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2010-09-23 09:17:37
By Jon Kelly BBC News Magazine
It has become the benchmark for a generous salary. So why do its recipients
complain that earning 100,000 a year is an expensive business?
In those idle daydreams about the perfect job, that fantasy promotion, it is a
wage that - for the overwhelming majority of us - will do very nicely indeed.
An annual income of 100,000 is enough to put a recipient comfortably within
the top 2% of all earners, and the figure has become a key indicator that the
recipient is a high-flier.
The BBC's Panorama survey of the best-remunerated public servants took 100,000
as its yardstick - and it found that some 38,045 state employees take home that
amount or more each year. Going by official figures, that leaves about 545,000
privately employed people earning 100,000 or more per year.
It is a sum that puts one within touching distance of the prime minister's
earning power - David Cameron having taken a 5% pay cut upon assuming office,
bringing his salary to 142,500.
Start Quote
Geraint Anderson
It's like a gilded cage
End Quote Geraint Anderson Former banker
But what is it actually like to earn such an amount - generous beyond the
imagination of most Britons, more than sufficient to guarantee a comfortable
lifestyle, yet scarcely enough on which to fund an early retirement?
One of those who knows, and found the experience wanting, is Geraint Anderson,
38, who was earning a base salary of 120,000 and a bonus of 500,000 by the
time he left investment banking after 12 years in the City.
Anderson, who documented how he became disillusioned with his lifestyle in an
anonymous newspaper column and his book Cityboy: Beer and Loathing in the
Square Mile, indulged in many of the cliches for which the sector has become
notorious.
But he says earning such figures skews one's expectations of what is a normal
lifestyle, and ultimately robs high earners of the freedom they believe money
will bring.
"It's like a gilded cage," he says.
"They earn huge amounts but they have the massive mortgage, they have the
high-maintenance trophy wife, they have the kids at Harrow - then they wake up
on their 50th birthday and think, 'What a waste of a life.'
"They get into this culture where their worth is valued by how much they earn,
so they work ridiculous hours. I'd rather earn 25,000, have the kids at a
local school and not owe anyone anything."
Given that in 2009 median gross annual earnings for full-time employees was
21,320, few Britons will have much sympathy for those earning almost five times
as much.
Yet while most of us can only imagine the bigger house, extra holidays and
prudent savings that 100,000-a-year could allow, the reality of human nature
is that earning more doesn't make us any more likely to live within our means.
Jasmine Birtles, personal finance expert and editor of moneymagpie.com, warns
that, if anything, extra income is just as likely to leave us with less
disposable income.
"The problem in this country is that we are very bad at budgeting because we
don't plan ahead," she says.
"We have that whole suburban mentality of keeping up with the Joneses - moving
into a new area, paying the big school fees but being six months behind with
the mortgage. Earning 100,000 a year isn't going to change that."
Continue reading the main story
Start Quote
Dr Peter Holden
There have to be incentives or people just wouldn't do this job
End Quote Dr Peter Holden GP
Indeed, the cost of living in some parts of the country means that the sum is
barely enough to fund a loan to purchase a family home. According the Rightmove
House Price Index for September 2010, the average home in London costs almost
four times this high-rolling salary - 399,019. Of course, for dual-income
families where one partner is on 100k the housing market starts to look less
daunting.
Perhaps we should not be surprised, then, that a recent survey by the website
lovemoney.com found that Britons who earned 50,000 a year were happiest.
But one top earner who will not be giving up his salary any time soon is Dr
Peter Holden, 55, a general practitioner based in Matlock, Derbyshire.
Entitled to a salary of 106,000, Dr Holden - who was part of the British
Medical Association team which negotiated GPs' remuneration package - insists
he is worth every penny.
"I have a house worth 400,000, I drive a five-year-old Audi and my son goes to
the local comprehensive school," he says. "My wife was complaining last night
that we haven't gone out for nine months.
"I work a 60-to-62-hour week and I didn't earn a penny until I was 25. There
have to be incentives or people just wouldn't do this job."
Whether he is right or not is for readers to decide. What remains uncontested
is the old cliche about money not being able to buy happiness.
Analysis
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.
Below is a selection of your comments
So in fact, they are the same as everyone else, they just have these problems
in a more comfortable home environment. Please tell me where I can donate to
alleviate their suffering. I'm sure the people of Pakistan will understand that
these people are far more deserving of our sympathy and help.
James, London
Just because you earn what is perceived as a large salary does not mean that
you actually get to keep much of it, this country adopts the approach of taxing
it in every way it can down to a lower and lower point each year. My partner
and I both earn sizeable salaries and we are now seriously considering
relocating to another country where the time and effort for which we are paid
is not then removed by the government in ever-increasing stealth taxes.
Craig B, London
I wouldn't be comfortable at putting my health on the line with an overworked
GP. Sixty-hour weeks are unsustainable with the risk of mistakes increasing
each consecutive week. Work 40 hours and get some rest.
JBJ, Kopavogur, Iceland
Everyone makes a choice about what they want to do with their life. I am very
happy with my choice and really that is all there is too it. Unfortunately
people have got very good lately at feeling bitter towards those who make
exceptionally high salaries, as if the world owes us more than the choices we
made for ourselves.
Greg Turner, Horsham, West Sussex
It's all relative - if you earn 100k+ per year, you have to pay a
proportionately larger maintenance to your ex-wife!
Peter, Colchester
The more you earn the more you spend. That's how it always is. So you go "oh,
we can afford to splash out a little on that" and then it becomes habit. As a
totally selfless experiment, I'm willing to trade my salary for one of theirs
for a while, just to see how badly wrong my life goes. Contact me through the
Beeb.
Paul, London, UK
Quick! Somebody call Bob Geldof to organise a benefit concert for these poor,
deprived people.
Gordon Gekko,
I just started earning approx 100k a year quite recently. Such a good job isn't
easy to come by and it's a hard slog with a long commute, so the trick, as far
I'm concerned, is to live month-to-month as if I earned half that, then use the
rest as cash savings for, e.g. deposit on our next house. That way, I can drop
back to a more secure job at 50k if/when I'm knackered. I also get to save for
retirement.
Dan, Manchester
Keeping up with the Joneses will never bring you happiness no matter how much
you earn. But if you can't live within your means when earning that much then
I'm not particularly sympathetic (and being in the same earnings category this
lack of sympathy does not equate to jealousy). Set a good example to your
children and teach them what the important things in life are!
Natasha, Cheshire
Having experienced what it is like to have a large salary ( 95,000), and now
earning a modest one ( 45,000), I can say that I am far happy now than I was
back then, I work normal hours, I have weekends free and most importantly, I
can now spend time with my wife and Daughter and take time out for holidays.
Yes, I dont drive the same car as I once did, but at the end of the day... does
it really matter? No.
Paul, Scunthorpe
To have the worry of such a peril! I wish someone would stop just once and
consider our Armed Forces who work in excess of 60 hour weeks, in dangerous and
testing conditions - they have no option but to put their children in
'numerous' local schools and can not have the luxury of living in their own
homes due to constant moving around. Some people are just not happy with their
lot.
Lynne Clark, London, UK