiness' boils down to having a few quid left at the end of the day, after you've paid for all your essentials and a few luxuries on top - and a bit put by for emergencies.

Dickens' Mr Micawber definition does it for me....

""Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery".

summer and winter cushions?

Dh can't even see the point of the couple we've got, left over from tarting up previous flats for sale etc. They regularly get chucked off the sofa in irritation!

Completely agree with you btw.

Well we must not be average then.

We spend far less than that, and have pension provision too.

I certainly would't say that we were living hand to mouth.

Chil1234 - that's my personal mantra too! I've tried telling my dm and df that many times, for all the good it's done, blooming irresponsible 60s baby boomers that they are.

I would say 45K is about what we need tbh

I learned about summer and winter cushions on MN
It isn't knowledge I've been tempted to use.

It depends where you live though.

If you live somewhere where £200,000 will buy you a nice house, and you have been on the property ladder for a few years so bought when house prices were much lower, then you will not spend £7,000 on mortgage repayments for a start.

Nearly everyone I know their mortgage is roughly about £1000. So we are paying 12k there. so thta scuppers his 7k workings.
We need alot more than 45k.

Well dh earns half that, I am a SAHM, our mortgage repayments are going to be 5k a year which is roughly our rent atm anyway (we're in the process of buying our first home) and we manage to live month to month quite happily. Well, frugally, but we manage.

I wondered about the £7000 pa mortgage figure as well. Ours is about double that, but we choose to live where we do, so it's our own lookout and I cannot complain.

The thing about average earnings being £25k a year is a bit of a red herring imo. It means that half of all people (inc people on benefits) earn less, and half more.

The same study showed that it's relative income that really matters, so if your joint income is £200k gross and all your neighbours are on £230k, you could feel relatively poor. Equally if you're living on £25k in a poor area where all of your friends are earning £20k, you feel well off.

Is it the mean, median average or the mode average Mumble - do you know for sure that 25k is precisely the middle income (median) with 50% above and 50% below? Not needling just interested?

It's the median, according to a prog on Radio 4 last week about earnings. It was on Friday at about 9am if you're interested.

agree how wealthy you feel is more to do with your environment and what most people earn where you live - but also what income is needed to live where you do. My family in South Wales have much lower income than we do but as we live in SE England then cost of living is much higher. So our quality of life is not as differnt as it would look on the surface iyswim?

Yes, I do swym. I remember years ago going back up to Cumbria where I come from originally and my friends were really boasting about how much their husbands were on. I think the most was about £20k, and they clearly thought that was a fortune, which it kind of was, compared to what you need to earn in the Home Counties.