Middle class misery

[Clitheroekid]

Having read this article in The Guardian I’m afraid my stony heart was resolutely unmoved by any stirrings of sympathy - https://www.theguardian.com/business/20 ... -bills-tax

I calculated that Scott, the person mentioned at the beginning of the article, would be taking home around £4,400 pcm after tax. After deducting his mortgage, the grocery shop and his student loan repayments he would still be left with around £2,900. I therefore find it incredible that he claims to have only £300 left over “after all the things I have to pay for".

When I used to handle divorce cases I came across people like him regularly. They nearly always lived in new build houses, having borrowed the absolute maximum mortgage they could obtain. They nearly always leased a new and expensive car to impress their equally pretentious neighbours, and regularly maxed out their credit cards. Although they gave every appearance of being affluent the reality was that they did not possess a pot for micturition purposes.

The same goes for the other people mentioned in the article. If `Chloe' is earning £57,500 a year she would have a net of tax income of around £3,600 a month. Even assuming she is paying £1,000 a month on her mortgage, which is unlikely, that still leaves her with around £600 a week. She is single, with no children, and it's simply absurd to say that this level of income would mean that she was unable to heat her property, or that the she was forced to `downgrade' her poor dog's food, presumably from caviar to smoked salmon!

Bearing in mind that the article was in The Guardian it did cross my mind that the author might be writing tongue in cheek, simply to provoke old gammons like me into righteous indignation, but I couldn’t detect any sense of irony. Or am I just being hard and unfeeling in my inability to summon up any sympathy for these `victims'?

[Mike4]

The bit that brought me up short in the article was this:

"To save money, Chloe says, she has stopped drinking"

Hard times after all!

[monabri]

I arrived at the same numbers for " Chloe". After paying her mortgage she should have ~£2600 per month to live on. Where and on what is she spending it?

https://www.theguardian.com/business/20 ... -bills-tax

"To save money, Chloe says, she has stopped drinking, eating takeaways and buying new clothes, as well as downgrading both her and her dog’s food. “I’ve also borrowed money from my parents, who were concerned by how little I was putting the heating on in my property and were worried it would cause damp.”

I'm calling BS on the article.


Edit...I see that the author of the report is a single mother. I wonder if she is financially better off than " Chloe "?

https://www.thetimes.co.uk/money-mentor ... ajah-otte/

[monabri]

Oh dear ( seriously!)

https://tn.com.ar/internacional/2023/12 ... ros-casos/

Seems she lost her baby ( report Dec 2023)

"A two month old baby died after she was fed intoxicated food in a hospital in London: The case occurred almost a decade ago but was only made public now as it will be presented to Justice."

"In January 2014, Aviva Otte was only two months old when she died at Evelina Children’s Hospital located in the London city. She was in the neonatal intensive care unit and was supervised by medical personnel. According to investigations by Dr. Julian Morris, the chief coroner of the case, the baby died of a contamination in food that they gave him during his hospitalization. For this reason, Aviva contracted a bacteria that finally ended his life."

"Aviva's mother, Jedidajah Otte, believes that her daughter's case should be dealt with the other two similar ones."


( I realise there's an error regarding the child's sex but the report was in Spanish and translated via an online translator).

[Nimrod103]

I think the article linked alongside the original article quoted, better summarizes the issues:
https://www.theguardian.com/business/20 ... ness-trust

Britain’s insecure jobs market and high housing costs are leading to the growth of a precarious middle class struggling to maintain a decent living standard on household incomes as high as £60,000 a year, a report has said.
A study released by abrdn Financial Fairness Trust, a research body set up by the fund manager, said the uncertain nature of work meant there was a one in three chance that someone earning a middle income today would not be doing so next year.

These are people with middle class aspirations but who do not have the protections of the closed shop industries like the legal, medical and public sector industries. Their jobs are precarious because British private industry is not all that profitable (evidence - subdued British stock prices), and the risk of AI making whole job sectors unnecessary. They are the people who are (going up the income scale) the first to be hit by higher rate taxes, higher rate university loan repayments and the withdrawal of child benefit. Other posters claim they have a lot of disposable income, but I would hope that they are putting a higher than usual amount into their pensions or savings in order to tide them over periods of unemployment.

[Gerry557]

I read the article and got my calculator out and went onto the tax website. I should have read a bit further and found Clitheroe kid had already done the donkey work.

I often wonder why they never start to save and or invest. If not working for a month is going to have such an impact on your lifestyle. I remember watching tv shows going through people's spending habits to help them buy a house and often found £5k of various savings.

I know an IT person earning well but doesn't appear so. They spend a lot on rent, bought an expensive to run car and top of the range phone contract etc. I'm not sure exactly how much they earn but it's slightly more complicated by loosing their personal tax allowances and paying two student loans. I suppose that must be £100k+ and I think they have a degree and a masters to pay off. I think they said the tax rate was effectively 70% (can that be right) but the good news is that they should have paid off the student loans in a couple of years and they are likely to hit the max pension amount too.

They are saving for a house and estimate that the mortgage might work out cheaper than the rent. They have had words of advice and some has stuck. They have a six month emergency fund in place and looking to up the level of their starting deposit. Probably after the probationary period ends. We have discussed share ISAs for after the house is purchased. So three stepping stones to be better off.

