Budgeting for the ‘Wealthy’

[Howyoudoin]

Between us, my Wife and I earn over £120k a year so would be considered fairly wealthy by any standards. And yet, I find myself wondering how we are going to cope over the next year.

And wondering how on earth if I’m thinking that, how are others earning far less going to cope?

We’re currently paying the best part of £2,000 a month for the mortgage. Council tax and other bills adds at least another £500. This doesn’t include groceries obviously.

If you have a child, that’s another £1,200 a month in Nursery fees.

How on earth do people manage?

We will. But many won’t.

HYD

[Lootman]

Between us, my Wife and I earn over £120k a year so would be considered fairly wealthy by any standards. And yet, I find myself wondering how we are going to cope over the next year.

I usually associate the term "wealthy" with assets and net worth, rather than income.

So a household income of £120,000 a year certainly places you in the "above average" category of income. But if there is no underlying wealth that can provide a buffer when household costs go up, then that household could indeed suffer. Especially if they live in London, have a mortgage and have a child. Without wealth you are still living month-to-month, payslip to payslip.

Again without wealth there is always the risk of a job loss and a sudden fall in income with no reduction in costs.

[SalvorHardin]

Between us, my Wife and I earn over £120k a year so would be considered fairly wealthy by any standards. And yet, I find myself wondering how we are going to cope over the next year.

And wondering how on earth if I’m thinking that, how are others earning far less going to cope?

We’re currently paying the best part of £2,000 a month for the mortgage. Council tax and other bills adds at least another £500. This doesn’t include groceries obviously.

If you have a child, that’s another £1,200 a month in Nursery fees.

How on earth do people manage?

We will. But many won’t.

HYD

As Lootman has said it's assets that make you wealthy, not income. Assets let you absorb price shocks and other expensive events. Assets are a stock, income is a flow.

Build up wealth by spending a lot less than you earn and successfully investing this money.

When I worked in the City of London I ran across lots of people who were income rich but asset poor. As soon as their money came in it was spent, often on status/positional goods designed to impress others (e.g flashy cars, expensive holidays). A common factor was that most of them didn't have a clear budget to track their spending. Most loved shopping at Waitrose.

Me, I live well within my income (I could live nicely on 50% of it even if my gas and electric trebles) and retired just before turning 40 because I'd built up a sizeable portfolio.

My favourite supermarket is Lidl (even though I could afford to shop pretty much anywhere, including Harrods). One of my neighbours thinks I'm poor because I shop there

About the only status good I have is a Burberry watch (they aren't too expensive, a bit cheaper than their scarves, though most people don't know this, and I don't show it off). My Burberry shares are worth about 200 times more than the watch.

[mc2fool]

Between us, my Wife and I earn over £120k a year so would be considered fairly wealthy by any standards. And yet, I find myself wondering how we are going to cope over the next year.
:
We’re currently paying the best part of £2,000 a month for the mortgage. Council tax and other bills adds at least another £500. This doesn’t include groceries obviously.

So that's (£2000 + £500) * 12 = £30,000. Obviously some of the remaining £90K will go on taxes (assuming your £120K figure is gross).

So how much do you spend on groceries?

[AsleepInYorkshire]

Between us, my Wife and I earn over £120k a year so would be considered fairly wealthy by any standards. And yet, I find myself wondering how we are going to cope over the next year.
:
We’re currently paying the best part of £2,000 a month for the mortgage. Council tax and other bills adds at least another £500. This doesn’t include groceries obviously.

So that's (£2000 + £500) * 12 = £30,000. Obviously some of the remaining £90K will go on taxes (assuming your £120K figure is gross).

So how much do you spend on groceries?

You didn't include childcare so shouldn't the projected annual commitment be a little higher? I'm assuming, as HYD's mentioned it that this has to be taken into account?

2,000 + 500 +1,200 = 3,700 x 12 = 44,000

AiY(D)

[Dod101]

Well I have not had mortgage for many years, in fact come to think of it I have never really had a mortgage. I had a short term loan for a while but that was all. Income is fine but you need assets to provide the security. Income is only as good as the next paycheque. I hope the op is building up assets out of his significant income.

Dod

[mc2fool]

So that's (£2000 + £500) * 12 = £30,000. Obviously some of the remaining £90K will go on taxes (assuming your £120K figure is gross).

So how much do you spend on groceries?

You didn't include childcare...

Because he said "If you have a child", which I took (possibly incorrectly) to refer to "others" and not to his household.

[Lootman]

So that's (£2000 + £500) * 12 = £30,000. Obviously some of the remaining £90K will go on taxes (assuming your £120K figure is gross).

So how much do you spend on groceries?

You didn't include childcare so shouldn't the projected annual commitment be a little higher? I'm assuming, as HYD's mentioned it that this has to be taken into account?

2,000 + 500 +1,200 = 3,700 x 12 = 44,000

Another expense not mentioned by either, but surely relevant and material, is the expense of running a vehicle, and other transit and transportation costs.

Also £500 a month doesn't sound like a lot for bills, if that means all bills i.e. council tax, property insurance, electric, gas, water, phone, internet, cable/satellite, streaming etc.

