How much income that you can live comfortably with?

hugheskevi

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?

Whether or not it is adequate depends on final income/capital goal and how much has already been saved, so impossible to tell.

However, it is pretty good, and the main thing at this stage is to not be falling behind. As you say, there are other demands on resources when younger, so the main thing is to ensure that you are not leaving yourself so far behind that it is not possible to catch up in later life. With contribution rates around about 15% or thereabout averaged across both of you you aren't going to be going too far wrong at this stage.

What else do you suggest we should do with the savings?

The standard things to consider for capital going into long-term savings are pension, ISA and mortgage reduction. Depending on circumstances, buy-to-let and unwrapped investments might also be right.

What is best differs from person to person, but paying down a mortgage effectively locks in a rate of return on the capital equal to mortgage rate. When rates are at their current levels that is locking into an awful rate of return. However, many like the security of having less debt, so even though mortgage reduction is very unlikely to be the most financially efficient thing to do, that doesn't mean it will be the wrong thing to do.

These are the sort of questions that can only be answered by drawing up a comprehensive long-term financial plan which takes into account the sort of things you have mentioned and considers your risk tolerances.

Purplesky_2

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 (Can you take advantage of the government scheme to provide free healthcare for a number of hours a week - May not be applicable in Scotland)
• Mortgage: £780
• Council Tax: £190
• Factor (this seems a lot to me but nothing we can do): £140
• Electricity & Gas: £100 (seems high)
• TV Licence + media package: £46
• Bus (1 day a week for 2 person): £26
• Professional Subscriptions: £9
• Mobile Phone for 2: £43
• Life Insurance: £10
• Giving away (we feel blessed in many ways so we'd like to give away if we can): £150 (You could reduce to £50. Still a lot more than lots of people can afford, but not totally gone)
• 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 (This seems very high. Could you look at car pooling with your work or your partner, Maybe take your most efficient car to the parents?)
• Lunch & Small Spending make-up, hair cut, exercise for 2 adults: £195 - Good Lord, this seems high.
• Food & Household goods (consumables) for family of 3: £305
• Entertainment (cinema, meals out): £180 - (I would redefine a meal out. No alcohol, Toby Carvery midweek, Vouchers for chain restaurants, a takeaway. We work on less than a quarter of this budget)
• Furniture and Home Improvements: £130
• Clothing : £43 - (This seems high - Charity shops/Reduced expenditure)
• Medical and Dental : £44
• 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 (Could you start alternating or doing two years on, one year off?)
• 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 notice there's no birthday or christmas spending in there. That might be a bit of a blind spot for you guys? You need to think about how much you generally spend and roughly how many birthdays you have a month.


We survive on a salary half the size of yours (about £33000), albeit with no child, and we used to save about £800 between us without really trying, £1000 or so if we pushed. There has been times in the past 18 months where all our supposed savings bar a few hundred quid has gone into home improvement, but I'm told that that's normal!(We just had an inheritance and paid off our mortgage, so now we'll be throwing a third of our salary into investments, and saving/investing ultimately about half...).

Our budget for giving, for entertainment, for holidays, for clothing and for TV is about £120/month total. We finally got rid of our TV licence, we don't have a subscription or freeview, we buy clothes on sale or at charity stores, we buy DVDs and books used on Amazon or in the market or charity/second hand stores, we use vouchers for shopping and meals out (on the rare occasion we actually do that), we take advantage of my partner's job to get cheap hotels, but we travel to local cities and we only have long weekends at the minute. We can't 'afford' a bigger holiday right now. We know that the money we spend now is gone forever and we want to be able to retire or go part-time or start our own business without going broke in the process.