I've seem many others that appear to be much better off even though they earn much less. Starting work at 16/18 and saving from the off. No student debts and starting on the housing market earlier albeit an older property and them moving up the scales over time. Some might have had a decade of earnings ahead of those students.

I also know of others that will probably never pay off the student debts so would caution those considering uni to be picky. The chap in the spar shop had two degrees. Hopefully something better for him will come up in time.

I'm sure most of those people in the article could do much better with some advice from those on here. Better planning, more saving/investing, less outgoings. Treat their personal finance like a company hoping to always report better figures every year.

[UncleEbenezer]

I often wonder why they never start to save and or invest.

Save it - and when you have a spell "between jobs" you fail means-testing and have to use it to live on.
Spend it - and you qualify for means-tested benefits when you fall on hard times.

Which is one reason means-testing is not merely iniquitous but also perverse.

[mc2fool]

I calculated that Scott, the person mentioned at the beginning of the article, would be taking home around £4,400 pcm after tax. After deducting his mortgage, the grocery shop and his student loan repayments he would still be left with around £2,900. I therefore find it incredible that he claims to have only £300 left over “after all the things I have to pay for".

Small point of correction: https://www.moneysavingexpert.com/tax-calculator/ confirms the ~£4,400 but the article says "The couple’s mortgage uses up more than a third of Scott’s take-home pay". If we take more than a third to be 35% then that leaves him £2,860 before taking off the grocery shop and student loan repayments, so leaving him with around £2,000 after those.

Still sounds OK but then he says "We lease a car, the cost of which has risen greatly too because of higher interest rates". Of course, how much that costs will depend on the car but whereas we heard a lot about the Truss-Kwarteng effect on mortgage costs there hasn't been much noise about other interest-rate based costs ... or maybe there has and I missed it....

[the0ni0nking]

I earn just over £80k a year from my salary. My tax code is adjusted to reflect property income and I also pay a substantial % into my pension pot. My pension contributions are done through salary sacrifice such that my P60 shows a figure close to 25% less than my gross pay IIRC.

My take home pay is just over £3,200 a month.

My main home mortgage is currently subject to a complaint with HSBC so the monthly payments are likely to change but up until the end of last year my payment was c£1,100 a month. The bulk of this is capital overpayment - interest rates would need to double again for it to hurt me in a meaningful way - and by hurt, I simply mean it delays the end repayment date, Over the course of the last 16 years, I've paid off the mortgage once on my main property and remortgaged to buy somewhere else taking advantage of the low rates available that everyone knew were once-in-a-life time but many chose to splurge cash elsewhere.

After that, I have council tax (c£170), electric/gas (c£300), water (c£10) and mobile/broadband (c£45) and insurance (c£30)

This leaves me with around £1,500 a month on which to buy food, repairs, holidays etc.

In 2007, when I bought my first house my salary was I think £36k and my mortgage was c£900/month - but even then, I didn't feel as though my lifestyle was materially impacted (interest rate on that mortgage was 5.45% IIRC as I was stuck on it for a couple of years before I was able to extricate on to a lower rate).

Not having or needing a car obviously helps but I probably spend enough on airfares/taxis to cover that.

As ever, it seems all anyone wants to do is moan rather than take some degree of responsibility.

[mc2fool]

If we take more than a third to be 35% then that leaves him £2,860 before taking off the grocery shop and student loan repayments, so leaving him with around £2,000 after those.

Aren't student loan repayment taken off at source?

I believe so but it doesn't make a huge difference to the already approximate figures....

[the0ni0nking]

And almost as if by magic, the BBC joins the bandwagon:

https://www.bbc.co.uk/news/business-68448107

I want, I want, I want .......

[MuddyBoots]

One takeaway from this is that 'middle class' people who feel the tax burden is too high after such a long period of Conservative rule don't have an obvious alternative to vote for in the election if they want to improve their living standards. What's the choice of economic policies going to be for the next 5 years?

[Mike4]

And almost as if by magic, the BBC joins the bandwagon:

https://www.bbc.co.uk/news/business-68448107

I want, I want, I want .......

I often think TLF must be a rich seam of ideas for BBC producers to mine. I often notice stuff being discussed here and points made, popping up 3 or 4 days later on the radio and on the website.

[88V8]

I arrived at the same numbers for " Chloe". After paying her mortgage she should have ~£2600 per month to live on. Where and on what is she spending it?
"To save money, Chloe says, she has stopped drinking, eating takeaways and buying new clothes...

In the early years of our marriage, everything house-related was DIYd - and largely still is - and we made our own booze, have always cooked from scratch and my wife made her own clothes... she still buys stuff in charity shops including the shirt I am wearing. Lease a new car? Never bought a new car. Get out and get under.

Some people are just bone lazy and impecunious. We amassed our six-figure income through being the opposite.
Zero sympathy from me.

V8

[Leothebear]

I think it's the culture change brought about by the Thatcher doctrine. "Why save for something wnen you can borrow and have it now!"

"A new car? - Just remortgage your house!"

