Disposable Income

robinspain

Hi, First post so not sure if im in the right place but here goes.

Ive always wondered how much we has a family should aim to have left at the end of each month after paying all our "normal" bills. I mean after paying mortage/rent, Utility Bills, and food. I guess you could clll these items things that have to be paid, theres no way getting round them eh..
after that we have a car loan, credit card and pension to pay. after that, how much should we aim to have left over, how much of this should we be allowed to enjoy such as meals out, saving for holiday etc, and how much should be put away, either in savings, pensions or investments.

I would be interested to know what your thoughts are on this, and how much you manage to save, either in monetry terms or as a % of your incomes.

Hope ive made sense....
Rob, in Spain.....

curlygirl1971

Hi Rob

Well am sure there are plenty of different opinions on this! I guess it just depends on how big your income is and how big your absolute necessary expenses are. If your income is relatively low then there is never going to be much left after all your bills. And it also depends on what's important to you and where you are in life - money sat in the bank or a lovely home / experiences?

I was trying to find the answer to more-or-less this question some months ago and found something that helped answer the question for me. It was from an American website so I guess it needs to be taken in that context (different taxes, they have to budget for healthcare and education etc.) but a number of financial "guru's" base their core message on the following:-

50% of income should go on Needs (Essential food, shelter, bills you have to pay)
30% on Wants (Things you could basically live without if you had to for 6 months - like Sky, Entertainment, some food.....)
20% Saving

I guess it also depends on what you call savings - as some people save up for their annual insurance (so to me that's not savings that's a need)

I have been a budgeting-obsessive-fantatic for a long time - I track and account for every penny - which is a bit ridiculous but the only way I can be with personal finance. And I suppose it's relatively easy for me as there is only me spending my income. When I did an analysis of my own spending/saving profile I found that actually I wasn't too far out with these percentages - at the present.

There have been times when I've been on a much lower income than I am now but no matter what, I've always had a budget and I've always tracked my spending against it and this has helped me to save. If I want to spend money then it has nearly always been a case of 'Do I need it or want it?' and if it's something I need then the question is whether I can get it cheaper. That's not to say I constantly deny myself or spend weeks trying to find the best deal! I do go out and I have holidays and spend money on things that I really want (or wait until a Birthday). I guess its all about priorities and what's important to you - £100 in the bank Vs. 15 CD's on a shelf or a family meal out or a new coat you fancy........

There is also another way of looking at it - and you will find this often mentioned in the forum - you should aim to build up savings of between 3-6 months expenditure. Many people on here seem to prefer at least 6 and that's certainly the minimum level I feel comfortable with.

Sorry for rambling on.....this is just the kind of question I like at 11pm!

jennikitten

I'm only one person, so things are a lot easier for me than if I were budgeting for a whole family. But my monthly set up is something like this:

Mortgage: interest is covered by my housemates
Bills: ~£150/month (my share of water, gas, electricity plus the Sky, BT, private road costs, phone contract, tv licence and council tax)
Loans: £7/month on my student loan
Food: ~£40/week (I believe food is the most important area of life to spend money so I try to buy organic wherever possible)

Everything left goes into my savings account, admittedly a good chunk gets frittered away but I'm definitely working on stopping that.

Saving for a holiday when you're living in Spain?! :P I'd say put a good chunk in savings if you have an account with no restrictions, that way if you fancy a treat you can just have one, but at the same time you'll be more motivated by the amounts building up and less inclined to spend...?

sebtomato

Sorry, I don't understand the statement:

"50% of income SHOULD go on Needs (Essential food, shelter, bills you have to pay)".

If I am spending less than that, what should I do? Buy more food, maybe better brands (from Tesco value to Tesco premium)? Get a bigger house?

curlygirl1971

No of course not. The %'s are just one personal finance 'theory' and to be taken with a pinch of salt. They are an opinion not a rule and like I said - it depends on the size of your income and the size of your expenses. I see them as a guideline designed to help people reign in their over-spending.

Any

HI,

There is two of us at the moment and the way we do it:

Joint account for bills and food - neccesary. Each pay that amount into the account each month ples each £50 to build up back up in case of need for new oven or any emergencyu

I can only talk for myself on the way of the rest of my wages...

Car loan goes out the moment I get paid
Pension goes out of my wages direct

The rest I spend how I feel and what is left on the end of the month goes to savings.

However I am going to change that so that savings goes out as soon as I get paid so I cannot see that money in my account - what you don't have you cannot spend:D I would like to build up at least 3 months wages for "just in case" and then start building ISAs for long term.

I am the sort of person who does not like spending though... I don't mind blowing £ on overseas holidays and once in a while to go out for meal, but on everything else I am very frugal.. I don't feel the need and cannot justify having Luis Vuiton handbag for £400 or pay full price for Karen Millen coat.. I like nice clothes but that is what outlets are for:D
And I loooove getting bargain.

There are currently no % or no set amount for left over... I could probably get a better car and manage easily with higher loan, but I don't feel like it... It all depends.. After the bills I currently have £800 left over. £250 car loan and £25 phone bill. So let's say I have £500 for savings and fun stuff.

CLAPTON

robinspain wrote: »

Hi, First post so not sure if im in the right place but here goes.

Ive always wondered how much we has a family should aim to have left at the end of each month after paying all our "normal" bills. I mean after paying mortage/rent, Utility Bills, and food. I guess you could clll these items things that have to be paid, theres no way getting round them eh..
after that we have a car loan, credit card and pension to pay. after that, how much should we aim to have left over, how much of this should we be allowed to enjoy such as meals out, saving for holiday etc, and how much should be put away, either in savings, pensions or investments.

I would be interested to know what your thoughts are on this, and how much you manage to save, either in monetry terms or as a % of your incomes.

Hope ive made sense....
Rob, in Spain.....

basically, if you are having to pay for a car loan and are not paying your CC in full ech month (unclear from your post) you are anyway spending more than your income.

so your first step is to think about ways of becoming debt free rather than how much you can spend on other things.

Once debt free then start savings so you never need to pay banks lots of interest again (mortgage excepted)

jennifernil

When we were first married (1969) there was very little left over once the bills had been paid, but if there was then it went into savings. OH always contributed to the company pension scheme before anything else.

We have never been into eating out much, and holidays were always modest and saved up for. We also saved for a new car, or anything else we needed/wanted, so never had debt other than our mortgage.

I would agree with aiming to have at least 3 months expenditure in your savings, preferably more, and to save for things as far as possible rather than taking loans.

Now we are retired we are still saving, although more by habit than need. Our various pensions are, after tax, about 2 1/2 times what we need to live on now we have no mortgage, so we are able to enjoy time away in our caravan and still save.

For pensioners inflation is much higher than any pension increase, so savings (and the interest on them) helps maintain our standard of living.

robinspain

Hi
Many thanks for the responses, Just the kind of feedback i was hoping for.
Especially Curlygirl, thanks for your reply. The breakdown in percentages gives a good example of how to break it down.
Hopefully now we have renogtiated our mortgage next year we will have sime disposalble income and this gives me a good idea on how much i should use to treat ourselves with, and what to save.

Any more replies, always welcome.
Thanks,