By Bonnie Sumner for The Wireless

When Nick* and his wife Bridget* bought their two-bedroom home in northwest Auckland off plans four years ago, they didn't imagine they would have to choose between having a second child and paying the mortgage.

Together, they bring in more than the average Kiwi household income of $100,103 (as of June 2017), but when Bridget took time off her teaching job to have their first baby they were only just able to make ends meet on Nick's sales salary thanks to family help.

"We only just survived the year, and that was a stretch, and that's because we'd had nine months living with Nick's parents putting aside our rent while our house was being built - and a teacher's maternity grant kept us going that much longer," Bridget says.

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"But to have another kid you've got to lose income for a while. To pay the mortgage, we can't survive on one income."

Data collected last year by Statistics New Zealand showed 116,000 households earning more than $100,000 said they had just enough to make ends meet, and a further 30,000 said they did not have enough money to live on.

Nick and Bridget say they're lucky because they got into the property market before it really took off, so their mortgage payments are lower than what they would now have to be forking out in rent.

Still, they don't know how they will keep climbing the ladder.

"It's not necessarily that we're not doing okay, it's that you don't know how you'll go any further. Or how we'll have another child in Auckland."

"You think you get into the house market and it's a good stepping stone but really the next step is so much higher it doesn't feel like a step, it feels like you're stuck.

Incomes aren't keeping pace with living cost

This is where economist Shamubeel Eaqub says the crux of the middle class problem lies.

"I don't think anybody should be saying that $100,000 is a small amount of money - it's not, it's still quite a large amount of money and for most New Zealanders it's still an almost unimaginable amount, but it's about how far does that money go?"

"The answer is, it's not going as far as it used to, and I think that's where the surprise is," he says.

Snowballing house prices and increasing utility costs coupled with the fact incomes haven't kept pace with these rises have created a perfect storm: those in the middle-to-upper income bracket, who in previous generations would have been considered to have almost limitless opportunity, are now finding it hard to make ends meet.

Reserve Bank numbers show an income of $100,000 today doesn't go as far as in the past.

The equivalent income in 1998 would have meant $149,000 worth of spending power today.

Meanwhile, housing costs have increased 50.5 per cent in the past decade, and household income has risen just 42 per cent in that time.

'We probably don't understand what is a need versus a want'

But are changes to the wider economy and society entirely to blame or do poor budgeting skills come into play?

Financial adviser Hannah McQueen says 20-25 per cent of her clients are in the $100,000 and struggling camp.

She puts this down to a combination of external factors and changes in spending habits.

"$100,000 is not going as far as it used to, but at the same time we're less equipped than previously as well. There are some basic financial smarts that most people haven't mastered, but a lot of the tools that might previously have helped to get ahead are outdated now, like delaying your gratification."

"Back in the day you delayed your gratification and you would be sure you would still get what you wanted, so it was just a period of time [of going without], whereas now you can delay your gratification but in many instances it's still not going to be enough to ensure you're going to get what you want."

"But we know that 50-60 per cent of us do live beyond our means. We spend easier; I think we probably don't understand what is a need versus a want."

Tauranga planner and mother of three, Sarah*, agrees.

Her household salary is just shy of $100,000 and her family happily live a no-frills lifestyle.

"I think we're a little bit different than most people in terms of what we choose to spend our money on or not choose to spend our money on."

"We buy budget food, neither my husband nor I drink or smoke, so that kind of thing really helps with your spend. We don't buy coffee out, my husband might once a week - I never do; we don't buy dinner out, we get takeaways occasionally, and never really did things like going to the movies or shows or anything like when we were in Auckland.

"I made all the same decisions when I was on the DPB that I do now and my daughter still got to do dance lessons or gymnastics."

'On paper I'm middle class.. but I can't get anywhere'

Even so, the dramatic rise in housing costs over the past decade means some people are now finding it tough.

Amy's salary as a counsellor is $66,000, which is well above the average New Zealand personal income of $49,475, but after the rent on her two-bedroom Auckland home, taxes and student loan repayments, she is left with just $250 a week for power, water, school fees, internet, phone, food, transport and any extra or unexpected costs.

