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The Ginger Winger

What Gross Income Is Needed

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Lets take a £175k house. Three bed semi. Husband wife and 2 children (10 & 12).

They have £35k worth of equity

They are both aged 35 and need to save for a pension

They are able to work and move their children around with 1 car

I think the income needed is as follows:-

Housing

Mortgage - £140k over 25 years at an interest rate of 7% (to be reasonable cautious) - £10K per annum

Utilities - £100 rates £30 water rates £50 electricity £50 gas £60 insurance (home contents) £30 telephone, TV licence/sky etc so £400 per month £4.8k per annum

repairs and replacements to the house £2k per annum

Total £16.8k

Motoring

Car- cost/deprecoiation £1.5K per annum

Petrol 10k per annum @ 30 mpg @ £6 per gallon £2k per annum

Maintenance £1k per annum

Insurance tax .75k per annum

Total £5.25k per annum

Food/clothes/Holidays etc

Food/cleaning etc - £500 per month - £6k per annum

Clothes £200 per month £2.5k per annum

Holidays - £2k per annum

Recreational persuits/fun odd days out presents £200 per month = £2.5k

Total £13k

Pension/life cover

15% of gross income so with tax relief about 12% but lets say £6k per annum

Savings

£150 per month rounded to £2k per annum

I believe the minimum for a reasonable life as set out at the top is around £43k per annum AFTER TAX and therefore around £60k gross

Yes I am sure savings can be achieved but the lifestyle I have outlined above is hardly excessive and can only be achieved with tight control on budgets. I suspect many will not be saving either for a rainy day or indeed for a pension. How do people on far less manage..how???

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Lets take a £175k house. Three bed semi. Husband wife and 2 children (10 & 12).

They have £35k worth of equity

They are both aged 35 and need to save for a pension

They are able to work and move their children around with 1 car

I think the income needed is as follows:-

Housing

Mortgage - £140k over 25 years at an interest rate of 7% (to be reasonable cautious) - £10K per annum

Utilities - £100 rates £30 water rates £50 electricity £50 gas £60 insurance (home contents) £30 telephone, TV licence/sky etc so £400 per month £4.8k per annum

repairs and replacements to the house £2k per annum

Total £16.8k

Motoring

Car- cost/deprecoiation £1.5K per annum

Petrol 10k per annum @ 30 mpg @ £6 per gallon £2k per annum

Maintenance £1k per annum

Insurance tax .75k per annum

Total £5.25k per annum

Food/clothes/Holidays etc

Food/cleaning etc - £500 per month - £6k per annum

Clothes £200 per month £2.5k per annum

Holidays - £2k per annum

Recreational persuits/fun odd days out presents £200 per month = £2.5k

Total £13k

Pension/life cover

15% of gross income so with tax relief about 12% but lets say £6k per annum

Savings

£150 per month rounded to £2k per annum

I believe the minimum for a reasonable life as set out at the top is around £43k per annum AFTER TAX and therefore around £60k gross

Yes I am sure savings can be achieved but the lifestyle I have outlined above is hardly excessive and can only be achieved with tight control on budgets. I suspect many will not be saving either for a rainy day or indeed for a pension. How do people on far less manage..how???

I'd say the mortgage cost you describe would get a bigger house @ 200k.

Petrol is a bit high, I'd say the average should be 1k-1.5k p/a. In a few years time, you may look conservative, though.

The rest makes sense (savings look appalingly low to me but that's the way of the world...).

However, you missed one thing : childcare...

As to how people manage, wait until IR reach 6%+ and you'll know (hint : look at the proportion of IO mortgages today...).

Edited by Froggy

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How do people on far less manage..how???

benefits and or benefit fraud, crime and the black economy(cash in hand work cheap homebrew and cigs etc) in general, or a mix of some or all of the previous options.

welcome to life outside the matrix B) for a rough guide watch the channel four show shameless for a realistic (albeit with overdone humour) of how some pretty fair sized chunks of the uk population live, extrapolate those trends (income generation) outside the sink estates (at a lower intensity level) and you get your answer.

i actually know a few people that are toned down versions of the characters in that series, so i speak from an informed position on the issue, without condoning or promoting such activities.

going forward a lot more people will have to get dirty to survive its a harsh world out there without the comforting fog of easy credit to keep you mollified.

