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The perils of earning a 100,000 salary

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