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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  • Comment number 1167.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 1166.

    I'm a student and I spent my 3rd year away working, which I got paid £16k pa (about 12k after tax). For me that was a huge amount of money. I survive well inside my means with money to spare, and was able to learn to drive at the same time.

  • rate this

    Comment number 1165.

    whilst i dont agree with the strikes yesterday...i had to laugh at the comment made by MrC when he said the average nurse will retire on £37k....WHAT i dont earn anything near that and I have been a nurse for 8 years!! Hubby & I dont earn £40k either but we pay our mortgage, bills, feed half the neighborhood cats (+our own), give to charities & eat.. cutting your cloth accordingly comes to mind!

  • rate this

    Comment number 1164.

    If 40k is not enough to live on how do those millions on less than average manage? Could it be they don't buy a new car every 2 years (hardly average), less culture and restaurants, fewer luxuries. In fact I would suggest the majority of families even with benefits manage on far less than 40K. Struggling on 40 K? - learn some economics and restraint.

  • rate this

    Comment number 1163.

    I live on £14,500pa, rent a place luxury place with one other person and still have £250pm in disposable income and I'm 21. £6k off the average wage for a single person. If people on £20k (Combined) can cope with raising a family im sure someone on £40k can cope. STOP spending money on rubbish.

  • rate this

    Comment number 1162.

    @ David H Parry

    People don't live in a vacuum (and i don't mean a household appliance) . You make it sound as if we live in place like a self service restaurant where we make our free choices from an endless menu of our own preferences. It's not like that in reality. There are many constraints and influences in life. Do you think you have a computer or a television just because you want one?

  • rate this

    Comment number 1161.

    40k a year, what a dream, we both work for less than half that, these selfish people need to get a grip on what reality is for most people in this country, nowhere near 40k a year, no newish car, no holidays, no eating out, shopping at aldi and other discount stores etc. These public sector workers should be ashamed of themselves, if there not happy leave the public sector

  • rate this

    Comment number 1160.

    I agree with Dr Mike, we live on more than £40k, although we are far from "well off". The difference is not having kids surely? We cannot afford to buy a new car every couple of years like Kate above, we have not been abroad for 15 years as we can't afford to fly and private eductaion - forget that. There is no way we could live off £40K with kids. Kate should be saving!

  • rate this

    Comment number 1159.

    I may not have a mortgage ( cannot afford one on the minimum wage) but i will be paying my less council rent for life ( 50 plus yrs). So in the end i am doubly worse off. Would love to buy, but one this home of mine is for people who cannot afford to buy so don't agree with buying it and for 2 i do not have the luxury of 40k.... :/

  • rate this

    Comment number 1158.

    The 'rich' don't FORCE people to aspire to them... 'you kinda did that on your own!'


    Stop blaming other people for your woes.

    People CHOOSE the life they live, the money they spend, the life they aspire to and the values they live by.

    It ain't the rich... it's the man or woman in the mirror you have to blame, worry about and fight against!

  • rate this

    Comment number 1157.

    For everyone quoting a family income of £15k or less, are you also including your tax credits and benefits? Do you get reductions on council tax? Do you pay a mortgage? Unless you're comparing apples for apples this is all meaningless. We pay £8400 a year for our mortgage. If we lived in a council house we could live on lower wages. I'm very grateful I can afford my own home however.

  • rate this

    Comment number 1156.

    We have a combined household income of considerably more than £40k, and we would never dream of spending £10k on a new car every couple of years, and several package holidays per year. I think that's extraordinary for a family who claim they have to have "priorities". If people were a bit more prudent with money, they'd be a lot better off.

  • rate this

    Comment number 1155.

    "Average" figures are meaningless.
    It's not what you earn but what you spend that matters. But how can you cut your living costs with inflation out of control? Houses are still silly money (up to 10x income).
    Politicians (right and so-called left) need to take a long hard look at the society they have created.
    We have all been conned by the rich and powerful. Time to revolt brothers and sisters!

  • rate this

    Comment number 1154.

    David Cameron is right; Pay off your creditcard!

    Want to be happy? It's EASY...

    Live within your means.
    NEVER equate spending with happiness.
    Manual labour leads to a sense of achievement.
    Make do with what you have.
    Fashion is a worthless & pointless treadmill.
    NEVER follow everyone else over the edge of the same cliff.
    Brands are a luxury nobody needs.

    Some of us make do on far less than 40k!

  • rate this

    Comment number 1153.

    Re the comment from Droschke (1148). I am glad you have posted this. I hope people appreciate the sacrifice you have made. I do and thank you sir. I think we really should be helping you financially instead of throwing money at benefit cheats and new arrivals to our free society. You paid taxes all your service and gave more than I can imagine. You grin and bear it, its a disgrace for our society.

  • rate this

    Comment number 1152.

    'Older people don't go out and spend their monbey on holidays' Absolutely untrue! Tell that to Saga whose business is based on supplying holidays for senior citizens. Maybe older people are more careful with their spending having grown up when times where harder.

  • rate this

    Comment number 1151.

    I'm convinced this is a joke. Many people don't have even half this to live on and manage. Most of the people in this article need a good kick up the behind.

  • rate this

    Comment number 1150.

    My wife and I live on just over £20,000 a year. Consists of pensions and a few careful investments we made some years ago for a small annual income.
    Our last car was six years old when we changed it and the one before that was also six years old.
    We own our house having paid it off when I was made redundant 16 years ago.
    Not rich, but careful and enjoy life in the main.

  • rate this

    Comment number 1149.

    As usual an article written by the rich.... £40K a year, what a fantastic amount to struggle by on. Try supporting an unemployed teen, two school children and an adult who can't work. Total household income before tax of £24K...... There is reality and then I go past a certain supermarket and its like the Range Rover showroom. It sell chocolate Oranges at £2.75 each. Asda do them for £1...

  • rate this

    Comment number 1148.

    as a disabled ex serviceman your "weekly average household spending"
    ( £473.60) is what I have to live on for a month, try living on that. and that's what you get for serving your country and risking your life for your country


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