Here's a statement you probably wouldn't have heard five years ago:
life is getting tougher for the moderately well paid. While the
Institute of Fiscal Studies last month found that rising living costs
are hitting the poor hardest (inflation was 4.3% for the bottom 20% of
households and 2.7% for the top 20%), there is growing evidence to
suggest it is the rest, the 60% in the middle (the 7 million households
earning £14,500-£33,800 a year) whose incomes and lifestyles are also
being adversely affected.
Anyone earning £27,000 or more, for example, will have no help paying for university tuition fees, according to the Social Market Foundation. In April an extra 750,000 workers were dragged into the higher rate 40% tax band – despite earning no more than they did last year – because of the reduction in the threshold.
Carmen Wong-Ulrich, Glamour magazine's resident money expert, and author of Generation Debt and The Real Cost of Living, calls this having "little or no wiggle room". She says: "Living off what we make has become more difficult. Middle earners are not poor per se but are, percentage-wise, nearly as squeezed. In the recent past our discretionary income was 30% of what we earned. Today this is nearer 10%, and what can we do with that? We have to save for our retirement, save for our kids' education and care for our ageing parents. The demands on our money are much higher than our income is comfortable with."
Wong-Ulrich suggests it's not that Britons are living beyond their means, but that our means are beginning to get beyond us. Last month the Office for National Statistics reported that disposable income is now at its lowest since 1977 – a finding reflected by the Guardian/Unum's Work:Life UK survey of more than 5,000 employees. Overall, it finds that 28% of workers say their outgoings regularly exceed their incomes, and among socio-economic groups there is consistency, with the A (25%), B (24%) and C2 (26%) groups all around the same figure. The Work:Life UK survey also reveals that 42% of As think meeting bills is harder this year than last; it was a similar 44% for Bs and 46% for C2s.
Financial expert Alvin Hall believes the statistics show that people are increasingly monetarily classless. "It's middle management that has got laid off, with their cars and houses to pay for," he says. "Living in anticipation of pay rises and rising property prices is no longer certain and it's getting harder for all people to think of new ways of making money go further.
"I don't think people are living extravagantly, but we've become casual in our spending, and this is under pressure now. It's all about not losing face, it's almost a case of 'how are we going to spend less without the neighbours noticing?'
In this new landscape, Hall says it's vital that people in all income brackets be financially prepared for a change in their circumstances due to, for example, unemployment or inability to work due to illness or injury.
"Feeling in control is the essential thing here, knowing you have a back-up plan," says Hall. "It is possible, just, to make money last longer, without a massive drop in people's living standards. Just saying things are hard is often embarrassing – people feel that others will judge them harshly – especially if they've been used to a good income. But more people are reaching the point where they are having conversations about their finances."
Hall has had good cause to put his own back-up plan into practice. When the investment bank Lehman Brothers collapsed in 2008, his already booked six-months' consultancy work was doomed and he was owed a six-figure sum he knew he'd never get back.
"Just being in control of my money wouldn't have been enough in this situation," says Hall. "Luckily I had a plan B, and I survived and rebuilt. The need to have some sort of back-up plan can't be overstressed. The point about money, however, is that you have to deal with it when you're calm."
Anyone earning £27,000 or more, for example, will have no help paying for university tuition fees, according to the Social Market Foundation. In April an extra 750,000 workers were dragged into the higher rate 40% tax band – despite earning no more than they did last year – because of the reduction in the threshold.
Carmen Wong-Ulrich, Glamour magazine's resident money expert, and author of Generation Debt and The Real Cost of Living, calls this having "little or no wiggle room". She says: "Living off what we make has become more difficult. Middle earners are not poor per se but are, percentage-wise, nearly as squeezed. In the recent past our discretionary income was 30% of what we earned. Today this is nearer 10%, and what can we do with that? We have to save for our retirement, save for our kids' education and care for our ageing parents. The demands on our money are much higher than our income is comfortable with."
Wong-Ulrich suggests it's not that Britons are living beyond their means, but that our means are beginning to get beyond us. Last month the Office for National Statistics reported that disposable income is now at its lowest since 1977 – a finding reflected by the Guardian/Unum's Work:Life UK survey of more than 5,000 employees. Overall, it finds that 28% of workers say their outgoings regularly exceed their incomes, and among socio-economic groups there is consistency, with the A (25%), B (24%) and C2 (26%) groups all around the same figure. The Work:Life UK survey also reveals that 42% of As think meeting bills is harder this year than last; it was a similar 44% for Bs and 46% for C2s.
Financial expert Alvin Hall believes the statistics show that people are increasingly monetarily classless. "It's middle management that has got laid off, with their cars and houses to pay for," he says. "Living in anticipation of pay rises and rising property prices is no longer certain and it's getting harder for all people to think of new ways of making money go further.
"I don't think people are living extravagantly, but we've become casual in our spending, and this is under pressure now. It's all about not losing face, it's almost a case of 'how are we going to spend less without the neighbours noticing?'
In this new landscape, Hall says it's vital that people in all income brackets be financially prepared for a change in their circumstances due to, for example, unemployment or inability to work due to illness or injury.
"Feeling in control is the essential thing here, knowing you have a back-up plan," says Hall. "It is possible, just, to make money last longer, without a massive drop in people's living standards. Just saying things are hard is often embarrassing – people feel that others will judge them harshly – especially if they've been used to a good income. But more people are reaching the point where they are having conversations about their finances."
Hall has had good cause to put his own back-up plan into practice. When the investment bank Lehman Brothers collapsed in 2008, his already booked six-months' consultancy work was doomed and he was owed a six-figure sum he knew he'd never get back.
"Just being in control of my money wouldn't have been enough in this situation," says Hall. "Luckily I had a plan B, and I survived and rebuilt. The need to have some sort of back-up plan can't be overstressed. The point about money, however, is that you have to deal with it when you're calm."
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