"On paper I'm middle class. But after all my expenses I'm left with almost nothing. I can get by, but I can't save. I can't get anywhere."

She should receive child support, but her child's father, who lives in Australia, has never made the payments he is supposed to.

Every few years he is chased for the money but most of what he is made to pay goes to fines and Amy receives a one-off nominal amount.

Despite his failure to pay, Amy recently lost the bulk of her Working For Families payments when he was reassessed and ordered to pay more.

That he won't - and doesn't - pay didn't come into it.

"Because he's earning more I now get $400 less a month. But they won't enforce this because he's in Australia. I just got a $6000 pay rise but because of his reassessment, even with my good pay rise, I'm still $60 down a week than when I was being paid less."

Despite this, she doesn't see herself as living in poverty.

"There's no way I would be able to afford to smoke, or have a glass of wine with my friends on the weekend or go to a gym or to yoga, I just can't. On paper I should be able to go on a holiday, but I can't. But it really depends on what people consider to be needs."

The end of the middle class?

Eaqub says the middle class is a curious phenomenon.

Before the industrial revolution, wealth was concentrated in the hands of the few and everyone else lived in relative poverty.

"The recent experience in terms of humanity is quite unusual in that so much of the spoils went to workers. Essentially, what was interesting about this period of post industrialisation is it created a large group of middle-class jobs, but that's actually never happened before in history," he says.

"When you look forward over the next ten to 20 years we're not going to see people on middle incomes, we're going to have people on low incomes and high incomes, so those middle class, middle-wage jobs that were so prevalent are simply not going to be available in the numbers and quantities.

"From the 90s, income inequality in New Zealand hasn't fallen one bit, so it doesn't matter how much the economy grows, the class structures are quite firm.

"It's a bit dystopian but I don't think it's going to shift anytime soon. Our parents had shortcuts, like they could just go to university and you're pretty much guaranteed things are going to be okay, but it's not true for us."

He says the future for the middle class now depends on an individual's level of support.

Getting on the housing ladder isn't as easy as it used to be say experts. Photo / file
Getting on the housing ladder isn't as easy as it used to be say experts. Photo / file

Everyone spoken to for this story had some kind of family help, from the occasional groceries to an inheritance used as a home deposit.

"If you have a house already and if your parents have homes, then it's very likely you and your family will be okay, and if you're generation rent, it gets a bit tougher because your income is just not enough to keep up," Eaqub says.

"But that middle class route to home ownership is getting much harder and if you do own a home then you become a mortgage slave for the rest of your working life and the cost chews up a good chunk of your money, and that kind of ideal of middle class security, I don't think that's there," says Eaqub.

The difference between feeling poor and having nothing

Shifts in employment are also one of the biggest drivers presenting challenges to stable incomes of the past.

Tracey and her husband moved to Napier from Auckland to escape the onerous house prices and to be closer to family support with the impending birth of their second child.

Together they make around $100,000.

She says they're lucky; living in the provinces is cheaper than Auckland, but as a registered independent social worker Tracey's income is unreliable.

New Zealand has a high rate of self-employed workers, at almost 18 per cent of the workforce. She says this can create instability in their income.

"You've got to put money aside throughout the year for all these other things and you get stung by ACC and often other things come up you haven't thought about because you might be new to that kind of work," she says.

"But at the same time we choose to have this house and we choose to have a rental property and we do have expensive food, things like that, but then we don't go out as much now. We've got it really sweet, but then if something happens with my work we are screwed."

However, in her work as a counsellor she is faced with real poverty on a daily basis, and says the stark difference between feeling poor and having nothing is very clear.

"If I compare our situation to my parents' generation, we're more hard up, but if I compare it to people I see each day in my work, we're doing extremely well. We're squeezed sometimes when bills come in because we don't have as much in the way of savings as I would perhaps like.

"We live month to month, but again that's partly because of the choices we make. But we are very, very fortunate. We might struggle to maintain the lifestyle we've got, but we don't struggle when it comes to absolute poverty," she says.

"I don't think many people comprehend it. A lot of people think they understand what's going on out there but they don't. The difference between what we have and what the lower socioeconomic groups have is vast."

*Names have been changed