How much income that you can live comfortably with?

hugheskevi

There is no mention of retirement saving/pension, or income protection insurance. Are those in place and adequate?

littlewillow87

hugheskevi wrote: »

There is no mention of retirement saving/pension, or income protection insurance. Are those in place and adequate?

I'm contributing 6.5% salary. don't really know if it's adequate. I'm in my 20s so still haven't thought much about retirement
Never thought about income protection insuranc, worth looking into though, thanks

littlewillow87

shegirl wrote: »

£70 a week on food isn't bad when you consider that on top of that you pay £20 per person per week on lunches!

I honestly don't understand your trying to scrimp on food with your budget or why you'd rather do that and waste £40 a week on lunches!!

That said,if you want to it's doable. I spend around £200 a month on food and have meat everyday,for me and teen ds,but I but meat in bulk from a butcher monthly,cook from scratch,meal plan and work from home

My £25/week includes lunches, personal things like exercise, makeup, clothes. I occasionally have a lunch out but most of the time just eat leftovers. £5/week on exercise then I often save the rest for clothes and makeup or nice treats like nice drinks or small things for my baby.
So the £70 actually includes my lunches as well.

shegirl

littlewillow87 wrote: »

My £25/week includes lunches, personal things like exercise, makeup, clothes. I occasionally have a lunch out but most of the time just eat leftovers. £5/week on exercise then I often save the rest for clothes and makeup or nice treats like nice drinks or small things for my baby.
So the £70 actually includes my lunches as well.

That's not what you said earlier hence me mentioning it

hugheskevi

I'm contributing 6.5% salary. don't really know if it's adequate. I'm in my 20s so still haven't thought much about retirement

6.5% is low, unless that doesn't include an employer contribution. Mid to late 20s is the ideal time to consider retirement planning. Even early 30s is leaving it late, and 40s is leaving it far too late.

One of the problems of having a decent income and spending most of it is that sets an expectation about living standards that your retirement income will have to deliver. With an income of £68K if you take a standard 2/3 of income target that is around £45K of retirement income you will wanting which will require around £1m of capital.

Be careful of a trap many fall into. 20s=young so haven't thought of retirement 30s=many expenses, no money to think of retirement 40s=family, too busy to think of retirement, 50s=too late to achieve retirement goals.

Savings (for emergencies & mortgage lump sum): £200

That suggests you use savings to reduce mortgage. That may well not be the most financially optimal decision, particularly if either partner is a higher rate taxpayer.

I think this would be a very good opportunity to review your entire finances, to make sure you have all necessary protections in place, and a clear retirement saving plan.

littlewillow87

shegirl wrote: »

That's not what you said earlier hence me mentioning it

I said "lunches and personal spending", sorry I didn't make it clear

shegirl

littlewillow87 wrote: »

I said "lunches and personal spending", sorry I didn't make it clear

'and £20/ week for each of us for lunches and bus.' Is what you said

audigex

At the risk of this post coming across quite harshly, I agree with some of the earlier posts here: you clearly have luxuries which you're so used to that they've become "misc expenses" in your head

littlewillow87 wrote: »

Thank you all for your replies.
Yes I also think £200 for emergencies is too little, that's why I'm worried.
I'm listing all our monthly spending here (just realised the income is higher than I thought - 3900 after deducting childcare voucher. I'm trying to squeeze other categories so that more can be put towards saving and giving away. If you can see any item that we can save, please feel free to comment.

Income (monthly): £3900

Outcome (monthly):
• Childcare (after childcare voucher) £500
• Mortgage: £780
• Council Tax: £190
• Factor (this seems a lot to me but nothing we can do): £140
• Electricity & Gas: £100
• TV Licence + media package: £46 (£32 of which is luxury)
• Bus (1 day a week for 2 person): £26
• Professional Subscriptions: £9
• Mobile Phone for 2: £43 (Of which I'd call £20-30 "luxury" considering a sim only unlimited minutes deal costs £12)
• Life Insurance: £10
• Giving away (we feel blessed in many ways so we'd like to give away if we can): £150 - whether you consider it one or not, many people do not have the "luxury" of having £150 to give away
• Car running costs (Service, MOT, tyres, brakes, parts etc - I found this is too high but we counted the bills from previous years and it's £1200/year!!!): £100
• Car Insurance: 37
• Car Tax: 13
• Car fuel - To work, day out, visit parents: (230 At least some of this, as anything that isn't needed to get to work/school is a luxury)
• Lunch & Small Spending make-up, hair cut, exercise for 2 adults: £195 barring perhaps £5 a week toward haircuts...
• Food & Household goods (consumables) for family of 3: £305
• Entertainment (cinema, meals out): £180
• Furniture and Home Improvements: £130
• Clothing : £43
• Medical and Dental : £44 - if it isn't NHS, it's a luxury
• Holiday fund (this is a big expense but my family are abroad so we will need to see them every year - cost us at least £2500 each trip): £300
• Visa (I am foreigner so had to spend so much in the last few years for visa, £1000 anytime to renew, this will stop in 3 years time when I've got the citizenship): £65
  
  All leaves us with:
  
• Car buying saving (so we can get a bigger car in 2 years): £100
• Savings (for emergencies & mortgage lump sum): £200 - I won't remove this, but saving is a huge luxury

If it's red or orange you can save all or most of it.

