How much money do you need to feel rich?
How much do you need to earn to feel rich? A Beckham-style £40 million a year? A Goldman Sachs banker's average wage of £280,000? For many people, being able to meet ever-increasing household bills, pay the mortgage, run a car and have an annual holiday without going overdrawn can be enough to meet the ‘rich' criteria.
However, it seems how much you need to feel rich is all relative. A friend of mine suggests: "If you need to keep earning then you're not rich."
Meanwhile, another - who has recently made a hefty lump sum by selling his publishing business and moved to a salubrious country pad - confesses: "I don't feel rich any more surrounded by neighbours who are hedge fund managers." And my hairdresser's receptionist reckons being able to afford a weekly £28 blowdry without batting an eyelid constitutes a rich woman's lifestyle.
The average UK salary just touches £26,500 a year, according to the Office for National Statistics. Back in 2009, a survey by the Joseph Rowntree Foundation titled Understanding Attitudes to Tackling Inequality revealed how surprised respondents were to discover that people earning £42,900 were in the top 10% of UK earners and that only one in 10 people earn more than this.
Apparently, we all think we are in the middle somewhere, even if we earn below or well above the average - or even if we are actually in the top 10% of earners.
So how much income would make you feel rich? We asked three different earners what would make them feel wealthy.
SINGLE MAN, LOW EARNER
Peter McInerney, from Romford in Essex, earns a gross income of about £10,000 a year, which is less than half the national average wage, and puts him in the lowest 30% of earners.
He lives in a housing association property and each year he has to re-negotiate his rent depending on his earnings. The former chef turned movie extra was left to bring up his three children when his wife left him. Although they are now grown up, he still helps support them financially when they need it.
Peter, 53, says the pay as an extra is low and the work unpredictable but at his age it provides a better work-life balance than he had as a chef. He says: "I worked long hours as a chef and I was on my feet all day, which gets harder as you get older, and the pay wasn't great - especially for where I live."
Since becoming an extra a few years ago, he has picked up scores of jobs, including playing a wizard in two Harry Potter films, a part in Charlie and the Chocolate Factory, and ‘Dave the prop man' in the movie My Week with Marilyn.
"I've got some work lined up for the next six months or so but I do worry that it's getting more difficult," he says. "I'm very frugal and don't go out much and have never been a holiday person. I don't buy things if I don't have the money. I only use credit cards as a stopgap to get me through until I'm paid – it usually takes three months for the cash to come through from a job.
My main luxury is my Virgin Media TiVo for recording TV series and going online. I buy and sell on eBay." Peter says he felt at his richest before his wife left and there were two incomes coming in. "I think I would need to earn about £52,000 a year before I would really feel rich."
FAMILY OF FOUR, TWO EARNERS ON AVERAGE INCOMES
Howard Joseph, 31, a former brand consultant who recently set up his own market research company, lives in Finchley, North London, with his wife Lara, a trainee doctor, and their two children Nathan, 3, and Ariella, 1.
The couple's joint income is currently in excess of £40,000 but Howard is nervous about what the future holds now he is working for himself. "I realise how much you depend on regular cash coming in to make you feel rich or not.
"This is something I have to get used to working for myself as you wait for payments. If you have a regular salary and more starts to come in, then you start to do things like going out for dinner or buying a new car," he says.
Howard is in the ‘wealth is relative' camp: "I feel that there will always be people who are much richer than you are and they will look on others as having more than them. Others will look at the things you have and do and say you must be rich even if you don't feel it.
"The richer you become the more you add to your financial worries by buying a bigger house or sending your children to private school, which means bigger bills and that probably means you won't feel rich."
Howard tries to be prudent by shopping around and only using credit cards with cashback incentives. "I use cashback sites such as Quidco to buy things we need, including insurance. I travel a lot with work and book hotels through it. I've earned £3,500 back in five years using it," he explains. The Josephs also switched their mortgage 18 months ago. "That saved us a fortune."
Howard cannot pinpoint a particular income that will automatically make him feel rich. "What's important is not to be complacent and to keep striving to achieve things. I suppose how successful my business is will be measured by the amount of work that comes in and how profi table it is," he says.
SINGLE MUM, HIGH EARNER
By most people's reckoning, Gina Whitelake, 47, a fulltime publishing executive from North London, should feel rich. With a gross income of more than £80,000 a year, this single mum of one teenage daughter, has earnings of about three times the national average and is in the top 10% of earners.
But with a broken relationship behind her, a £100,000 mortgage, a string of credit card debts to juggle and a teenager to bring up, she is left with little or nothing to spare at the end of each month.
"I have brought it on myself, partly as I choose to send my daughter to private school. We don't live in the catchment area for the good state primary schools and having sent her to an independent school in the beginning it is very hard to switch over later. I see the £15,000 a year cost as an investment in her future," she says.
"I could have downsized but the house we are in is not too big for two and it means we can occasionally have paying lodgers." Gina believes she is unlikely to ever be or feel rich "unless I marry someone rich", she says.
"I have never felt rich, although I probably felt at my most comfortable when I was living with my ex. We had two incomes coming in and could manage the costs of childcare quite easily.
"But when a relationship breaks down there are lots of costs. I now pay the whole mortgage and the school fees. The credit card debts that started at that time about a decade ago have been with me ever since. I've just been switching the debts to different cards. I hardly ever go out and don't buy clothes. We haven't had a holiday for two years."
Gina is taking action on her finances. "On the advice of a mortgage broker, I recently switched to an interest-only mortgage. Incredibly, this has reduced my monthly repayment from £1,200 to £200. This doesn't make me rich but it helps deal with all my other debts," she says.
"I'm also planning on selling the house in two years' time, when my daughter has left school, to pay off the mortgage and give my ex his share of the capital. I will also try to start working part-time and move to a cheaper part of the country."
Gina struggles to put an absolute figure on the exact amount of money it might take to make her feel rich but she suspects somewehere in the region of £150,000 year might do it. "To be free of debt would certainly make me feel good."
What you can buy on the average income
What property can you buy if you are on a £26,500 average salary? Let's assume you can get a mortgage of up to £100,000 (based on a loan of three times salary and a deposit of around £20,000)...
London: If your heart is set on Central London, forget it, unless it's a garage you're after. You can pick up one of those in Mayfair at that price, according to the website Findaproperty. Head south to Balham, SW12, and you would still need £185,000 for a studio flat.
Suburbia: London's satellite towns, such as Watford, Hertfordshire, offer better value with a few one-bedroom properties at £50,000, although there are far more at £100,000. Further afield in Ashford, Kent, a one-bedroom flat will set you back a more reasonable £80,000.
Scotland: Scots fare better. £100,000 gets you a three-bedroom semi in Irvine, Ayrshire – one of the cheapest towns in the UK – while in Glasgow you could have a two-bedroom flat in in Pollockshields, or a one-bedroom flat in the Leith area of Edinburgh.
The North East: In Newcastle, NE5, you could afford a three-bed semi or if you prefer the city centre, a one-bedroom flat.
East Anglia: In Norwich, you can pick up a one-bed flat for £75,000, or a three-bed house for £100,000.
Wales: In Cardiff, one-bed flats are £55,000 but in trendy Cardiff Bay they're £95,000.
A loan in which the borrower pays only the interest on the sum borrowed for the life of the mortgage but, at the end of the mortgage term, they still owe what they originally borrowed as this remains unchanged. The advantage of an interest-only mortgage is the monthly repayment is considerably lower than for a comparable repayment mortgage. Lenders generally insist the borrower also invests in an endowment, ISA or pension savings policy that, on maturity, is intended to pay off the capital loan.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.