plonkee money an english-er's thoughts on personal finance

February 19, 2008

how much do i need to earn? reverse engineering my ideal salary

Filed under: budget — Tags: , — plonkee @ 12:00 pm

kids, don’t grow up to be yuppies

The other day, Catherine Shaffer @ Wisebread asked if six figures was really that much. This inspired me to work out what income it would take to sustain my semi-ideal young professional lifestyle.

For the purposes of this, we’ll imagine that I am living in my existing house, and that the only things that I want to alter are my discretionary spending, and my savings and investment rates. My existing spending on housing and bills is around £730 a month.

eating and drinking

Ideally, I’d buy reasonable quality groceries, and have the delivered, not buying extravagantly, but not worrying about the cost. I estimate that would be about £50 a week.

In addition, since I hate making my own, I’d want to buy lunch everyday at work estimated at a generous £5 a day. I also really like to eat out, ideally I’d have a Sunday pub lunch out, have a snack lunch in a cafe on Saturdays (estimated at a combined £15 a week), and once a month go to a proper restaurant (estimated at £30 a month). As an aside, when I had a serious boyfriend this was pretty much how often I’d eat out.

I’d also like to go out for drinks once a week spending on average £30 a time – this would be very variable, most of the time I’d spend quite a bit less, with occasional splurges.

hair, beauty and clothes

It costs me £35 to get my hair cut, and ideally I’d have that done once a month. I’d also like to buy expensive-ish beauty products (Clinique, YSL, Lancome etc) and occasionally get my nails done, for a combined £25 a month.

Last year I went on a spa day with my sister, and I’d like to repeat that annually, but make it a residential thing – approximate cost £400, including accommodation and treatments.

Finally, I’d love to have some better quality clothes, but I’m a minimalist, I think £200 a month would keep me happy.

travel

It would be quite nice to have a car, as many other young professionals do, I think would cost me about £300 a month. I’d be driving to the supermarket, and making occasional trips home, and to Ikea of course.

I love to explore new destinations and I’d like to take a two week holiday each year, plus 4 or so weekend breaks. For the two week trip, I’ll estimate £600 in flights, £500 in spending money, and £400 in accommodation. For each weekend break, I think that £150 in flights, £150 in accommodation and £100 in spending money would on average cover it.

house related things

I’ve confessed before about my love of house magazines, so I’ll enable that with 4 or so magazine purchases a month, plus £200 a month buying all the great things that I see in there.

savings and investments

I am of course a sensible personal finance person, so I’d want to save and invest my entire ISA allowance of £7,000 and put away 15% of my salary towards my retirement, as well as donating a tithe – or 10% – to worthwhile charities (almost certainly not churches).

and the income required is…

After doing a bit of fiddling around (since retirement investments and tithing are dependent on gross income) and using a take home salary calculator, I would need an income net of tax and national insurance of just over £3,700 per month, which in turn requires a gross income of £85,000. I would conservatively describe this figure as more than three times my current gross salary.

What’s funny to me, is that I don’t think I’m being particularly unusual in my spending suggestions. I’ve based them on both my own habits, and those of other people that I know who are also single, professional, and in their 20s. And none of the people that I’m basing this on are likely to be earning as much as half of the £85k it would take to do all of it.

Life really is about choices, and I’m unlikely to ever have the money to spend doing all the things that I’d like to at the same time. I need instead to focus on finding the things that actually make me happy and spend only on those.

Image by BaronBrian

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