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I'd say £6000 per annum for one, with £3000 or so per extra mouth to feed. But only if your neighbours have the same, and you walk to work.

To be honest I don't think your describing a lifestyle.

Your asking how much to run a fairly expensive car with currently priced oil and cheap insurance (relative to the what I get quoted) whilst buying an overpriced house in the pound sterling currency. Whilst spending a fairly large chunk on utilities and food.

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Lets take a £175k house. Three bed semi. Husband wife and 2 children (10 & 12).

They have £35k worth of equity

They are both aged 35 and need to save for a pension

They are able to work and move their children around with 1 car

I think the income needed is as follows:-

Housing

Mortgage - £140k over 25 years at an interest rate of 7% (to be reasonable cautious) - £10K per annum

Utilities - £100 rates £30 water rates £50 electricity £50 gas £60 insurance (home contents) £30 telephone, TV licence/sky etc so £400 per month £4.8k per annum

repairs and replacements to the house £2k per annum

Total £16.8k

Motoring

Car- cost/deprecoiation £1.5K per annum

Petrol 10k per annum @ 30 mpg @ £6 per gallon £2k per annum

Maintenance £1k per annum

Insurance tax .75k per annum

Total £5.25k per annum

Food/clothes/Holidays etc

Food/cleaning etc - £500 per month - £6k per annum

Clothes £200 per month £2.5k per annum

Holidays - £2k per annum

Recreational persuits/fun odd days out presents £200 per month = £2.5k

Total £13k

Pension/life cover

15% of gross income so with tax relief about 12% but lets say £6k per annum

Savings

£150 per month rounded to £2k per annum

I believe the minimum for a reasonable life as set out at the top is around £43k per annum AFTER TAX and therefore around £60k gross

Yes I am sure savings can be achieved but the lifestyle I have outlined above is hardly excessive and can only be achieved with tight control on budgets. I suspect many will not be saving either for a rainy day or indeed for a pension. How do people on far less manage..how???

edit actually i think i misread your post, 10 k in mileage

on a 10k second hand estate ( 3 years old)

we spent max of £3k on petrol year ( 2 cars and going to france a couple of times )

car maintenance around £300 a year

insurance around £250

Edited by cardiffone

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Your motoring costs are way out.

on a 10k second hand estate ( 3 years old)

we spent max of £3k on petrol year

car maintenance around £300 a year

insurance around £250

Well it looks remarkably similar to my costs :rolleyes:

So who's way out now? These sorts of summarys will always be up and down in places you just have to go with an average. I bet lots of people spnd little on car maintenance, until the year their German tdi blows its turbo.

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You also forgot tax credits and child payments of around £300 an month, so thats £3.6k a year to add to income.

Also, only 35k of equity at 35.... I would image most people of this age who own a house bought their first around 10 years ago.

Then a 175K house costs around 80K, so if there house is now worth 175K they have 95K of equity.

Or if they bought say a 40k house then, this is now worth around 100K so even then they have 60K of equity.

Also 2k a year on maintenance sounds a lot.

We've spent around 6-8k on maintenance over the last 11 years in total ( over a combination of 3 houses and including a new roof and kitchen ), any they where all 90 year old houses.

Edited by cardiffone

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Why not try looking at your situation Micawbertastically?

Income...20 shillings, savinga one shilling. Result; happiness! (based on saving 5% of 40k.)

The problem is that over the next year we might see 5% inflation with 0% wage increases which would leave you at 20/20. I suggest you panic!

As for me ,income 20 shillings, savings 10 shillings, no need to panic yet.

