Is £40,000 really a liveable income for families in the UK?


Monica and Bryan Adams lost £85,000 in a failed business venture and now owe £360,000 on their £310,000 house

The average income for a British family with two adults working is £40,000 a year. But while there are people who feel well-off living on this, for others it is a daily struggle.

"I try and buy myself a new-ish car every two years," says Kate Golding.

Cars are a particular weakness for Kate, a nurse who lives with her partner Jai Rossiter in Bristol.

"I could easily impulse buy a car," she admits.

Kate and Jai, an electrician, both own cars, putting them among the 30% of UK households owning two or more vehicles.

They own a £300,000 detached house, and say they feel "comfortable and stable" living on a combined income of £40,000. That is the average family income for a household with two people working, according to the Office for National Statistics.

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Money: £40,000 is on BBC Two on Tuesday 13 December 21:00 GMT

"It sounds like a lot of money, you think 'my god I'm earning £40,000' but you're not really after tax," points out financial expert Alvin Hall.

"You need to have priorities to live off £40,000," he says, and with Kate that means cars.

She spends £10,000 every couple of years to buy a new car and likes to go on two or three package holidays a year.

"If you want your kids to go to private school you can't do that on £40,000," says Hall. "If you have to have everything in your house that is current, you can't do that on £40,000, so people need to set priorities."

Kate Rossiter Kate Rossiter manages to buy herself a "new-ish car every two years"

The 2011 Family Spending Survey shows households spent the largest proportion of their income on transport, rent, fuel and power, and recreation and culture.

There has been a fall in spending on clothing, health, recreation and restaurants, but a rise in spending on education, housing, water and electricity.

Many families will have relied on some kind of personal debt to get them through the year. But Kate is unusual in having no debt.

"I don't have a credit card. I haven't ever been overdrawn," says Kate. "I've had a loan once, £5000 for a car. I had the loan three months and I paid it off."

The average household debt (including mortgages) is £55,795 according to Credit Action, a national financial education charity.

"It doesn't matter if you have £10,000 or £100,000 a year if you spend more than your income that's when you get into trouble," says Paul Lewis, presenter of BBC Radio 4's Money Box.

"About half the population doesn't have debt," he says. "It tends to be older people, as they have finished paying their mortgages and don't aspire to go out and spend on things like holidays."

Family Spending Survey 2011

  • In five regions expenditure was higher than the UK average: London, South East, East , South West, and Northern Ireland
  • Households in rural areas had higher overall expenditure than those in urban areas
  • Spending figures show a fall in spending on clothing, health, recreation and restaurants but a significant rise in spending on education, housing, water and electricity
  • The ownership of consumer durables continued to increase

Kate and Jai do not have children, but Kate puts their large disposable income down to being good at financial management.

"I like the fact that I can manage my money, and a lot of my friends are in debt for whatever reason and never have any money left at the end of the month."

But financial expert Alvin Hall says you "don't need a lot of financial education to live well off of £40,000, it's just common sense".

Spending also depends on where you live in the country. In London, the South East, East, and South West of England, and Northern Ireland, spending for households is higher than the national average.

Houses prices in the south of England are much higher, the average house price in Greater London is £440,230, while in Blaenau Gwent in rural south-east Wales it is £88,163.

Monica and Bryan Adams live in Bournemouth where the average house price is £226,279 - around £15,000 less than the national average. But they owe £360,000 on their £310,000 house after getting into financial difficulties running their own business.

They have two children, Alexandra, who is eight, and Matilda, who is three, and describe their finances now as "tight" and "draining".

Their cafe failed after just eight months and they were made bankrupt after losing £85,000. The same thing happened to 4,242 other businesses in England and Wales in the last three months according to figures from Insolvency Direct.

Nevil Arthur Nevil Arthur spends a lot of time at his computer managing his elaborate accounting system

"I won't even buy a shop-bought pizza, that's £1.75 and I can make four pizza bases for that," says Monica.

Bryan now works for a utility company, and his wage - combined with tax credits and money from taking in lodgers - brings their income up to the national average of £40,000. After being made bankrupt they are not allowed credit cards.

"It's actually doing me good," asserts Monica. "It's teaching me to manage my money. If I haven't got the money I can't do it.

"I feel more pious for being able to now do that but I feel more stressed and worried. It's not as fun as slapping down a bit of plastic," she admits.