That's £1189 per month which you could cut without hitting any bills, any transport to work etc. That's more than my entire household income 3 years ago! And I didn't include your £200 savings nor any proportion of the fuel usage.

Frankly, the fact that you consider none of this "luxury" astonishes me. Improving your home is a luxury when many people can't afford one. Going to the cinema is a hell of a luxury.

Simply put you could free up £1389+ in any given month without hitting anything vital. And that's ignoring the fact you could buy a new £500 banger every year, rather than spend £1200 repairing and maintaining your current car, to save £60 a month. Buy it for £500, drive it into the ground and then buy a new one.

Some items are debateably necessities, although I'd argue that if it's not a bill, mortgage, food or transport to work, it's a luxury. Things like clothing become necessities after a period of time, especially with young children, but they aren't regular monthly expenses.

---

Imagine you lost your job today, what would you actually NEED to live? What could you get rid of or cut down on to survive?

Mortgage: £780 - currently necessary, although you could downsize if cutting costs was vital
Council tax: £190 - although it would drop if you downsized
Factor: £100 - although again it would vanish with the downsize, I think?
Electricity + Gas: £100
TV License: £14
Life Insurance: £10
Mobile Phone: £24
Food and household goods (consumables): £300 (although you'd manage it on £200 if you had to)
Visa: £65

That's all you actually "Need" from your list. Cars, holidays, giving things away and doing anything with your evening/weekend other than sitting in your home or going for a walk is absolutely a luxury, if your only priority is living. You don't need a car or childcare if you're not working.

So that gives a "how much do you need to live on" value of
£1583
Which would drop to more like £1200 or lower if you downsized and cut at least £200 total from the mortgage/council tax/factor, cut down £100 on the food and consumables and didn't have to save for the Visa.

So overall, as far as I can tell, you spend £1500 a month on luxuries and £1400 a month on true necessities. Everything else (~£1000) is either necessary while you're working, or somewhere between the two (ie you need it, but you're spending more than you have to).

Would you enjoy it compared to your current lifestyle? Probably not. But I know of families of 3 surviving on less than £1200 a month without benefits or any benefit-related discounts on council tax etc. That's three and a half entire families living on your income.

My advice, take a look at the expenses/luxuries, work out what you could actually live without, then put that amount into savings/mortgages. Even if you just did some of it, you could easily save significantly more than £200 a month. I suspect you could save at least £800 a month through lifestyle changes, without significant pain

littlewillow87

hugheskevi wrote: »

6.5% is low, unless that doesn't include an employer contribution.

That suggests you use savings to reduce mortgage. That may well not be the most financially optimal decision, particularly if either partner is a higher rate taxpayer.

I think this would be a very good opportunity to review your entire finances, to make sure you have all necessary protections in place, and a clear retirement saving plan.

Thanks, 6.5% doesn't include employer contribution. I think my employer contributes more than 10% on top, so in total about 16.5% (can't remember exactly).
My husband also contributes 6% but his employer only tops up 4%, so make it 10%.
Does it sound adequate?
I always thought that people need more money when children are young (nursery/ school etc). Later on you'll have all salaries for yourself and probably have inheritance of some kinds... As you said, like others in their 20s, I haven't really thought much about it. Should start having a plan then.



What else do you suggest we should do with the savings?
Our plan is to remortgage next year (before having a 2nd child) and take the monthly mortgage down to £500 or so. (At the moment our mortgage is £650 and we're overpaying 20%). We want lower mortgage because we expect to earn much less than now when we have another child (I may work part-time, £450 of our income at the moment comes from letting out 1 room in the house but we'll need it then so that income will go, also nursery fees for 2 would be very high).


Or we could use the savings on investing on a small business. I'd be really interested in "buy to let" option too but don't think we can afford it just yet, haven't really looked at this.

littlewillow87

audigex wrote: »

At the risk of this post coming across quite harshly, I agree with some of the earlier posts here: you clearly have luxuries which you're so used to that they've become "misc expenses" in your head

Thanks, it's good to see other perspective on which are luxury, which are not.
To be fair, when I was a student, I lived on £500/month including rent and it was fine (lived in a cheaper city, I lodged with someone for £200 including bills). Things changed when you have a family. Back then I used to travel by overnight coach and always got the cheapest tickets (eg. £10 from London to Edinburgh) but now we have a baby, it's hard to do coach or stay in hostel.


Anyway, I want to balance lifestyle & savings, not to save as much as possible. After all, we're working hard to earn the money, we deserve to enjoy it. Just need to be sensible.
It's good to know that we can live on under £1600 (and many families are surviving on that). As you say, things like TV, car, holiday they're nice to have but if we're desperate we can drop them (I actually don't bother not having a TV or a car, my husband would be quite sad though but he will survive)


In one of my previous comments, I said the following items could be considered as savings so actually I'm saving more than £1,000 a month:
Car running cost: £100
Medical and Dental : £44
Furniture and Home Improvements: £130
Holiday fund: £300
Visa: £65
Car fund: £100
Savings: £200
And we're overpaying 20% mortgage: £120