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I believe the minimum for a reasonable life as set out at the top is around £43k per annum AFTER TAX and therefore around £60k gross

Yes I am sure savings can be achieved but the lifestyle I have outlined above is hardly excessive and can only be achieved with tight control on budgets. I suspect many will not be saving either for a rainy day or indeed for a pension. How do people on far less manage..how???

Mr Waitrose, do you have any idea of what the average UK salary or living standard is? it is a world away from your idealised Sunday Mail supplement pipe dream may suggest. That is unless you are generating £60k worth of value to the UK economy. Otherwise you need to curb your enthusiasm and expectations somewhat.

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I'd say the mortgage cost you describe would get a bigger house @ 200k.

Petrol is a bit high, I'd say the average should be 1k-1.5k p/a. In a few years time, you may look conservative, though.

The rest makes sense (savings look appalingly low to me but that's the way of the world...).

However, you missed one thing : childcare...

As to how people manage, wait until IR reach 6%+ and you'll know (hint : look at the proportion of IO mortgages today...).

Agreed - a full time childcare place costs us nearly £1200 per month - it's crippling.

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Lets take a £175k house. Three bed semi. Husband wife and 2 children (10 & 12).

They have £35k worth of equity

They are both aged 35 and need to save for a pension

They are able to work and move their children around with 1 car

I think the income needed is as follows:-

Housing

Mortgage - £140k over 25 years at an interest rate of 7% (to be reasonable cautious) - £10K per annum

Utilities - £100 rates £30 water rates £50 electricity £50 gas £60 insurance (home contents) £30 telephone, TV licence/sky etc so £400 per month £4.8k per annum

repairs and replacements to the house £2k per annum

Total £16.8k

Motoring

Car- cost/deprecoiation £1.5K per annum

Petrol 10k per annum @ 30 mpg @ £6 per gallon £2k per annum

Maintenance £1k per annum

Insurance tax .75k per annum

Total £5.25k per annum

Food/clothes/Holidays etc

Food/cleaning etc - £500 per month - £6k per annum

Clothes £200 per month £2.5k per annum

Holidays - £2k per annum

Recreational persuits/fun odd days out presents £200 per month = £2.5k

Total £13k

Pension/life cover

15% of gross income so with tax relief about 12% but lets say £6k per annum

Savings

£150 per month rounded to £2k per annum

I believe the minimum for a reasonable life as set out at the top is around £43k per annum AFTER TAX and therefore around £60k gross

Yes I am sure savings can be achieved but the lifestyle I have outlined above is hardly excessive and can only be achieved with tight control on budgets. I suspect many will not be saving either for a rainy day or indeed for a pension. How do people on far less manage..how???

Hi TWG, joined 06, 350 posts. noted.

Obviously lurks more than posts, no probs with that ;)

I too wonder how people are mananging, despite the nick picking responses you've had :rolleyes:

I was considering making a post along the same lines for a while, based loosly on my own circumstances, as I believe there are some very switched on people using this site and you could gain some good pointers.

Unfortunatey very few of the them have replied to your post, but don't give up!

KB

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The point many have you missed is that the lifestyle I outlined is not flamboyant it is what many would think is reasonably pleasant.

Some of the observations surprise me. One poster suggested to maintain a car costs just £300 per annum. With respect a modest car has four tyres that will need replacing periodically then there is servicing, MOT etc. I chose a reasonable car costing say £5k and therefore it will fall in value by £1k per annum and then there is the interest you pay or lose on having your capital tied up. Cars do go wrong it could be an ECU unit, a dashboard problem or brakes. Some years you may be lucky and spend perhaps just £300 but there will be other years where it will cost you considerably more.

Houses do need to have a kitchen and bathroom replaced every 15 years or so, rooms need to be redecorated, re carpeted and new curtains. Repairs to the roof, chimneys etc will arise. Furniture will of course need to be replaced. Yes some years very little others it could be very expensive but to suggest that just a few hundred pounds is unrealistic.