We also try to maintain a healthy bank balance and have out money working for us while it's sitting around waiting for a rainy day, so it generates a few pounds of income each month. We also try to ensure that our savings are kept separate from our usual bank. Reduces the chance that we'll 'dip in'

lizzieliz87

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 save here
• Bus (1 day a week for 2 person): £26
• Professional Subscriptions: £9
• Mobile Phone for 2: £43 sim only deals from £12 a month
• Life Insurance: £10
• Giving away (we feel blessed in many ways so we'd like to give away if we can): £150 many people don't even have money to save for themselves let alone 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 buy newer car with cheaper running costs
• Car Insurance: 37
• Car Tax: 13
• Car fuel - To work, day out, visit parents: 230 set a fuel budget per month/buy more economical car
• Lunch & Small Spending make-up, hair cut, exercise for 2 adults: £195 all luxuries, re think approach to these i.e. less hair cuts
• Food & Household goods (consumables) for family of 3: £305
• Entertainment (cinema, meals out): £180 all luxuries, find free activities to do
• Furniture and Home Improvements: £130 a month? luxury
  
• Clothing : £43
• Medical and Dental : £44
• 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

Personally I think you as a family have plenty of money to live on and are living a very comfortable lifestyle. Many families cannot afford half of what you have.

Another point, why do you want another child? As a nation we are over populated, people struggle for jobs, for housing, for a good NHS, for good education (primary schools now having over 1000 pupils) and the list goes on. I believe people should live within their means and not rely on the benefit system (although I know you are not relying on it).

littlewillow87

lizzieliz87 wrote: »

Another point, why do you want another child?

Thanks for your comment but I find this a very odd question.
It's a personal choice. I have 1 child and I want one or 2 more children. I will love them, give them good education and raise them to become responsible people. We're working very hard to provide for our children. The problem is in the benefit system itself and also healthy people who don't want to work and want to produce many children to get more benefits. Doesn't mean responsible parents should not have children.

audigex

Growing up on a council estate, I found that the number of people having children to gain benefits is absolutely tiny. There are some, sure, but they're vilified to an extraordinary extent: I wouldn't want to be in their shoes. And they really don't have lots of spare money, it's just that having further children increases their income disproportionately to the cost of having the first child.

You're also clearly capable of affording two or three children, so I wouldn't agree with Lizzie's comment: you want another child because you want one, and that's enough of a reason for two working parents with a reasonably good income.

And to de-harshen my own comment for earlier, it's not that I think you're wasting money willy nilly or being irresponsible. It's not even that I think you're being snobby or entitled, which is a trap many fall into. I think you've had enough excess money for long enough that you've just lost some of your ability to separate income into categories

Run through your budget and sort everything into one of these

1) Necessities that can never go, even if I have to steal for them. (Food, roof, basic bills). These are things you will never cut and are your ultimate "This is how much we need" baseline.

2) Necessities where we're perhaps spending more than we could and there's a luxury element in how much we spend on it, so there's some saving possible. (House size, lunches, food brands etc, clothes, haircuts, car brand/age). These are probably things you'd cut with different degrees of urgency depending on what situation you found yourself in.

3) Necessities which would become luxuries if the situation changed. (Cars, transport costs, childcare). Combined with #2, you may "downgrade" these in a minor crisis, but would cut them entirely in a major one

4) Simple luxuries, things which are cheap but could go if they really had to. (TV License, broadband, eating out for a treat, occasional cinema trips). These would be probably the last thing to go, as they're not excessively expensive and add a lot to your life for a small cost. You may cut down, though - standard broadband not fibre, happy hour restaurants more rarely, one cinema trip a month or only one parent takes the child.

5) Flat out luxuries. Things which are lifestyle choices and are you enjoying your money. There's no shame in them, you earn your money and deserve to enjoy it: but they'd be the first on the chopping block if one of you lost your job or similar. Holidays, saving for a new car, home improvements (so you'll have an old sofa instead of a new one, you'll get over it until the situation improves) etc all fall into this category. In fact if you could do without it for the next 4 weeks, it probably belongs here.

After that you'll be able to see a few different "how much do we need" numbers/plans for cutting back in different circumstances

a) The bare minimum spend after downsizing and cutting everything back dramatically. This is your panic stations target to cut to if necessary, but is just a contingency plan if things really went to crap.

