First Steps to Solvency

getmore4less

The original rule was a member of motleyfool  that did rule of 1/2 that was very tight

The 3rds gives a better balance.

With kids you can go to a 4 way split and have 1/4 allocated to kids and 25years.

As a business owner you have to include your business assets as part of the saving 1/3 portion.

Being aware of eggs and basket problems.

Some diversity is good so investments outside of your primary source of income might be worth considering, most take advantage of  pension for tax relief on the way in and ISA to ring fence funds from tax completely. 

mothsinmywallet_2

I also have 3 children and a non working husband. I feel your pain @annabanana82

alt80

@getmore4less is home 1/3 literally just mortgage or mortgage + running costs?

So I would account for the comm property I have, development block and BTLs etc - at MV or just the part I own? Surely if I were doing that I’d also take into account the value of the main business if sold too? Actually makes it look a lot less dire counting that lot but I wouldn’t sell any of the property / business so hypothetical assessment.

Not going to lie I have very little diversity business is comm / res property all investments are res property with one comm thrown in nothing else. Some cash in companies tbf but that really is it. Have no clue about anything but property tbh so always stuck with what I know. Personal life have always been so desperate for the cash I’ve no standard pension investment either but know it’s very tax efficient accountant thinks I’m an idiot sure. Now in the position of not being able to make ends meet without all my income so thirds not going to be possible for me for a long time just dreaming I may someday apply a bit of sense to my personal life rather than spaffing the lot on cars etc haha.

alt80

@annabanana82 thought you said you made £5k/m - that’s £1666/m not £870 which is roughly a 1/6 not a 1/3? Could be mixing you up with someone else. 

alt80

@mothsinmywallet_2 ha 1 kid and none working wife so also in the club.

strawb_shortcake

alt80 said:

@annabanana82 thought you said you made £5k/m - that’s £1666/m not £870 which is roughly a 1/6 not a 1/3? Could be mixing you up with someone else. 

I think I said when my Husband goes back to work we would have a joint income of around £5k a month. But as he's just started uni we've got 4 years before he starts bring in any money. If he does well his salary could quickly outstrip mine. 
Trouble with my work, I'm looking at maybe 10 years for a promotion to give me around a £10k pa increase. We are all expecting minimal increases for the foreseeable. 
If I was to go consultancy I could possibly get £500-700 a day but those opportunities are likely to be reduced going forward. Besides which I love my job and it's quite safe

getmore4less

annabanana82 said:

I quite like the idea of these 3rds but not sure I could manage it. It would mean taking £870 a month and locking it away, even with my mortgage being around a 6th of my monthly income it would leave things tight. 
Having 3 children a non working husband and wanting to have a life it just doesn't seem doable at the moment.
But if I could do it coupled with my work pension I'd be a rich old(er) lady

Pension contributions count towards the savings pot.
Employer and employee. 

With 3 kids a 1/4 might work better where you spend 1/4, save 1/4, pay for the kids 1/4,  buy a house 1/4

The other option is make the timescale a bit longer, you can adjust the savings down a bit. 

TheAble

Worth pointing out that money going towards capital repayment of mortgage is technically saving. It's only the interest part that's the expense. So eg if you take home £3k of which you save £1k and pay £1k towards mortgage, of which £800 is capital, then your effective savings rate is 60%.

alt80

@annabanana82 you see £2610/m net so about £45k/a PAYE I assume but could see av £600/d consultancy - you’d only need 75 days worth of work a year to match current salary. Assuming some additional outlay say 80-85 days worth to break even though work through ltd still more tax efficient than PAYE so maybe not required depending on the work you do.

If you got 150 days of work you’d turnover £90k/a. Absolute no brainer imo never understood the employee mentality tbh. One life don’t spend it making £2.5k/m when you could make much more.

alt80

@TheAble 100 this if repayment on res home - almost everyone these days.