Another suggested that spending £500 per month on food and cleaning products makes me Mr Waitrose. If you want a diet of budget mince, tinned sardines, corned beef road kill and berries in Autumn from the hedgerow then I would agree that considerably less that £500 to feed a family of 4 is possible. But that was not what my question posed. I suspect a weekly shop of around £70 per week with milk and odd items and school dinners will bring the total to around £115 per week i.e. about £500 per month. Even if I was out by £100 per month the thrust of my argument that £60k is need for a reasonably lifestyle whist taking care of the future is required.

You can appear to live a lifestyle I outlined on much less but it can only be achieved by not saving for retirement or for a rainy day.

So for a family with two children wanting to have a pension in retirement and some cushion to deal with an emergency living in a reasonable house being maintained with a respectable car also maintained reasonably will need around £60k to keep it all afloat. I do not think that a £175k house for a family with 2 children is unreasonable and is not achievable in London or its immediate areas.

Edited by The Ginger Winger

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You can appear to live a lifestyle I outlined on much less but it can only be achieved by not saving for retirement or for a rainy day.

So for a family with two children wanting to have a pension in retirement and some cushion to deal with an emergency living in a reasonable house being maintained with a respectable car also maintained reasonably will need around £60k to keep it all afloat. I do not think that a £175k house for a family with 2 children is unreasonable and is not achievable in London or its immediate areas.

Correct

Yet on another thread ( Scrum for Halewood jobs ) they said there were 10 people for every job , these jobs paid just £14000 a year , the whole work raise a family buy a house thing is just so out of kilter , no wonder so many with kids have just given up go on benefits and/or work in the black economy . Earning anything like enough for them to do it by working in a normal job is about as likley as winning the lottery.

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I believe many have managed to have this lifestyle by not saving for retirement, releasing equity and using credit cards.

I think the biggest elephant in the room is pension provision (or its lack of it) the current low interest rates with many paying IO have kept the ship afloat but when interest rates go up the patience of lenders who have allowed many to pay less than they should will be severely tested.

The pensions time bomb for many will be delayed whilst they are saved by inherited wealth from their parents but the following generation will be well and truly shafted. Student loans, ageing population, low investment returns, less stable employment, rise of China and India as the new super powers.

Those who think that a good family income if £50k per annum £1k per week need to think carefully about all the costs they face and whether they are correctly costing them

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Spot on. The idea you can maintain a house including its contents for a few hundred a year on a long term basis is ridiculous.You can do it for a couple of years but not long term

The same is true of cars

I am on record on this forum for suggesting that to have a middle class lifestyle where two children are educated at private school with a detached house and two cars in the suburbs and adequate pension provision would require at least £250k per annum. Before the mindless one liners come flying across ...work it out and factor in the repairs and renewals for the home and the car and lets see the figures.

The lack of pension provision is going to be a major factor in the next few years and if the government either make people save or they save as a result of persuasion then there will be less to spend on housing and of course prices will fall.

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OP, depressing if true post. Right now I'm living at home on approx £30k (just under) aged 26. The way I'm going to try and get around all this is by saving up as large a deposit as possible and hopefully paying any mortgage off in under 15 years (would HATE for it to be longer - and hopefully by that time I'd be on £45k+). It's the biggest cost so I'd like to see it go. Also try to live close to work to cut petrol costs but that would mean higher housing costs (just the way it is) so there may be a compromise there.

Anyway... I'm relatively comfortable right now, but if I had to start paying a mortgage, bills etc right now, I would probably struggle big-time. It's just unbelievable .. the whole thing.

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I believe many have managed to have this lifestyle by not saving for retirement, releasing equity and using credit cards.

I think the biggest elephant in the room is pension provision (or its lack of it) the current low interest rates with many paying IO have kept the ship afloat but when interest rates go up the patience of lenders who have allowed many to pay less than they should will be severely tested.

The pensions time bomb for many will be delayed whilst they are saved by inherited wealth from their parents but the following generation will be well and truly shafted. Student loans, ageing population, low investment returns, less stable employment, rise of China and India as the new super powers.

