budget breakdown advice wanted

Andyf33

I have a good basic salary of circa 80k, wife is full time mum and we are both in early 30's. Just reviewing monthly budget and we disagree on breakdown. Currently take home pay roughly divided as follows:

Mortgage (incl overpayment): 30%
Cash Savings: 15%
Investments (inc pensions): 10%
Food/general expense: 15%
Bills:10%
Car & petrol: 10%
Cash for fun: 10%

We currently disagree on saving/investment v fun cash balance.

I know it will be different for all and depend on inidividual circumstances, attitude to risk and what you want out of life etc etc but does anyone out there think they have the right balance and how did you achieve it. Views appreciated.

Thanks

Any

Sorry, I cannot help.
we have joint account for bills and then each our own money because I work.
But I would think that you need to put quite a lot in investment and pensions, especially nowadays AND especially because your wife is full time mum. That means that you have to save up for both of you and that her state pension will not be worth mentioning.
If you don't save up enough for retirement because you throw away lot of money on fun, that will be GREAT shock for both of you when you will be retired and won't be able to afford ANY fun.
My private opinion anyway.
Good luck

daveyjp

10% for investment AND pensions doesn't seem much unless employee contribution is excluded.

Andyf33

employee pension contribution included in 10%. i pay 300/month and employer pays in another 900/month.

have recently downturned unit trust contribution from 300/month to 100/month in order to increase mortgage overpayment.

Lunar_Eclipse

Andyf33 wrote: »

Mortgage (incl overpayment): 30% - ours is 14%, 43% with overpayment
Cash Savings: 15% - 8%
Investments (inc pensions): 10% - small amount in pension only
Food/general expense: 15% - 10%
Bills:10% - probably the same
Car & petrol: 10% - 15% (DH takes train to London)
Cash for fun: 10% - 10% split into family entertainment (days out), kids activities and £100 for DH & I for discretionary spending/month

We currently disagree on saving/investment v fun cash balance.

I know it will be different for all and depend on inidividual circumstances, attitude to risk and what you want out of life etc etc but does anyone out there think they have the right balance and how did you achieve it. Views appreciated.

Thanks

Your split looks pretty balanced IMO, but it's all personal and depends on what your priorities are. I've filled in our details, similar sole income provider currently, income a bit less.

I am curious as to where the disagreement is though, I'm guessing one of you wants more money for fun? My £100/month pays for my gym membership (£56), weekly tennis lesson (£30) and the odd coffee, book, iTunes download or skincare treat. Hubbie spends his on things like an iPhone, iPod & books.

Do let us know how you get on. I love money & budgets.

Andyf33

thanks for the replies. yes we currently disagree as one of us would like more fun cash. the kids are still all young and we want to get the balance right between doing things with them now but also putting money away for when they are older for uni etc (i was one of the lucky ones from the early 90's that didnt have tuition fees and did get a grant).

Part of me says live for today as you never know what might happen tomorrow but part of me thinks that on my income we should be using it to help the kids in the future.

Lunar_Eclipse

Andyf33 wrote: »

Part of me says live for today as you never know what might happen tomorrow but part of me thinks that on my income we should be using it to help the kids in the future.

I agree. Both are important. So you need to find the balance that works for your family. Ultimately your spending should reflect your priorities. So if you increase spending in the fun category, could you cut it elsewhere (besides savings?) For instance, could you substantially cut your food/clothing spending? Maybe just for the short term.

Hubbie & I are keen travellers and his family are spread across 3 different continents; so we have recently spent £5k on flights for a Christmas holiday. And it will be an expensive 3 1/2 weeks when we're there too. So because overseas holidays are a priority for us, I have cut our monthly food budget down to £250 max/month until we go. This will save us at least £400 by the end of next month without us having to resort to a beans & rice diet and we can do the expensive days out that I have my eye on. The children won't mind giving up packets of crisps in exchange for my homemade cakes, whale watching and kayaking in the Abel Tasman National Park for instance.

