The day I tried to apply for my first mortgage (this was back when it was actually possible to get one of course) was the day I realised that I had no concept of my actual earnings. I knew I was receiving a depressing £2.55 per hour basic wage. Believe it or not, this was not all that long ago, and I was celebrating a recent pay rise but I had no idea what I was likely to earn in a week, a month or a year.
My shifts varied from week to week, I got a slight (very slight) pay bump for working unsociable hours and I didn’t have any idea how much tax was going to be taken before I received the payment, so I was always playing the month end guessing game. You know the one, trying to guess what the amount is going to be on the paycheck before you open it.
You will either find you took home more than you thought, happy days or, less than you hoped, bah humbug. I was really bad at this game, I could never seem to guess it right no matter how many times I tried or how carefully I tried to work it out. It got to the stage where I would purposely guess a low number just so that I could get that warm fuzzy feeling when I saw the amount was higher than I had allowed myself to estimate.
This inability to predict my pay made budgeting a real headache. I was bouncing from month to month wondering if there was going to be enough cash to put something away for a rainy day, pondering if I could afford the new shoes or wondering if the extra shifts would be enough to pay back my overdraft.
This particular day, having received my ‘pay rise’ I found myself sat with a mortgage broker. I had got it into my head that I could now own a house and become a real grown-up.
The broker after some idle chit chat and me telling him proudly that I had received a pay rise, assured me that getting a mortgage should not be a problem, all he needed to know was my annual salary.
Uh oh… I panicked, I didn’t know how to calculate my annual salary or how to make £2.55 per hour sound at all convincing enough to hedge a mortgage on. All I could think of to say was “I don’t know but don’t forget I got a pay rise, so it should be fine!” Pathetic right. Needless to say, on that occasion I didn’t get any further than the application form. After a kind smile and less than convincing promise that he would be in touch, I was shown the door.
Recalling this time in my life and feeling nostalgic for the years gone by, I was playing with the new salary calculator on the Blue Arrow website. I put in my old salary just for fun, to see what my annual wage would have been at the time… when I saw the numbers I burst out laughing, I had actually tried to apply for a mortgage with an annual salary of less than £3k per year working just three days a week! How that poor broker kept a straight face I don’t know.
I called my other-half in to come play with the new tool, I asked him what the earliest pay rate was that he remembered, for him it was just £1.33 per hour £2.6k per year (full time)!
The tool I was playing around with was on Blue Arrow’s website but for ease click here if you want to take a look , I do need to say here that it was not actually built just so I could see how crazy my old pay rate was, it was really built to help people answer these questions;
- How do I work out my yearly income when I only know my hourly rate?
- How to find out what you really take home at the end of the month?
- What does £x per hour really look like when it arrives in your account?
Once you know the answer to any of these questions you can realistically forecast the months ahead based on the shifts you know you have coming up. If I had access to something like this back when I was getting an hourly rate I would have been much better at budgeting.
To check it out for yourself simply click over to the tool, enter the number of days you work followed by the hours per day. Then enter whichever rate of pay you know, so if you know you earn £6.50 per hour you will select hour from the Gross Salary drop-down and put 6.50 in the box. If you know you earn a weekly rate of let’s say £200 per week you would select ‘week’ from the drop-down and enter 200 in the box.
Once you have hit ‘calculate’ you will see a new box that shows you a guide amount for your hourly, daily, weekly, monthly and yearly take home pay.
I say ‘guide’ because everyone’s circumstances are different, the calculator is based on the 2017-2018 tax table to give you an estimate of your pay, but not a guarantee. The payslip guessing game is now a thing of the past, as you can see in advance if splashing out on the shoes is a good idea or how taking those extra shifts could really bump-up your rainy day fund.