What was your financial turning point...

[CaptainJ]

Evening,

I'm interested in what has been the thing that's helped you most in increasing your take home income / resources.

I think I've been going about things the wrong way and I'd be glad to hear some insights / perspectives from those who have gone or considering any of this 👇🏼

My career started 4 years ago and I earn just over 42k which with my student loan, tax and pension is £2457 take home.

I've a lot of student + personal debt (self funded student / first generation backgorund etc) a solo mortgage (£700) and I'm aiming for IVF next year (again solo). I've not made as much of a dent in my debt snowballing as I would have liked (I think everyone is experiencing this at the moment) so all of this is my motivation for higher take home pay.

I have an offer for a new role which is £47-50k that I'm considering. But when I search the Money Saving Expert take home calculator the difference between my take home pay on a £42k compared to a £47k is a 200-300 difference - 50k is £2769 (or thereabouts). Given the increase in responsibility of this new job I thought that it would balance out with a better take home - but it just seems like any benefit gets zapped by bigger contributions on Tax and NI.

I'm starting to see that I'm not going to make profound leaps in my income by pushing myself into higher salary brackets esp given the big emotional and energy cost (tbh I'm not coping very well in my current role - my performance isn't an issue, but I can feel it in myself and I know it's not sustainable).

I thought that moving into new jobs every year (averaging 9 months) would give me a bit of a tailwind emotionally (because onboarding etc is tiring) and financially (because this is the best time to negotiate a new salary) ... but... I'm starting to think that a better option would be finding a role that was at 34-36k level, and supplement my income with a couple of hours self employed in report writing / copywriting (either setting up as a ltd or a Trading As). That way I can set a % of my utilities against this and pay myself in dividends.

I feel that the headspace in taking a lighter loaded role would give me more space to explore other streams instead of continuing down the path that I've been on (bigger salary (more pressure) bigger salary (more pressure) bigger salary etc).

What's worked for you? Have you opted out of the salary climb in pursuit of other ways to create income and or other incentives?

Glad to hear what's been the turning point for you.

How old are you? Can you give trying to conceive a little bit longer?

It's a funny window because of the change in tax, but you benefit from increased pension contributions and maybe better life assurance if that's in offer. And future pay increases from a higher wage help.

Student debt is just a tax how much personal debt have you got? Are you planning on clearing this before you have a baby?

Setting up a business and being self employed is hard and takes a lot of self motivation. It can be financially rewarding and more flexible but you don’t get much towards utilities.

Paying dividends is after corporation tax

• min 19%

and then dividend tax: Dividend Tax thresholds for the 2023/24 tax year in the UK Dividend Tax rate From Basic Rate 8.75% £1,000 Higher Rate 33.75% £36,70 Additional Rate 39.35% £125,140

Not exactly saving anything. Climbing the pole is the best way as jumps become big once you hit your 30’s. Get to LTIP level and it can be lucrative.

I’m in my 50’s now and will earn c160k part time this year. At 22 I was earning 18k

Turning point? Professional qualifications.

My turning point was passing my professional qualification after studying towards them for 5 years. I immediately changed employer and doubled my wage. Previous employer only offered a 10% pay rise upon qualification - no thanks!!!

You will pay a very similar amount of tax on self-employed/Ltd co unless you can charge more for the hours you work (bearing in mind presumably you will get benefits with your job like sick pay, possibly enhanced maternity pay, pension etc so higher charges may not = more money). You still pay student loan contributions on dividends and self-employed income. Also if you are going on mat leave could you keep up the work whilst you are off, a lot of self- employed people take very little time off as they will lose their clients.

Can you put off the IVF for a couple of years, I’ve just been through it and realistically with medications etc you need £10k a round and emotionally very draining if you are doing a stressful job (I dropped a day at work to help juggle appointments etc).

For me I would probably have a two pronged attack, spend as little as possible and increase earnings. Bear in mind nursery costs can be as high as £115 a day depending on where you are, we are doing 3 days a week nursery in Leeds (where it is cheaper) and even with the tax free childcare it is over £900 a month!

Unfortunately tax (20%/40%) plus NI (soon to be 10%/2%) student loan (9%) plus minimum pension (4%) means you “lose” nearly 50% of any pay rise.

In terms of when my salary increased, it was when I qualified and then as I took on more and more responsibility. Unfortunately in general terms, stressful jobs pay more.

Late 30s - nearing the 40 mark + referred to fertility clinic because my ovulation isn't happening... still early days so keen to get started with whatever options are available :)

Thank you WhatWouldTheDoctorDo and @Eatbetterthisweek for your comments - sometimes overlook the long term advantages.. I've around 15k outstanding which I feel I can clear in the next 18 months.

Thank you @Applesaarenttheonlyfruit - saving posts to come back to. Just had a google on LTIP. I hadn't heard of this before. Realising I could be more aware of other perks of new job ops (like dental / pension contributions etc).

Qualifications came out a lot from the responses too - thank you all for sharing.

@NorthernDuck thank you for sharing your experience on the emotion and cost of IVF and child costs too. Think a lot of this depends on choices Ill have re fertility but in the immediate term figuring what next qualifications are going to enhance my options...

Thank you all!

But the OP wouldn't cross any tax boundaries with the salaries stated, would they? So, I don't buy the argument that the payrise wouldn't add much.

If you are in UK
If you take the new higher paid job
Pay into your employee pension each month
Your employer will probably add some free contributions too into the pension
Plus you will probably get free life insurance too
Compound interest over time, should give you a pension pot in the future

If you own your own property
You can rent out a room/s tax free up to 7K per year
The exact info is on www.gov.uk

@GeneCity fair point, I was thinking more once you get beyond £50k (and I'm in Scotland where the 42% band kicks in earlier, and before the drop in NI). I just mean that generally, once you hit that higher rate window, it doesn't feel like much more in your pocket initially for an increase in responsibility, but things like pension contributions count and future % increases are based on a bigger amount, so it's worth thinking about the long game in a new job that has growth potential rather than just take home pay.

In the OP's shoes I'd take the new job, put the full increase towards debt, and then review options around work, hours, responsibility vs self-employed options once I had cleared the debt.

A self-employed side hustle can be really teally hard work (set-up costs, getting clients, customers etc). Would recommend casual work, renting a room out, tutoring, over it, to be honest. Even if you make a go of it, be very careful in paying yourself in dividends rather than a salary; you could find yourself paying tax-on-account which is excruciating. Speak to an accountant first.

Tax on account is STILL after the money has been earned, it’s just before the balancing tax return. If your earnings vary greatly, you can adjust it.

What was the professional qualification out of interest?