how much to save opposed to enjoying life!

ianbar0

i have inherited a fascination with budgeting from my mum. although almost all of mine is online,i remember her having a tub full of jars!

i have been wondering however how much to save (rainy day and life/retirement) opposed to spending on enjoying ourselves (holidays or nice items).

i do currently put a small amount every month into a rainy day account and we put a little more into life savings. the amount i earn depends a lot on overtime etc so some time si have a fair bit of extra cash compare to the month before.

i kind of wondered if anyone put a certain % each month rather then a set value?

sal_III

We tend to keep a 3-6m worth of living expenses "rainy days"/slush fund in an easy access savings account, plus some longer term investments and savings. The rest we spend. No fixed amount saved monthly etc.

When we need a major spending on something like holiday the slush funds gets depleted (never goes under 3m), then we slowly replenish it to 6m.

That being said our we have a decent amount of "disposable" income, so this strategy might not be well suited for someone on a tight budget.

Long term (retirement) plan is to sell our UK home and live in a cheaper location with nicer weather like the Canary islands with our UK pensions. Makes no sense to me to be extra frugal in the prime of your life, just so you can potentially live slightly better in retirement.

LobsterMemory

I allocate all income after fixed costs to

1/2 General expenditure
1/8 Investing
1/8 Holidays
1/8 Hobbies
1/8 Splurge

I've already got an emergency fund but if I hadn't or I need to top it up then I would change the 1/8s to 1/16s and put the remainder in the emergency fund until it reaches the required level

tacpot12

If I have ever received any unexpected income, I have saved half and spent half. This has worked well for me.

nicetomeetyou

Still_Dave wrote: »

I’ve set myself the same amount of spending money each month for a few years, and as my wage has increased I’ve put all of the extra away for the future.

I don’t see me increasing my monthly spending until it’s clear that my retirement targets are certain to be met, I’m too cautious at the moment for that.

How much in relation to your spending to your savings?

Mine is 50/50 for my personal allowance I get. And I'm not keeping to that..

kinger101

I put a fixed percentage into my pension each month, though that might be topped up at the end of the year for tax reasons (once I know what my final income for the year is).

Really, it helps to ask yourself how much you need to live comfortably in retirement. You'll have fixed income sources (e.g. state pension and any DB pension schemes). But the rest you're gonna have to fund yourself.

Let's say you want to retire at state pension age, and you'll get the new state pension of of £168.80 a week. That's £8.8K per year. If you need £20K per year (after tax), that needs an annual income of around £24K (i.e. £15.2K on top of state pension).

At a safe(ish) withdrawal rate of 4%, you need a pot of £380K to achieve that.

But how do you get there?

Well, to make calculations simple, ask yourself what might be a reasonable rate of return AFTER inflation. US stock markets have a historical average 7%. A more diversified portfolio would be less. And then fees will eat into that. And the future might not be as goods as the past. So perhaps we say 4%.

There are various only calculators, but you if you're 30 years from retirement (and have nothing in your pension), then £550 per month over 30 years would reach £376K.

The key then is making that £550 per month as affordable as possible. Which means

(a) making sure you match out employer contributions
(b) making sure you opt in to salary sacrifice if available
(c) make any addition contributions via salary sacrifice if available.

If the whole amount is employer matched, then for a basic rate taxpayer, the cost the them is £275 * 0.68 = £187 per month.

In reality, it better to make hay while the sun shines. Any pension contributions you can make under higher rate tax are more tax-efficient. And life gets in the way of the the best plans (e.g. being put out to pasture by your employer in your late 50s).

EssexExile

As a person well into their retirement all I can say is put as much as you can into a pension. I'm lucky in having an old fashioned defined benefit pension but I look around & see people who are struggling in their later years. You never know what's coming but do your best to make it as easy as possible.

Stingy_Yates

Before becoming unemployed I only used to save money going out of the main bank to the other 4 banks via standing to get the most out of budgeting for the future.

When I lost my job in Feb '19 I used some of my remaining wages plus Christmas bonus to purchase some large sweet jars that you find in a traditional sweet shop and a SafeScan money counter.

In June '19 I was moved onto Universal Credit and I switched banks as the one I was switching from had closed our local branch down.

My budgeting mindset is basically the following goals

- £100 per month put away (between 4 banks)
- 'If you can't afford it, don't buy it' (spend within my budget)
- Aim for £300 in each savings by the end of the 12 months

Rich1976

It's all about achieving a balance. Life should be about enjoyment but needs to be balanced between savings needs.

In the New Year we will focus mainly on 3 main accounts for Home, Holidays and Car Expenses. I have calculated how much roughly our cars cost to service and insure plus extra for emergencies.

Equally if we want a holiday each year, I have worked out what we can reasonably afford to save each month to pay for it

Finally for home this covers home insurance, TV LIcence, boiler servicing and again extra to cover breakdowns and a sum to save up for expensive items in a few years eg kitchen or bathroom.

I also want to start a new Car Fund next year which will come in handy in hopefully 5 years time.

Finally I want a set amount going into a pension and Isa ( which is on top of our employer pensions )

On paper at least ( or spreadsheet to be more accurate) this looks achievable whilst leaving a reasonable amount of spending money jointly and individually. We dont have any kids which helps to have adecent surplus each month once we have sorted a couple of current issues between now and February.

jseagullz

Every time I receive my paycheck, I automatically keep 20% for savings. I only splurge in the last week of a month; I make sure I spend on my needs first. Once a new month starts, the unspent amount goes to my emergency fund.

Herbyme

Rich1976 wrote: »

It's all about achieving a balance. Life should be about enjoyment but needs to be balanced between savings needs.

In the New Year we will focus mainly on 3 main accounts for Home, Holidays and Car Expenses. I have calculated how much roughly our cars cost to service and insure plus extra for emergencies.

Equally if we want a holiday each year, I have worked out what we can reasonably afford to save each month to pay for it

Finally for home this covers home insurance, TV LIcence, boiler servicing and again extra to cover breakdowns and a sum to save up for expensive items in a few years eg kitchen or bathroom.

I also want to start a new Car Fund next year which will come in handy in hopefully 5 years time.

Finally I want a set amount going into a pension and Isa ( which is on top of our employer pensions )
.

Rich1976, do you have an actual separate account for each of those 3 categories? Sorry if I've asked you about that already in a different post!