Quick straw poll: Is £250,000 a bad annual salary? Would earning that amount of money leave you struggling financially? For most of us, the very question is laughable – as in, we’d be laughing all the way to the bank were we ever to see that lofty number adorning our payslip, putting us squarely in the top 1 per cent of UK earners.
But ask a man called Frank Frulio, and you’d get a very different answer. Following his appointment as general manager and global head of space services at Spire Global UK, he recently took his employer to a tribunal, claiming he could not afford to work at the firm on his measly six-figure salary after bonuses were suspended. On top of the £250,000 base rate, he was expecting to receive an extra 60 per cent on top – equating to £151,800 – and claimed that, when this was not forthcoming, it “created a sense of panic, knowing that I could no longer afford to work at Spire”.
I feel for Frulio, really I do. A US native, he was contending with the challenges of a higher UK tax burden and the maintenance of two separate residences – “our house in the US which we recently had custom built, as well as a domicile in Glasgow” – but the tribunal ruled against him. The conclusion was that, while Frulio’s situation was “extremely unfortunate”, Spire had acted lawfully.
We might categorise this as a fairly extreme example of “money dysmorphia” – the phenomenon of thinking you’re poorer than you actually are – but Frulio is not alone in his detachment from financial reality. Far from it. One successful business owner who owns three rental properties recently told The Times that she has a feeling of “despair” when she thinks about her finances – regardless of the fact that a financial adviser told her in no uncertain terms that she and her family were “comfortably well off”. “I’ve never thought of myself like that before and still don’t really,” she said. “I still feel skint.”
Meanwhile, actor Millie Bobby Brown recently admitted that she struggles to splurge on anything at all, even after her star turn as Eleven in Stranger Things snared her a thriving Hollywood career and a healthy bank balance. According to Deadline, she earned a cool $30,000 per episode for the show’s first two seasons, leaping to $250,000 an episode from season three onwards. Yet on the Call Me Daddy podcast, the 22-year-old shared that her husband is far more likely to spend more on shopping – “I’ll be like, ‘I need socks’ and he will be like ‘let’s go to Prada’ and I’m like ‘let’s go to Target’” – while she still calls her parents before any big purchase. She even struggled to treat herself to a pair of designer sunglasses, despite encouragement from her family.
Brown may be a celebrity, existing in a rarefied sphere that most of us can only dream of – and yet the man or woman on the street is, in general, no more rational. Studies have shown a significant “wealth perception gap”, with people far more likely to underestimate their earnings in comparison to others than overestimate or have a realistic appraisal of them. One piece of research published by HSBC in February revealed that most Brits typically underestimate their earnings by 30 per cent.
More interesting still, the highest earners have the biggest blind spot when assessing where they sit in the pecking order. Nine in 10 workers on £100,000 or more, for example, do not consider themselves “well off”. This, despite the fact that hitting six figures immediately puts you in the top 4 per cent of the UK. In fact, the 1,000 high earners surveyed said they would need to take home an eye-watering £724,000 a year, on average, to “feel” wealthy.
Demographics affected people’s idea of what constituted financial security, too; younger people believed they’d need more money to feel rich, with those aged between 18 and 24 saying an annual salary of £343,000 would be necessary, compared to £324,000 for 25 to 34-year-olds and the far lower £135,000 for 34 to 46-year-olds.
Polling by New Statesman in 2024, meanwhile, revealed that 60 per cent of Brits earning £80,000-£100,000 think they are “about average” earnings-wise; high earners tend to view themselves as “normal” on the income scale, and “worse off” than those in their social circle. For context, the pre-tax median household income in the UK was £31,400 in the financial year ending in 2021, according to ONS data. You can try it for yourself: using ONS’s calculator, pop in your household income and find out exactly where you stand compared to the rest of the country. The results might just surprise you.
So why is our expectation so divorced from reality when it comes to money? One factor is almost certainly the level of financial security a person experienced growing up. If someone’s family was perpetually strapped for cash, they are more likely to carry an innate fear that everything could be lost in an instant. “Many of the values that inform our attitude to money are shaped when we’re young,” says counsellor Ashley Duncan of Spacious Place Therapy. Dr Christine Hargrove, a financial therapist and coach, agrees that the experience of financial instability as a child “can have long-term effects”. “Our minds are wired to keep us safe, and that includes protecting us from danger. Our feelings don’t always realise that the context has changed, and it can take some work to put our painful financial memories firmly in the past,” she says.
Brown is a prime example of this; “To be transparent, I grew up with no money, did not grow up with money, so I have a money thing, where I get very conscious about money,” she said of her upbringing.
Then there’s the issue of “lifestyle creep”, the term coined to describe how spending tends to increase alongside income. Things that were once considered luxuries quickly become necessities, often in line with what those in our social network deem “normal”. Hence why couples raking in a small fortune can claim they “feel the pinch” when school fees go up – a private education having become essential rather than extravagant – and the tax on their second property increases.
“The research on this is pretty interesting,” says Hargrove. “People underestimate two major components of their spending: the infrequent (often large) expenses, and the regular (small) expenses. Both are part of lifestyle creep.” On the former, she gives the example of buying a vehicle: “How often do you consider the outsized repair costs of a luxury automobile when considering your next car cost? Most people don’t realise the repair costs are not apples to apples.” On the latter, she finds that people tend to “gloss over” daily expenses like the multiple subscriptions, including apps, that quickly add up.
The comparison and absorption of what constitutes “normal” spending used to be confined to our known peers, the people in our immediate circle; nowadays, it can apply to the hundreds of thousands of people we come across online. “Money dysmorphia is kind of like today’s version of keeping up with the Joneses,” according to Credit Karma consumer financial advocate Courtney Alev, who adds that social media amplifies this “distortion between perception and reality”. One study found that nearly 25 per cent of Americans said that they felt less satisfied with their financial circumstances due to social media. Bombarded with images and reels showcasing aspirational, affluent and hyper-luxurious lifestyles, we struggle not to compare and feel dissatisfied with our own much more meagre lot.
Then again, it’s not all in your head: the actual cost of living has soared. Perhaps it’s unsurprising that people are feeling increasingly less flush when, in truth, they are. Changes to minimum wage and National Insurance payments for workers brought in this month by the government mean employers’ wage bills are shooting skywards, leaving many businesses with no choice but to pass on the extra cost to the customer. Recent gloomy forecasts put the average price of a pint in the UK at a record-breaking £5 for the first time; the £5 coffee is predicted to be just around the corner. As the prices of everything from rent and mortgage payments to public transport have also climbed, most Brits have less disposable income compared to several years ago.
It’s worth noting, too, that the whole lens through which we view “luxury” has changed. For the baby boomer generation, purchases that are now seen as everyday or essential – takeaway coffees, gym memberships, new clothes – were branded as luxuries. At the same time, they had a reasonable expectation of being able to buy a home before the age of 35, now an often unattainable goal that has come to represent the height of “luxury” for the next generation. For context, in November last year, the average UK house price was £290,000 – 10 times the average salary for a 22 to 29-year-old. Thirty-five years ago, a house could be procured for around five times the average salary.
So yes, there are legitimate reasons why many people may feel hard done by, legitimate reasons why they might tend towards underestimating their wealth in the grander scheme of things. If the result is that we’re a bit more careful and mindful with money, it’s not necessarily a bad thing. As Hargrove puts it: “One of the things I like most about financial therapy is that it’s rooted in real life. Sometimes, the fear is warranted.”
But one small piece of advice – if you are on £250,000 per annum, maybe don’t complain too loudly about money being tight. Even if you don’t get your bonus this year.