Average personal debt looks set to rise to £77,309 in the UK by 2015. David Cameron was criticised recently after a draft of a speech suggested that people should pay off their credit cards.

Virtual money pots

Nevil Arthur, a Eurostar train driver who lives in Ashford in Kent, believes he does not need lessons in money management.

"There's two ways of doing finance I think, the proactive approach and the reactive approach," he says.

"I believe that there's not many things in life that are actually surprises, so I try and allow a sum of money for replacing stuff or for how much things are going to cost."

He has devised his own elaborate and particular accounting system where he moves his wages into a "virtual pot system".

Weekly average household spending



Housing, fuel, power


Recreation, culture


Food, non-alcoholic drinks


Restaurants, hotels


Miscellaneous goods and services


Household goods and services


Clothing and footwear




Alcoholic drinks, tobacco and narcotics






Other expenditure (inc mortgage payments, council tax)




Source: Office for National Statistics Family Spending Survey 2011

The pots can be for "food, entertainment, holidays, stationery, car maintenance, petrol, white goods", among other things, explains his wife Diana, a teacher.

This way of allocating funds used to be the norm, says Lewis.

"When people lived on cash wages that's exactly what they did. Cash is a physical thing and when it ran out at the end of the week that was it, you couldn't buy anything.

"Nowadays money is much more virtual, it's not a real thing. We use less and less cash and more and more plastic so we don't have that discipline to allocate money for different things."

A few years ago Nevil was diagnosed with cancer, which he is now in remission from, but even that did not cause him to overspend.

"I did have a brief spell when the BMW M5 was sort of beckoning to me... but I think I've been trying to be good with money for too long."

Gary and Sarah Francillia, who live in East Grinstead, West Sussex with their two boys Dominic and Joshua, know only too well how health issues can affect finances.

Dominic has been diagnosed with cerebral palsy and his parents want him to have a special operation that is only carried out in the US, which will cost £60,000.

Gary is a sergeant in the Metropolitan Police and Sarah is a part-time manager for a travel company. They both owed around £20,000 when they met 10 years ago, which they are still paying off.

Carrying forward consumer debt is "spending the future you haven't earned yet", says Hall.

"It's a ticking time-bomb. At some point something will go wrong and you'll have to pay it all back."

But he understands a sick child is something that overrides all other priorities.

Gary and Sarah Francillia Gary and Sarah Francillia refuse to worry about their debts

"It eats away at me every day," says Sarah. "So what we've got some debt? What does it matter? We'll deal with it. We have bigger priorities."

While those living on the average household income of £40,000 might be struggling with budgeting or debt, Hall believes they are much more careful with their spending than those on much higher incomes.

He believes they "repress their spending urge" but that goes out the window when people hit a certain income.

"Once people get up to six figures something happens to them," he says.

"All of a sudden they see themselves as rich and they want to have the signifiers of being rich, they want to shop at Gucci.

"People think they are released from what they see as the need to set priorities. They think they shouldn't have to think about money and when that mindset sets in, watch out."


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  • rate this

    Comment number 927.

    we are social creatures, we live or die by each others deeds to each other, one persons effort is equal to that of another, this beautiful wondrous thing that is life is being destroyed by the evil that is called greed, a house is not an asset it is a place to make a home, food, shelter, warmth, love health care, education, should never have any connection to money or wealth or status

  • rate this

    Comment number 926.

    Ok for starters £340k house on £40k a year, impossible based on lenders multiples. Unless it's Self Cert and someone's self employed...Then the combined income for a Nurse and a Sparky still wouldn't make sense at £40k as nurses get upwards of £25k and if you know a sparky on £15k he's lying! Also, if you can pay of a 5k loan in 3 months, £1700 etc, then salary must be higher? Questionable

  • rate this

    Comment number 925.

    what's a holiday!

  • rate this

    Comment number 924.

    if you think £40k is a lot to live off - check out the average house price in the uk, then go onto a bank or building society website, and see how much you'd have to pay as a deposit, and what you'd pay per month in mortage payments - you need to have a deposit of at least £25k and be earning at least £60k a year to get an AVEARGE house with a high APR

  • rate this

    Comment number 923.

    WOW! im shocked at this whole thing 40k a year to live on as a single person id say is ok, but a family! but honestly transport £64.90 that wouldnt even cover my comute or most people i know! and food, again i spend more than aparently a family of 4!