Good luck. Small steps can also be a good strategy if you're looking at making big changes financially.

getmore4less

Part of the reason you have a problem is you don't seem to have a long term plans/budget which tell you what you should be putting away for the long term now so it is just a bit of guess work.

Set goals and targets that you both agree with and it usualy falls ino place, or at least you understand the trade offs, eg. more fun now work for 5 more years

I would set some goals and work backwards to see what you should be saving today to meet the goals, if you have possible big outlays in a few years like the kids uni fees you will need to factor those in as well, don't forget a few replacement cars and other big ticket items over the years.

You will be supprised how much you will need to be saving to have comfortable early retirement.

Get ahead of the saving requirements and you can relax the spends a bit get behind and it is really hard to catch up.

So set retirement date(early to give a fall back of working a bit longer) and estimate how much unearned income you would want to live on. also plan to have no debts by then as well(morgage paid off)

Using todays money.

Say you want £20k @ 55 you need a pot of around £500,000

Lets say 25years time and 5% growth(over inflation) then you need to be saving around £873pm now and increasing that by inflation each year

You are over this but that is tied up in pensions so may not be so easy to get at I would set up some other saving pots to run along side that are more flexable. But remember that was for 20k living you may want £40k so will need double.

Do outline budgets for the next few years till the kids are off your hands with detailed budgets for the next 12-24 months on a rolling basis. keep a track of the long term targets and adjust each yera if needed.

By the way it is easy at 30 to say I will work till I am 60 but if you decide at 50 you want to retire at 55 it will be too late, by the time you are 50 that is a very likely senario so plan for 55 or earlier, you can always change your mind the other way and work for longer.

Using % is a very poor way to budget and plan spends you will just end up waisting loads of money you should do this with real numbers and trade of value. why spend £200pp on food just because you can.


I would do a proper SOA/budget and see where your waste is it is very easy to just squander money when you have loads coming in.

http://www.makesenseofcards.co.uk/soacalc.html

Do you all have the free(for a year on contract) mobiles, are your TV/internet on the best deal, do you use cash back sites like quidco for buying things and insurance, are you running cars more expensive than you need etc.

eg
You say 15% on food/general so that £600+ generaly £100pp is considered about right but add some more if you drink or entertain a lot could be that there is a saving to be made there.

One thing a spend life style does is mean you HAVE to work, a few years of saving can buld a very nice buffer and reduce debt so the minimum you need to earn drops a lot giving a lot of secruity you won't have if you spend it.

Think about this if you live off 1/3, buy a house with 1/3 and save 1/3 you can retire in about 15 years.

Andyf33

thanks for the replies.

i guess for the last year or two we havent had any defined targets but did realise that we needed to be doing something. we have tried to balance reducing mortgage debt, building cash savings, starting investments whilst still enjoying the cash i bring in.

I have tried to balance reducing the mortgage debt, building cash savings, and enjoying the money i bring in. im lucky that at the moment i do have the income to support my lifestyle but i would like to protect this as who knows when the good times may turn bad in the current economic climate.

Lunar_Eclipse

getmore4less wrote: »

Think about this if you live off 1/3, buy a house with 1/3 and save 1/3 you can retire in about 15 years.

Really enjoyed your post thanks.

Especially interested in the above comment. Is this a loose plan to provide retirement income equal to inflation adjusted current living expenses (ie 1/3 of salary) in retirement? And at what rate of return over what timeframe and via what saving vehicle? I'm very interested and whilst I don't think we can live off 1/3 of our income, I also don't think we could retire if we saved a third of it for (only) 15 years. But would love to be proved wrong.

Am currently overpaying on mortgage by about 1/3 of salary so could gig things about to achieve what we ultimately would like - retirement at 50. We're 36 and 37 so it would be a tall order (and the kids would have to stay at the local 'free' school, but then that's our perogative as parents!:D)