b) The "things are going badly" figure where you cut out all the real luxuries and downsize those "it's a necessity but we spend more than we have to" ones, but maintain the little things. Your savings would allow you a little while to get here, and you could use some trial and error as you went along to see what you need to give up. It shouldn't ever happen, but you want to be prepared

c) The "bit of a bad spell" figure, where you've just had to replace your roof or one of you takes a pay cut (or perhaps even maternity leave if you want to maintain your savings). You cut back the things you know are luxuries, and delay the new car, holidays etc, perhaps take a packed lunch rather than buy from a cafe on a day out, but you can keep up a lot of the little things that you enjoy in life. This is the plan for if things get a bit unexpected but aren't really a worry, just a nuisance that you'll get through easily enough with an extra couple of grand over a 3-4 months. A handy plan to have in your back pocket

d) The "We could do with putting a bit more in the savings, dear" plan. For times where you just need to put a little extra aside or realise you need a new sofa, but don't have the spare cash. You target a few luxuries that you don't mind cutting or delaying in order to do something else temporarily. You'll do this every now and again then return to normal

Think about it now, work out what you'd do in each situation, and you can avoid a lot of stress if they ever happen. And if they hopefully don't happen, you'll enjoy the good times without that little nagging "But can we survive if I lose my job?" voice in the back of your head, because you've already worked out what you'll do in each situation. You'll also have a much stronger idea of your own budget, so if you do have to save £100, £500 or £1,000 a month for whatever reason, you'll know both whether you can do it, and how you'll get there.

pozza_73

There are 2 of us and we spend around £70 a week on food (sometimes more and sometimes less). I was heartened to see that you give £150 a month away. I wish that I gave away more and that you view seeing your family as a priority. It would seem that you have your priorities correct. Spending time together as a family, giving to those less well off. Yes you could make massive changes but do you really want to? Maybe try some of the challenges on these threads such as the £1000 emergency fund thread and watch your savings grow.

MARTYM8`

Surely the key factor is your housing costs - and your family make up.

If you own your home outright you automatically have potentially £1k a month more to spend on something else (or save).

So its a meaningless question - it depends on circumstances.

A single person owning their home with no mortgage needs less to live on than someone renting privately with 3 kids?

anoncol

lizzieliz87 wrote: »

Another point, why do you want another child? As a nation we are over populated, people struggle for jobs, for housing, for a good NHS, for good education (primary schools now having over 1000 pupils) and the list goes on. I believe people should live within their means and not rely on the benefit system (although I know you are not relying on it).

Its none of your business is it whether they want another child? Considering they aren't living on the benefit system what business is it of yours?

Heedtheadvice

Back to basics....your question!

Much older than you now so difficult to comment on what I would now find an acceptable income with a family. However we had about an average income and hopefully spent wisely and even saved a bit over the long term. To do this we had practically very few of what posters are calling luxuries. We simply could not afford them.

Considering average income of about £26K per annum I guess most would similarly struggle and you perhaps have become used to you level of income.

I think you are being sensible to analyse your budget and try and save/spread the load for expensive items. As your children grow you will certainly get many more financial pressures so building up a safety fund is wise.

As people have suggested many areas you could consider especially realising the necessary (such as the factor etc.) and the optional thus being realistic.

Let me at just one my mobile phone is just for essential use and, including the cost of the phone, I only spend about £50 ...a year!
Typical heating cost is about £1200 per annum so you are in the right ball park but could possibly only trim it so I doubt you could reasonably cut it to one third!!

slopemaster

68k! Wow!

Our income (only 2 of us) is about £29 000, and we feel we are now very comfortably off. We run a car, take holidays abroad etc.

But I suppose that just shows that it is all a question of attitude.

To us, one of our biggest luxuries is not having to scrimp on heating (as we did in the past). Another is eating good meat. And, on those (actually very rare) occasions when I buy a magazine or a cup of tea out, I feel fortunate to be able to do that without counting the pennies.

But then, for us I suppose being economical is normal. It is normal to buy the cheapest toilet paper, to buy clothes from charity shops, to turn lights out. We don't have a TV. or smartphones. Books are a luxury (I could get them free from the library but I like to buy them) but I take it for granted that they are 2nd hand off Amazon. We haven't bought new furniture in 20 years! Our car is 10 years old but still reliable - the minute it becomes unreliable, we will change it. That is another luxury - being able to afford to do that; not having to struggle on with a car that breaks down.

We take at least one holiday abroad a year, sometimes more - camping though.

We are very fortunate to have the income we do - but I suppose we are even more fortunate to have the attitude we do, so that we actually feel well off, rather than struggling.