  • rate this

    Comment number 922.

    You seem to have double counted housing costs under 'Housing, fuel and power' and 'Other expenditure'.

    As for the figures; who spends so little on food and so much on Recreation, culture?

    Is this another example of being able to prove anything with statistics?

  • rate this

    Comment number 921.

    What are these people on, well done cafe owers u gave it a go, still earning £40k. Yes poorly children is a difficult. 40kers think people with 100k are rich I think (single income) 30kers 40kers + 100k are rich. People in other countries starving and malnirished may think I am rich. Living at home, unable to regualry pay into pension or savings working lots hours. Squash the rich there usless.

  • rate this

    Comment number 920.

    Although it might be a strange thing to do - reading 'comments' on a daftish magazine article - I find myself fascinated by the comments. Something is happening! Spend a few days reading about the world economy and you might agree with me that the whole thing appears to be collapsing. We need to withdraw from dumb military misadventure. We need to replace our system of governance.
    a new system

  • rate this

    Comment number 919.

    try an income of £110 per week = £5000 per annum.
    yeh..the poor r getting poorer .
    I don't believe in money ..get rid of it ..most wud still work ..& everything would be free ..put your mind to it. No debts, no banks..No theft ..No bailiffs .
    Everything u need 4 free 3rd world ..nothing would be beyond our capabilities ..the use of money has been the ruin of everything that cud have been

  • rate this

    Comment number 918.

    As my dad would say 'you have to cut your cloth accordingly.' Some people are much better at organising their money than others - or have more expensive lives. I've 2 siblings on a similar wage; one lives very frugally, has no dependents, no property but has savings; the other has 2 kids, an ex-wife, a mortgage & tends to blow a significant amount on the latest gadgetry.

  • rate this

    Comment number 917.

    where do they get that the average couple bring 40k home, south of Watford as usual no doubt. They should try coming and living in Yorkshire on 1200 pounds a month. Oh by the way my car is 12 yrs old, must be nice to have a new car every 2 years

  • rate this

    Comment number 916.

    Our household income is c£90k. However, with 1.5 years unemployed and credit cards of £23k and a mortgage, it is all hand to mouth. We are left with a few hundred to buy food, entertainment and buy clothes, travel, pension etc. Don't be so quick to judge those on a high salary - more goes on behind closed doors than you think. Wish i was a civil servant asking for more free money today!

  • rate this

    Comment number 915.

    Andrew O'Neill, you are talking rubbish; how do you think pensioners manage? My wife and I live quite comfortably on £15,000 per annum. Admittedly, our house is paid for, after a struggle paying up to 15% interest during the 1990s, but if you cannot manage on £40k your priorities must be wrong.

  • rate this

    Comment number 914.

    OK, well I earn £40k and have no children to worry about, but I still think that a car every other year and three holidays a year is extravagant. What about making provision for retirement and savings in case of redundancy - especially important if you have a family. Saving should be more important than buying more..things.

  • rate this

    Comment number 913.

    "Weekly average household spending
    Transport £64.90
    Housing, fuel, power £60.40
    Recreation, culture £58.10
    Food, non-alcoholic drinks £53.20"

    Food, non-alcoholic drinks @ £53.20 - seriously?? for a family?? At least double that, if not more for a 2 adult/2 child family.

  • rate this

    Comment number 912.

    It seems the best thing is not to have children, then I remembered we chose not to have any!

  • rate this

    Comment number 911.

    Don't you feel sorry for people who cannot have a newish car every two years?

  • rate this

    Comment number 910.

    Anyone who thinks that a family of 4 can live comfortably on a £40k per year income, are either lucky enough to have bougt their house when they were cheap, have no children, get benefits, or have a big inheritance/help from daddy - or a mixture of all 4.

  • rate this

    Comment number 909.


    The government have closed the refund part on tax, but at least get what you can at the end of this tax year.

    Transferring your Married Couple's Allowance to your spouse or civil partner after the end of the tax year.

    if your wife is not working, you get double tax releif.

  • rate this

    Comment number 908.

    I am 16 and I know that our family earns well under £40,000. My Mum works part time in the Police force and my Dad is currently on a tour of duty in Afghanistan.In our family there are four children and my mother at the moment.Currently living in London
    Living under £40,000 is feesable, you just wont have to take anymore holidays to Ibiza and your new car every two years. Learn to Save Please.


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