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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