You didn't include childcare...

Because he said "If you have a child", which I took (possibly incorrectly) to refer to "others" and not to his household.

HYD mentioned in a recent topic that he is a new and proud father.

[scrumpyjack]

My favourite supermarket is Lidl (even though I could afford to shop pretty much anywhere, including Harrods). One of my neighbours thinks I'm poor because I shop there

Reminds me, awhile ago I was shopping at Lidl and saw a smartly dressed lady in the car park carefully transferring her Lidl shopping into Waitrose carrier bags, presumably so the neighbours would think she had shopped there! The old really rich would never do such a thing and would be driving an old banger anyway. They could not care less about their 'image'.

[Lootman]

My favourite supermarket is Lidl (even though I could afford to shop pretty much anywhere, including Harrods). One of my neighbours thinks I'm poor because I shop there

Reminds me, awhile ago I was shopping at Lidl and saw a smartly dressed lady in the car park carefully transferring her Lidl shopping into Waitrose carrier bags, presumably so the neighbours would think she had shopped there! The old really rich would never do such a thing and would be driving an old banger anyway. They could not care less about their 'image'.

I have never been to a Lidl nor an Aldi (cannot tell the difference between the two, if I am honest). I usually shop at Waitrose (Budgen sometimes). But I freely admit to being a snob with no taste or sense of value . I use my own bags.

I do drive an old banger, however. My wife has the nice car.

[Howyoudoin]

Between us, my Wife and I earn over £120k a year so would be considered fairly wealthy by any standards. And yet, I find myself wondering how we are going to cope over the next year.
:
We’re currently paying the best part of £2,000 a month for the mortgage. Council tax and other bills adds at least another £500. This doesn’t include groceries obviously.

So that's (£2000 + £500) * 12 = £30,000. Obviously some of the remaining £90K will go on taxes (assuming your £120K figure is gross).

So how much do you spend on groceries?

Sometimes I have to check if I’m on a financial website.

You do realise that higher earners are charged at least 40% tax right and that we have other commitments to those that I’ve disclosed above?

HYD

[mc2fool]

So that's (£2000 + £500) * 12 = £30,000. Obviously some of the remaining £90K will go on taxes (assuming your £120K figure is gross).

So how much do you spend on groceries?

Sometimes I have to check if I’m on a financial website.

You do realise that higher earners are charged at least 40% tax right and that we have other commitments to those that I’ve disclosed above?

HYD

Yes, of course (hence my comment about some of the remaining will go on taxes ) but what are you saying?!? You spend money on things other than housing, council tax and "other bills" and groceries?!? How profligate of you!

(Hint: my previous post [and the paragraph above] was somewhat tongue in cheek. You didn't really believe I thought you spent £90Kpa on groceries, did you?!?)

On the more serious point of your OP: https://ifs.org.uk/tools_and_resources/ ... you_fit_in

[CliffEdge]

Reminds me, awhile ago I was shopping at Lidl and saw a smartly dressed lady in the car park carefully transferring her Lidl shopping into Waitrose carrier bags, presumably so the neighbours would think she had shopped there! The old really rich would never do such a thing and would be driving an old banger anyway. They could not care less about their 'image'.

I have never been to a Lidl nor an Aldi (cannot tell the difference between the two, if I am honest). I usually shop at Waitrose (Budgen sometimes). But I freely admit to being a snob with no taste or sense of value . I use my own bags.

I do drive an old banger, however. My wife has the nice car.

Aldi is better. Waitrose is useless, they no longer stock McDougal's instant thickening granules.

[UncleEbenezer]

Also £500 a month doesn't sound like a lot for bills, if that means all bills i.e. council tax, property insurance, electric, gas, water, phone, internet, cable/satellite, streaming etc.

There speaks a rich man (entirely appropriate in the context of this thread).

But from the point of view of someone poor and/or frugal, it's a lot. Living within half that is not at all a stretch if you're in an economical house or flat. It's a lot more than I could've afforded (on top of rent) for most of my life, and a lot more than I'd pay now even with council tax [mumble] bands higher than ever before.

Though if you add a sinking fund for property maintenance on an old building I'd agree with you: £500/month isn't much!

[UncleEbenezer]

You do realise that higher earners are charged at least 40% tax right and that we have other commitments to those that I’ve disclosed above?

HYD

40% of £120k is £48k. I think it unlikely you pay that in inevitable taxes, so I guess you must like voluntary taxes?

Back-of-envelope calculation says two of you should have £25k tax free and another £60+k at about 32% (I forget what the headline NI figure is) before a notional 40% rate kicks in.

[AsleepInYorkshire]

Between us, my Wife and I earn over £120k a year so would be considered fairly wealthy by any standards.

Your income doesn't really determine your wealth. I recently read, and can't recall where, that the average UK citizen can only survive in the black for 19 days if they lose their source of income. That's not a display of a wealthy nation. I'd suggest, quite humbly, that you should review how wealthy you would be if one or both of your incomes ceased. In that context and in the spirit of tough love I'd suggest you need to stop thinking about how wealthy you think you are and prepare your family finances for some stress. God forbid but have you planned for illness? Have you planned for any downsides in your life which are outside of your control? Do you have sufficient funds in your bank account to survive the unexpected?