I was guilty of this once or twice. I did learn however.

[SalvorHardin]

Car leases, flashy foreign holidays, club memberships and "Keeping up with the Joneses" are a major drain upon people's finances. If school fees are involved then the strain can be immense. Car leases let people buy a car that is far more expensive than they would normally buy; the big downside is that they pay for the massive depreciation that happens within the first three years of a new car's life after which they don't have a car (and are enticed to take out a lease on a new car). But it allows people to flaunt their expensive and shiny car in front of their friends and neighbours, channeling their inner Hyacinth Bucket.

About fifteen years ago a friend inherited some money and spent about half of it buying a new car (the cost was roughly national average earnings at the time). He had wanted one of these cars for ages and was otherwise quite frugal in his everyday spending. Within two months almost every household in his street had replaced their car with a new car; judging from the gossip he reckoned that at least 75% of these cars were leased and the rest were bought with loans. He still owns the same car.

A few quotes from Thomas J. Stanley in his book "The Millionaire Next Door" nicely sum up the position:

"Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high."

"Twenty years ago we began studying how people become wealthy. Initially, we did it just as you might imagine, by surveying people in so-called upscale neighborhoods across the country. In time, we discovered something odd. Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then, we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.”

"It’s easier to accumulate wealth if you don’t live in a high-status neighborhood."

“The advertising industry and Hollywood have done a wonderful job conditioning us to believe that wealth and hyperconsumption go hand in hand.”

“It is easier to purchase products that denote superiority than to actually be superior in economic achievement.”

[tjh290633]

And almost as if by magic, the BBC joins the bandwagon:

https://www.bbc.co.uk/news/business-68448107

I want, I want, I want .......

I often think TLF must be a rich seam of ideas for BBC producers to mine. I often notice stuff being discussed here and points made, popping up 3 or 4 days later on the radio and on the website.

In that case it might be a good idea to point out that the Chancellor's idea of reducing NICs only benefits those in work. If he instead reinstated indexation of personal allowances it would be a bigger benefit to low earners and pensioners, who are increasingly being pushed into paying tax, as wages and pensions are increased with inflation.

Nobody seems to have cottoned on to this.

TJH

[Tedx]

Back in the dark days of the GFA, I was driving an old Merc C180.

The reliable old bird decided to blow a head gasket and the local independent quoted £600 to fix it. I doubt the car was worth that even before the fault. In it's current state it was worth zero - unless you could do the repairs yourself.

Still, it had a valid MoT and was drivable - although with great clouds of steam pouring out the back and a litre of water being boiled off every 10 miles.

....and just at that time the government introduced the scrappage scheme where they gave you a £2000 rebate on a new car. So I hunted down the cheapest new car (miles away!), which was a Hyundai i10 at £4995 after scrappage allowance and made the purchase.

At midnight on the eve of the collection, I loaded up the car at midnight with a 5 gallon jerry can of water, a 6 pack of Redbull, some chocolate, a headtorch and a pair of oven gloves and set off on my 70 mile overnight journey.

And I made it (just!)

The garage dumped my old Merc in the corner with the other scrappers (for they were fobidden to resell them) and I picked up the only brand new car I've ever owned. And it is so nice to have a brand new car, for a while at least. But these days, even the humble i10 is something like 15 grand.

Errrr.....no thanks!

[UncleEbenezer]

I often think TLF must be a rich seam of ideas for BBC producers to mine. I often notice stuff being discussed here and points made, popping up 3 or 4 days later on the radio and on the website.

In that case it might be a good idea to point out that the Chancellor's idea of reducing NICs only benefits those in work. If he instead reinstated indexation of personal allowances it would be a bigger benefit to low earners and pensioners, who are increasingly being pushed into paying tax, as wages and pensions are increased with inflation.

Nobody seems to have cottoned on to this.

TJH

Rewarding hard work is a Good Thing. Penalising it over and above tax rates on the unproductive is downright evil.

If he can afford tax reductions (which of course he can't, except as a poison pill for the next government), reducing NI is probably the single fairest thing he can do. And I speak as someone who, though having paid NI for many years, no longer stands to benefit personally from reducing it.

[Nimrod103]

In that case it might be a good idea to point out that the Chancellor's idea of reducing NICs only benefits those in work. If he instead reinstated indexation of personal allowances it would be a bigger benefit to low earners and pensioners, who are increasingly being pushed into paying tax, as wages and pensions are increased with inflation.

Nobody seems to have cottoned on to this.

TJH

Rewarding hard work is a Good Thing. Penalising it over and above tax rates on the unproductive is downright evil.

If he can afford tax reductions (which of course he can't, except as a poison pill for the next government), reducing NI is probably the single fairest thing he can do. And I speak as someone who, though having paid NI for many years, no longer stands to benefit personally from reducing it.

It isn't fair at all. National Insurance arguably is the one hypothecated tax, the payment of which roughly determines the amount of state pension one receives. There is currently a big argument about how the country can afford paying a generous state pension to a rising number of retirees. There are a very large number of retirees who receive a state pension far in excess of the (actuarially adjusted) payments they made during their working lives. Reducing NI just increases that number of freeloaders.