Those who think that a good family income if £50k per annum £1k per week need to think carefully about all the costs they face and whether they are correctly costing them

I would contend that the lifestyle you suggest can be done for sub £50K but in general the media projected "normal lifestyle" you see doesn't match up with official income figures and some of the reasons for that are explored here - extra debt, black economy earnings, untaxed earnings (diferent to blk econ.), cheap housing costs plus there's probably some more.

I imagine that until people realise that it isn't the 1970s you can't load up on debt and watch it disaappear as your wages rise greatly and your standard of living increase commentsurately, they'll think they're doing 1) the right thing and 2) they are entitled to the standard of living they are currently furnishing themselves with.

But is it going to be the 70s again?

Edited by daiking

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I do not think that a £175k house for a family with 2 children is unreasonable and is not achievable in London or its immediate areas.

Furthermore, once you get out into the sticks, running a second car becomes almost essential - especially in the scenario above where presumably both of the couple are working.

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Correct

Yet on another thread ( Scrum for Halewood jobs ) they said there were 10 people for every job , these jobs paid just £14000 a year , the whole work raise a family buy a house thing is just so out of kilter , no wonder so many with kids have just given up go on benefits and/or work in the black economy . Earning anything like enough for them to do it by working in a normal job is about as likley as winning the lottery.

People are figuring it out bit by bit.

If the economy truly needed their labour, the economy would gladly pay them well beyond living wage. Instead of a wage so low they couldn't remotely raise a family on.

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explain

If you want to be picky about things, 6k a year into pension?

yeh i don't believe anyone on that wage is paying that amount into a pension.

I worked out using an online calculator that tax credits and child benefits are between £3K and £7k a year depending on how much childcare you need to pay for.

Edited by cardiffone

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I’m in this demographic and I agree mostly with the family budget proposed but would suggest that this describes the budget of an affluent working class family – Tradesman breadwinner maybe spouse working part time so no child care costs and whilst there are many in this postion I don’t think it is typical.

I think the OP is about right with food costs - £500 a month for a family of four. Undoubtedly could be done for less but if you a having fresh fruit and veg with every meal and good quality meat or fish maybe fours times a week is about right.

Holiday cost are over the odds few people are fortunate enough to spend this much on a holiday every year. I would say maybe 1K and that’s in a year you’re feeling wealthy.

Pension contributions at 12% of income seems a little high. Personally I do 8% and among my contemporaries this is a lot. If you were putting in 12% you would be saving less.

Clothing is high, I would say £50 a month on two children and maybe £200 a year on each adult.

Motoring costs – If you rely on the car for commuting yes, in which case the mileage used might be conservative. I spend less but do most servicing/repairs myself.

Don’t know about home maintenance having mainly been a renter but it seems a lot. I would’ve thought if you were maintaining (doing DIY) rather than improving a relatively new house (last 50 years or so) it would be less.

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You don't HAVE to pay any motoring costs. I don't. Its that attitude that gets the exchequer so much money.

Oh and to answer the question without getting a calculator out, I'd guess around 55k p/a joint gross. It all depends how much people spend on junk they don't need.

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The flaw in the analysis is that it ignores costs spread over a lifetime. The lifecycle model suggests people are nett borrowers when the kids are young and their living expenses are high, and nett savers later in life when the kids have left home and inflation, even at relatively low levels, has eroded debt burdens.

Of course this relies on being able to buy a house and have kids while you are in your twenties, so from age 50 or so you move into savings territory. If you have kids in your mid-late 30s and buy a family home in your mid-30s then you'll be 60ish before the kids are gone and the mortgage paid off. Which leaves very little time to save for retirement. Of course it's no coincidence that the retirement age is being scrapped just when the 1946 cohort hit 65 but that's another story.

Point remains that what looks like a pretty unremarkable lifestyle is out of reach for all but a very small percentage of the population in 21st century Britain, and it's nearly all down to HPI.

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