And yet, I find myself wondering how we are going to cope over the next year.

That's a great place to start.

And wondering how on earth if I’m thinking that, how are others earning far less going to cope?

It's good to care. As you say some are going to struggle.

We’re currently paying the best part of £2,000 a month for the mortgage. Council tax and other bills adds at least another £500. This doesn’t include groceries obviously.

Time to look closely at every penny. Every penny saved now will have a compounding effect on your wealth.

If you have a child, that’s another £1,200 a month in Nursery fees.

And the delights of trying to be a good parent will bring you all great happiness.

How on earth do people manage?

They count every penny. They shop at Primark. They make do and mend. They know their way around Gumtree.

We will. But many won’t.

Glad to hear.

I've taken the last 6 months off. I can go another 4 years and 5 months before I need to work again. I'll be 66 by then. I can do that because I've followed the advice I've given above. When I am working our joint income exceeds yours. When I'm not I need to withdraw £400 per month from my current account to augment my good ladies salary and pay the bills. I've not been idle whilst not working. And today I've managed to put a few adverts on Gumtree too. I've got about £3K of stuff to sell. I've done quite a lot of work (pro bono) for my parents in law and my sister in law. And much to the relief of my good lady I've started to get on top of unfinished work in our home. If times get really hard then the £400 I am using out of my current account can be reduced to nothing by reducing some of our luxuries, such as two cars, Netflix, gym membership. And if it gets worse than that then we can sell our home and downsize or live in a caravan.

Only you can pull this off. Only you can take advantage of your income. Only you can create the wealth you and your family may need in the future.

You have a great opportunity to build a solid future for you and your family. Embrace it.

AiY(D)

[CliffEdge]

Also £500 a month doesn't sound like a lot for bills, if that means all bills i.e. council tax, property insurance, electric, gas, water, phone, internet, cable/satellite, streaming etc.

There speaks a rich man (entirely appropriate in the context of this thread).

But from the point of view of someone poor and/or frugal, it's a lot. Living within half that is not at all a stretch if you're in an economical house or flat. It's a lot more than I could've afforded (on top of rent) for most of my life, and a lot more than I'd pay now even with council tax [mumble] bands higher than ever before.

Though if you add a sinking fund for property maintenance on an old building I'd agree with you: £500/month isn't much!

Half of £500 is £250

[nimnarb]

Somewhere in this thread someone mentioned Primark. Well, what a store. Wife has very small feet and needs a bally type shoe and visited the Westfield shopping Center near Shepherds Bush. Never been there before. What a fabulous place! Anyway, sauntered in and to cut a long story short, walked out with 7 pairs of great looking shoes that fit her perfectly and damn comfortable. Price. £4.00 each. Are you kidding me! And then when I looked at the bill, they gave me an extra 50p off on two pairs( I have no idea why). Place was packed and saw many other items not suitable for where we live, but couldn't believe the displays, presentation and in many cases, the quality for quite frankly, ridiculous prices.

So impressed that 2 weeks later jumped into a taxi from where I was staying and went to their Oxford Street branch at 8.30 a.m in the morning. The place was already busy, mostly with middle Eastern clients buying as if there's no tomorrow. So, brt another 7 pairs of shoes, leggings and bits and pieces plus a wheelie with rotating wheels(£29.95 WTF! great quality) to store just the shoes and stuff for the plane.

But what really was the icing on the cake when at Wilton's(not your cheapest restaurant but one of my favs) a lady came up to my wife and commented how expensive her shoes looked and where did she get them from? I was just about to shout out, "Primark" when I received a dirty look from the wife. Think she mumbled something.
Too funny.

[CliffEdge]

Somewhere in this thread someone mentioned Primark. Well, what a store. Wife has very small feet and needs a bally type shoe and visited the Westfield shopping Center near Shepherds Bush. Never been there before. What a fabulous place! Anyway, sauntered in and to cut a long story short, walked out with 7 pairs of great looking shoes that fit her perfectly and damn comfortable. Price. £4.00 each. Are you kidding me! And then when I looked at the bill, they gave me an extra 50p off on two pairs( I have no idea why). Place was packed and saw many other items not suitable for where we live, but couldn't believe the displays, presentation and in many cases, the quality for quite frankly, ridiculous prices.

So impressed that 2 weeks later jumped into a taxi from where I was staying and went to their Oxford Street branch at 8.30 a.m in the morning. The place was already busy, mostly with middle Eastern clients buying as if there's no tomorrow. So, brt another 7 pairs of shoes, leggings and bits and pieces plus a wheelie with rotating wheels(£29.95 WTF! great quality) to store just the shoes and stuff for the plane.

But what really was the icing on the cake when at Wilton's(not your cheapest restaurant but one of my favs) a lady came up to my wife and commented how expensive her shoes looked and where did she get them from? I was just about to shout out, "Primark" when I received a dirty look from the wife. Think she mumbled something.
Too funny.

Do they sell pyjama bottoms?

[nimnarb]

Yes, in fact I saw some, albeit not sure if sold on their own.