The constantly rising cost of living makes people more picky when choosing their future profession, changing careers, or simply switching jobs. A salary of £38,000 a year, roughly £3,167 a month and £792 a week, doesn’t sound that bad, does it? There are, however, some pitfalls worth your attention when deciding if a 38k salary is a good salary personally for you. What are the pitfalls? We reveal them in our article.
Table of Contents
As for 2023, the median annual income in the United Kingdom reached 34,963 British pounds. It’s crucial to mention that region was the first and foremost factor influencing people’s annual earnings in the UK. Salaries reached 44,370 pounds in London, around 36,000 in South East England and Scotland, and fell to 31,200 pounds in the North East.
Every income that is over the Personal Allowance (£12,570) limit in the UK is subject to mandatory deductions such as tax and National Insurance. The good thing is that the 38k salary falls within the Basic Rate group (incomes between £12,571 to £50,270) where the tax rate stands at 20%. As for the National Insurance payment, there is also good news: starting from 6 January 2024, people whose weekly income is between £242 and £967, have to pay only 10% for their National Insurance instead of 12% as it was in the previous tax year.
So, the mandatory monthly calculations are:
Having calculated how much of an actual salary you will get with 38k gross per year, we can make judgments regarding its appropriateness. There are several factors that we have to analyse: how old a person is, where this person lives, and what standard of living they expect to have. Let’s delve into it.
According to Office for National Statistics official data released in November 2023, the age of workers had a visible impact on how much their earnings were. The age groups and their median weekly pay looked like this:
Considering that the weekly income with 38k salary stands at £633, it’s a decent result if you belong to the first, second, and sixth age groups on the list.
Location can become a real game changer when assessing the validity of the salary. People who live in more expensive areas have higher chances of landing a more lucrative job because their expenses for a comfortable life will also be higher. Whether you live in London or North East, your answer to the question ‘Is 38k a good salary in the UK?’ will inevitably differ.
According to the same Office for National Statistics report, the median weekly pay varied depending on the region and stood at:
So, living comfortably in London, South East, East, and Scotland with £633 per week could be a challenge. However, with financial discipline and proper planning, one may have a nice life in other regions of the UK.
Another crucial factor is what lifestyle you are expecting to have with your 38k salary. Our personal choices usually dictate our spending habits. If you strive for luxury, frequent travel, or regular eating out, try finding a more lucrative job. There is an excellent tip on how to find out what kind of an apartment you can afford – rent should be at most 30% of your net monthly income. With £25,420 net a year, your rent maximum may reach £1,200 per month, but ideally, it will be between £800 and £1,100.
If we take a look at the latest market rent statistics, we’ll see that the most affordable accommodation can be found in the NorthEast (average of £576), NorthWest (average of £604), and Yorkshire and the Humber (£591). The list of more expensive places includes East (average of £899), South East (average £1,003), and London (average of £1,615).
Or let’s say you are considering buying your place and taking a mortgage. With the £38,000 average salary, it’s potentially possible. However, such factors as the borrower’s credit history, down payment, savings, living costs, extra sources of income, current interest rates, and the type of property one wants to buy will also be taken into account. Lenders eagerly approve applications if they know the borrower can afford the repayments. Low debts and large down payments open doors to better mortgage deals.
Last but not least is the industry in which one gets £38,000. According to the November 2023 Statista report, full-time workers in such industries as electricity, gas, steam, and air conditioning had the highest average salary, which stood at approximately £50,528. In contrast, those working in accommodation and food service had the lowest average wage, which was 25,522 pounds per year. Among other industries, there were:
Even though the annual salary of £38,000 a year surpasses the national average, its appropriateness for a family life is under question. A lot will depend on the family size, living expenses, and lifestyle choices. Besides basic items of expenditure such as rent, food, and utility bills, there are some additional ones: for instance, childcare, education, and healthcare. Therefore, a smaller family combined with careful budgeting and low-cost area accommodation may well get by with £38,000 a year, however, larger families or those who prefer living in high-cost areas may require a higher income for a comfortable life.
Having £38,000 per year in the UK may provide a good lifestyle. Here are some workable tips.
Essentials go first. Rent, utility bills, groceries, and transportation expenses should be your top priority. However, there are also possibilities to decrease them a bit, for example, sharing an apartment (and money for rent) with a flatmate, using electricity and water responsibly, using public transport instead of a car, or buying specific food items at a discount. Paying off credit cards, loans, and other high-interest debts also belongs to this list.
Take your discretionary spending under control. Nobody says you should limit yourself completely; however, buying garments when essential and not because of boredom may be a good idea —the same goes for eating out and other leisure activities. There is a plethora of free but not less exciting options as well.
Plan your budget and save whatever happens. Saving 10% of your take-home salary is a must. Ideally, 20%. Fifty per cent should be allocated to cover the mandatory expenses, and 30% can go toward discretionary items. It’s known as a 50/30/20 rule of thumb.
Work on your financial literacy and discipline. Not only will you be able to manage your current financial situation successfully, but you will also find ways how to bring it to a new level